Former President Donald Trump has announced his plans to establish a “sovereign wealth fund” that the federal government will use to invest money in critical infrastructure like roads and airports and strengthen the US defense capabilities.
Wealth funds are created by governments that have surplus cash, which provides them an opportunity to invest in projects that are popular among the masses. Authoritarian governments in the Middle Eastern countries of Kuwait, UAE, and Saudi Arabia create these funds using the lucrative profits they generate from oil and gas exports.
However, in a democracy like America, such funds can attract public scrutiny, as many people may not trust politicians to make investments on their behalf. The constitutional viability of these programs also remains unknown.
Economic experts point out that the United States is already operating on debt, which suggests that putting money into wealth funds will be more complex than it may seem. Traditionally, countries seek to reduce their debt first before pouring billions of dollars into these funds. Currently, the US is buried under $34 trillion in debt.
Similarly, the creation of wealth funds would require the government to adopt a hands-on economic approach that defies the core principles of the laissez-faire markets. Laissez-faire is an economic philosophy that supports less government intervention in the markets, a policy that Trump usually supports.
In laissez-faire economies, private entities are encouraged to operate independently, with the government taking a back seat instead of actively investing in profitable projects, which would happen after the creation of wealth funds.
Trump indicated that he plans to adopt protectionist policies by increasing tariffs and doing other “intelligent things” to fund the sovereign wealth fund. The former president vowed to create a wealth fund that was better than any similar fund worldwide.
He asserted that this fund will be used in various projects, such as building roads, highways, airports, defense capabilities, medical research facilities, manufacturing hubs, and much more. Trump claimed that this fund would generate a “gigantic profit,” enabling the country to pay its massive debt.
Some economic experts also criticized the idea of a sovereign wealth fund and called it a way to legitimize corruption.
Brendan Duke, a former senior economic advisor at Biden’s White House, claimed that Trump would impose a “national sales tax” on every American to build up the wealth fund. He further alleged that the former president would hand over this fund to his billionaire friends, like Jeffrey Yass, who would invest it to expand Trump’s business empire and bail out Elon Musk for his purchase of social media platform X.
Meanwhile, President Joe Biden is also considering establishing a sovereign wealth fund, although it remains unclear whether he will be able to accomplish this during his remaining four months in office.
