What is a sovereign wealth fund? Both Trump and Biden want one.

Sep 9

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Emma Stoltzfus (Editor)

Both President Joe Biden and former President Donald Trump are piqued by the idea of a sovereign wealth fund for the United States. It’s a strategy largely employed by oil-rich nations and may seem more out of place for a country with more than $35 trillion in national debt, a trade deficit and Social Security deficits.

“This wealth fund will return a gigantic profit, which will help pay down national debt,” Trump said. “We’re going to work on national debt very strongly, by the way. We’re going to have so much money coming in. We’re going to work on national debt.”

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Trump first proposed the idea Thursday, Sept. 5, during an economic policy speech in New York. The next day, Bloomberg reported that top aides to Biden have been crafting a similar proposal.

“We will be so successful, we’ll create America’s own sovereign wealth fund to invest in great national endeavors for the benefit of all of the American people. Why don’t we have a wealth fund? Other countries have wealth funds. We have nothing,” Trump said.

Trump admitted the concept might need a name change.

“Perhaps ‘sovereign wealth fund’ wouldn’t be appropriate, but it’s going to be the same thing,” he said.

What is a sovereign wealth fund?

Sovereign wealth funds are investment funds owned and controlled by governments. These funds manage more than $12 trillion in assets worldwide, and the vast majority comes from oil-rich nations.

Countries like Saudi Arabia use surpluses from oil revenues to fund projects that play to a national strategy. Saudi Arabia’s Public Investment Fund manages nearly a trillion dollars in assets. A big part of their “Saudi Vision 2030” plan is investing in sports to play on a global stage.

“They won’t cop to sports washing, but they will admit that sports is of great appeal. It’s really where they want to park a lot of this discretionary Saudi sovereign wealth fund money,” Sports Illustrated senior writer Jon Wertheim explained, calling sports investments a “pillar of their economy.”

But Saudi Arabia has money to play. The country’s sovereign wealth fund is worth more than three times what it owes in national debt.

Not every country that has a sovereign wealth fund is in the black. Perhaps these are best called “sovereign leveraged funds,” as Zongyuan Zoe Liu coined in her book, “Sovereign Funds: How the Communist Party of China Finances its Global Ambitions.”

Where does the U.S. want to invest?

What do Trump and Biden have in mind for America’s global ambitions? Trump offered some thoughts during his speech last week.

“We will build extraordinary national development projects and everything from highways to airports to transportation infrastructure, all of the future,” Trump said. “We’ll be able to invest in state-of-the-art manufacturing hubs, advanced defense capabilities, cutting-edge medical research, and help save billions of dollars in preventing disease in the first place.”

As far as the White House plan is concerned, Bloomberg reports, “Proponents of the idea believe the fund could be tapped to support emerging technologies where there are high barriers of entry — including shipbuilding, emerging geothermal and nuclear fusion projects, and quantum cryptography.”

These proposed investments do not sound much different from what the U.S. already does; infrastructure investments, the CHIPS Act, solar subsidies and more come to mind.

Of course, there’s the question of how this fund will be funded. Trump said his tariffs will pay for it, though tariffs are also supposed to pay for his proposed tax cuts. It isn’t clear where funds would come from with the White House plan.

While the idea of a U.S. sovereign wealth fund is new, state funds are not. The Alaska Permanent Fund is the largest, managing $78 billion. It takes state proceeds from oil sales and invests in income-producing financial assets.

Tags: Alaska, China, Donald Trump, Economy, Joe Biden, National Debt, Norway, Oil, saudi arabia, Trade, U.S. Economy

Simone Del Rosario

It’s a page straight out of Saudi Arabia’s playbook.

Both President Biden and former President Trump are piqued by the idea of a sovereign wealth fund for the United States.

It may seem like an odd proposition for a country with more than $35 trillion in national debt, a trade deficit, and Social Security deficits.

Donald Trump: This wealth fund will return a gigantic profit, which will help pay down national debt. We’re going to work on national debt very strongly, by the way. We’re going to have so much money coming in. We’re going to work on national debt.

Simone Del Rosario: Trump first proposed the idea last Thursday during an economic policy speech in New York. The next day, Bloomberg reported that top aides to Biden have been crafting a similar proposal.

Donald Trump: We will be so successful, we’ll create America’s own sovereign wealth fund to invest in great national endeavors for the benefit of all of the American people. Why don’t we have a wealth fund? Other countries have wealth funds. We have nothing. We have nothing.

Simone Del Rosario: Sovereign wealth funds are investment funds owned and controlled by governments. These funds manage more than $12 trillion in assets worldwide, and the vast majority comes from oil-rich nations. Countries like Saudi Arabia use surpluses from oil revenues to fund projects that play to a national strategy. Saudi’s Public Investment Fund manages nearly a trillion dollars in assets. And a big part of their “Saudi Vision 2030” plan is investing in sports to play on a global stage.

Jon Wertheim: They won’t cop to sports washing, but they will admit that sports is of great appeal. It’s really where they want to park a lot of this discretionary Saudi sovereign wealth fund money. It’s part of this Vision 2030. They own an EPL team. They’ve owned, I mean, the WWE and the soccer and the golf, and becoming this real kind of this pillar of their economy.

Simone Del Rosario: But Saudi Arabia has money to play. Its sovereign wealth fund is worth more than three times what it owes in national debt.

Not every country that has a sovereign wealth fund is in the black. Perhaps these are best called “sovereign leveraged funds,” as Zongyuan Zoe Liu coined in her book, Sovereign Funds: How the Communist Party of China finances its global ambitions.

So what do Trump and Biden have in mind for America’s global ambitions? Trump offered some thoughts during his speech last week.

Donald Trump: We will build extraordinary national development projects and everything from highways to airports and to transportation infrastructure, all of the future we’ll be able to invest in state-of-the-art manufacturing hubs, advanced defense capabilities, cutting-edge medical research, and help save billions of dollars in preventing disease in the first place.

Simone Del Rosario: While Bloomberg reports that proponents believe the fund could be used to support emerging technologies where there are high barriers of entry, like shipbuilding, geothermal and nuclear fusion projects, and more.

These proposed investments do not sound much different from what the U.S. already does; think about the infrastructure bill, the CHIPS Act, solar subsidies and more.

And of course, there’s the question of how this fund will be funded. Trump says his tariffs will pay for it, though tariffs are also supposed to offset his tax cuts. It isn’t clear where funds would come from with the White House plan.

While the idea of a U.S. sovereign wealth fund is new, state funds are not. The Alaska Permanent Fund is the largest and best known, managing $78 billion. It takes state proceeds from oil sales and invests in income-producing financial assets.

To learn more about other economic policies proposed by former President Trump, search “Trump admin” for this story at SAN.com or the Straight Arrow News app.