So it is noteworthy that Democratic and Republican leaders both appear to want to establish a sovereign wealth fund to help the United States pay for stuff.
Top aides to President Joe Biden, including National Security Advisor Jake Sullivan and his deputy, Daleep Singh, have been quietly developing plans for a sovereign wealth fund over the past several months, Bloomberg reported.
The details, including the structure, funding, and investment strategy, remain unclear, but planning documents are making the rounds through the White House and Biden hopes to make it happen before he leaves office.
News of Biden’s effort came not long after former president Donald Trump called for a similar state-owned investment fund to finance “great national endeavors” during a campaign stop at the Economic Club of New York last week.
Sovereign wealth funds are an old idea that many other countries — particularly ones that generate vast wealth from their natural resources, like Saudi Arabia or Norway — have long used to pay for big things. Countries park their cash reserves in the state-owned fund so it can grow.
Norway’s $1.6 trillion Government Pension Fund Global, the largest sovereign wealth fund in the world, for instance, reported in January that it made $213 billion in profit last year driven by returns on investments in tech stocks, Reuters reported. The Norges Bank Investment Management, the branch of Norway’s central bank that oversees the fund, said the fund is supported by investment returns on equities, fixed income, real estate, renewable energy infrastructure, and revenue from oil and gas production.
Saudi Arabia’s Public Investment Fund, which manages about $925 billion in assets, reported a $36.8 billion profit for 2023, according to Reuters. The PIF says it is funded through four avenues — capital injections from the government, government assets transferred to PIF, loans and debt instruments, and retained earnings from investments. That money is being used to invest in everything from Uber and Blackstone to Heathrow and LIV Golf. It’s also using it to finance Vision 2030, a huge initiative to transform the country’s economy and reduce its reliance on oil.
It is unclear how an American fund would be, well, funded, or how it would operate. But people familiar with the Biden administration’s plans told Bloomberg that if the United States launched a fund, it could invest in national security interests like technology, energy, and supply chain initiatives.
This isn’t the first time Washington has toyed with the idea of a sovereign wealth fund. Last March, a group of bipartisan lawmakers led by Sen. Angus King and Sen. Bill Cassidy began discussing a sovereign wealth fund to pay for 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 the growth of our economy, and perhaps economies of other nations as well.”
The number of potential uses for the fund, if — again — it can ever be funded, is nearly unlimited, which excites lawmakers.
The White House’s interest in a sovereign wealth fund stems partly from its desire to compete with China, which has multiple state-owned funds itself. White House aides suggested an American fund could bolster 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 entry barriers, like geothermal and nuclear fusion projects or quantum cryptography. Or it 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 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 be, over time, larger than any of the existing funds.”
It sounds nice, but it all hinges on government cash to fund it and sound investments to grow it.
Former Treasury Secretary Larry Summers said in an interview with Bloomberg Television last week that it was “hard to believe that setting aside lots of funds for unspecified investments made in unspecified ways, where you don’t even know what it’s going to be called, is a particularly responsible, kind of proposal.”
