02-24-2025
Earlier this month, President Trump issued an executive order entitled: “A Plan for Establishing a United States Sovereign Wealth Fund.” A U.S. sovereign wealth fund (SWF) is a solution searching for a problem. Congress should say no.
SWFs are large pools of investment funds controlled by governments, often funded to manage surpluses generated by natural resources such as oil – Norway, Saudi Arabia and Alaska come to mind. Problem number one for the U.S. SWF is that there are no surpluses; the federal government ran a deficit of $1.8 trillion in the past fiscal year and the red ink is projected to continue as far as the eye can see.
Treasury Secretary Scott Bessent suggested monetizing federal assets. Problem number two is that assets are carried on the federal balance sheet as if they were riskless, inflating their value. Any sale to the private sector would come at a loss – not exactly a recipe for stocking a SWF.
In short, the only way to get the money would be to raise taxes, which is not the president’s plan.
More important, if somehow the SWF were funded, where would it spend the money? On the campaign trail, the president promised:
"We will build extraordinary national development projects and everything from highways to airports to transportation infrastructure. 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."
Other proponents of establishing a U.S. SWF believe the fund could be tapped to support emerging technologies where there are high barriers of entry, including shipbuilding, geothermal and nuclear fusion projects, and quantum cryptography.
But there is no need for the SWF, as these capabilities already exist. There is the bipartisan infrastructure bill, the CHIPS and Science Act, the Defense Advanced Research Projects Agency, and the National Institutes of Health. I could go on. We have programs, passed by Congress and signed by presidents, to address national priorities.
In short, there is already the ability to address every concern raised by the proposals. All a sovereign wealth fund would do is insulate the decision-making from the appropriate oversight of Congress and the normal policy process.
Thinking more closely about the SWF reveals a deeper economic truth. The United States does have a sovereign wealth fund: its $28-trillion economy that provides the resources to fund all significant national priorities. Instead of adding destructive taxes and borrowing in the name of a sovereign wealth fund, leaders would be better advised to actually propose policies that are good stewards of economic growth.
Douglas Holtz-Eakin is a Distinguished Fellow at Purdue’s Mitch Daniels School of Business and the President of the American Action Forum. He served as a senior economic and chief economist for the President's Council of Economic Advisers, and was the sixth director of the Congressional Budget Office. Doug blogs on The Daily Dish.
