Trump and Biden Push for Sovereign Wealth Fund: Political Dream or Fiscal Reality?

In a surprising bipartisan move, both former President Donald Trump and President Joe Biden are advocating for the creation of a national sovereign wealth fund, but many experts view it as more of a political fantasy than a practical financial solution.

During a recent speech at the Economic Club of New York, Trump proposed establishing a massive sovereign wealth fund, drawing inspiration from successful models in other countries. He suggested funding this initiative through tariffs and other revenue sources, envisioning it as a way to generate significant profits that could help reduce the national debt. Trump did not provide specific figures but hinted at consulting billionaire hedge fund manager John Paulson for guidance. Paulson echoed the sentiment, expressing enthusiasm for America to join the ranks of countries with sovereign wealth funds.

However, experts are skeptical about the feasibility of such a fund. Trump’s reference to Norway’s $1.7 trillion wealth fund as a goal seems unrealistic given that the U.S. federal government spends that amount in just four months. The proposed fund would represent only a small fraction of the $35 trillion national debt and would require extraordinarily high returns to make a significant impact.

Meanwhile, the Biden administration is also exploring the idea of a sovereign wealth fund. Bloomberg reports that top aides are working on a proposal, debating its size, structure, and funding sources. No concrete details have been released, but the fund could potentially be used to support American companies competing with Chinese firms.

Despite the allure of a sovereign wealth fund, both Trump and Biden face challenges in making this concept a reality. For Trump, the fund’s success depends on an ambitious and unlikely return on investment, while Biden’s proposal faces hurdles in capitalizing and managing the fund effectively.

Both leaders are united in their desire to create new financial instruments to address fiscal challenges, but the practicality of these proposals remains in question. As they continue to push for this idea, it remains to be seen whether it will materialize or simply serve as a symbolic gesture in the ongoing political discourse.