The US should finally start a sovereign wealth fund

• The Biden administration appears to be exploring the possibility of a sovereign wealth fund.

• Last week, Donald Trump proposed a similar idea.

• The fund could support technology, energy and supply chain initiatives or even ease the national debt.

Bipartisanship in the United States is unusual, especially during elections.

So it’s worth noting that Democratic and Republican leaders both seem to want to set up a sovereign wealth fund to help the United States pay for things.

President Joe Biden’s top advisers, including national security adviser Jake Sullivan and his deputy, Daleep Singh, have been quietly developing plans for a sovereign wealth fund for the past several months, Bloomberg reported.

Details, including structure, funding and investment strategy, remain unclear, but planning documents are circulating through the White House and Biden hopes to have it happen before he leaves office.

News of Biden’s effort came shortly after former President Donald Trump called for a similar state investment fund to finance “great national efforts” during a campaign stop at the Economic Club of New York last week.

Sovereign wealth funds are an old idea that many other countries – especially those that generate immense wealth from their natural resources, such as Saudi Arabia or Norway – have long used to pay for big things. Countries park their cash reserves in the treasury so it can grow.

Norway’s $1.6 trillion global government pension fund, the world’s largest sovereign wealth fund, for example, reported in January that it made a $213 billion profit last year, thanks to returns on investments in technology stocks, Reuters reported. Norges Bank Investment Management, the subsidiary of Norway’s central bank that oversees the fund, said the fund is supported by investment returns in equities, fixed income, real estate, renewable energy infrastructure and income from oil and gas production.

Saudi Arabia’s Public Investment Fund, which manages about $925 billion in assets, reported a profit of $36.8 billion for 2023, according to Reuters. The PIF says it is funded through four channels – capital injections from the government, government assets transferred to the PIF, loans and debt instruments, and retained earnings from investments. This money is used to invest in everything from Uber and Blackstone to Heathrow and LIV Golf. It is also using it to fund Vision 2030, a huge initiative to transform the country’s economy and reduce its dependence on oil.

It’s not clear how, well, a US fund would be funded or how it would operate. But people familiar with the Biden administration’s plans told Bloomberg that if the United States were to launch a fund, it could invest in national security interests such as technology, energy and supply chain initiatives.

The story continues

It is not the first time that Washington has toyed with the idea of ​​a sovereign wealth fund. Last March, a bipartisan group of lawmakers led by Senator Angus King and Senator Bill Cassidy began discussing a sovereign wealth fund to pay social security. At the time, Sen. Mitt Romney, who attended the talks, said the fund would allow the United States to “be able to borrow at low interest rates and invest in growing our economy and perhaps the economies of other nations. “

The number of potential uses for the fund, if – again – it can ever be funded, is almost limitless, which excites lawmakers.

The White House’s interest in a sovereign wealth fund stems in part from its desire to compete with China, which itself has several state-owned funds. White House aides have suggested that a US fund could support national interests through things like “bridge financing” for companies competing with China, according to Bloomberg.

Others have suggested the fund could support technologies with high barriers to entry, such as geothermal and nuclear fusion projects or quantum cryptography. Or they could create synthetic reserves of critical minerals by purchasing futures contracts.

Or, hey, maybe it could even be used to pay down the national debt.

“It would be great to see America join this party and instead of having debt, have savings,” billionaire John Paulson said last week in an interview with Bloomberg Television. “It would, over time, be bigger than any of the existing funds.”

It sounds nice, but it all depends on government money to fund it and solid investment to grow it.

Former Treasury Secretary Larry Summers said in an interview last week on Bloomberg Television that it was “hard to believe that putting aside a lot of funds for unspecified investments made in unspecified ways where you don’t even know how you name it, it’s a particularly responsible proposition.”

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