Borrow, Spend, Invest? The Fantasy of a U.S. Sovereign Wealth Fund

America doesn’t need another subsidy machine—it needs fiscal discipline.

Talking to CNBC, Kevin Hassett, director of the National Economic Council, noted that Pres. Trump’s Intel move is possibly the first step toward the US creating a Sovereign Wealth Fund. Hassett said that “it's more like a down payment on a sovereign wealth fund, which many, many countries have."

It is true that some countries have these funds, but none of them look anything like the United States. Sovereign wealth funds are what governments create when they have budget surpluses, such as when countries like Norway, Qatar, UAE, Saudi Arabia, Kuwait or Singapore want to put excess oil revenues or budget surpluses to work. The United States government, in contrast, is drowning in debt. It’s running multi-trillion-dollar budget deficits, borrowing more every year just to cover entitlements and interest. Suggesting that Washington should borrow even more money to then invest it in a stock portfolio is fiscal insanity. It’s like a family with maxed-out credit cards and an underwater mortgage deciding that the smart move is to borrow even more money in order to open a Robinhood account.

While the president likes to claim that he "PAID ZERO FOR INTEL, IT IS WORTH APPROXIMATELY 11 BILLION DOLLARS,” he is misleading taxpayers. His ability to extort this share from Intel is due to the $8.9 billion CHIP Act subsidies that have been, and will continue to be, paid to Intel. So yes, taxpayers paid plenty of money for the Intel shares. In fact, Hassett admitted as much during that CNBC interview when he said, "In the past, the federal government has been giving away money, lickety-split, to companies and the taxpayers have been receiving nothing in return … So now, what's happening now, with the Intel deal, the CHIPS Act money is going out as planned, but instead of it just going out and disappearing into the ether, the U.S. taxpayers are getting a little bit of equity."

Even if our government weren’t broke, a sovereign wealth fund is the ultimate vehicle for cronyism. Imagine trillions of taxpayer dollars invested directly in equities and bonds, with politicians deciding which sectors or companies deserve funding and which don’t. Every major investment decision becomes politicized: energy policy, tech regulation, labor standards, even foreign affairs. Do you want a future in which Congress leans on the “U.S. Equity Fund” to steer capital toward politically favored green projects and away from disfavored industries like fossil fuels, guns, or social media? A sovereign wealth fund doesn’t depoliticize capital allocation—it ensures that politics infects every investment decision.

And don’t fall for the line that such a fund would “make money for taxpayers.” Governments are not mutual funds. They can’t separate themselves from their regulatory powers. When Uncle Sam owns a slice of corporate America, the temptation to tilt the rules in favor of its portfolio companies will be irresistible. At best, the returns wouldn’t come close to offsetting the borrowing costs on $36 trillion of debt. At worst, it entrenches rent-seeking on a scale we haven’t seen since the New Deal’s corporate cartels.

The U.S., in a way, already has a sovereign wealth fund: It’s called the US economy! If you want to improve that SWF, consider removing government discretion from all private-sector businesses. If Americans want exposure to global equities, they can on their own buy index funds. If policymakers want fiscal space, they should cut spending and reform entitlements. What they should not do is create a slush fund for political meddling, financed with borrowed money, and camouflage it as a responsible wealth strategy.

Don’t miss Jack Salmon’s great piece on why SWF are a dumb and dangerous idea here.