MW Why Trump's sovereign-wealth fund won't MAGA

By Brett Arends

I'll take a hard pass on this idea

President Donald Trump's proposal to create a multi-trillion-dollar U.S. sovereign-wealth fund, run by the government, isn't a bad idea.

It's a full bingo card of bad ideas.

Where even to begin with this? Trump claims his fund would "lessen the burden of taxes on American families and small businesses," but the opposite is true. This fund will increase the tax burden on the country, because it will be financed with taxpayers' dollars. That will be our money. And Trump has said it could be as much as $2 trillion.

This isn't a tax cut, it's a tax hike.

And what is this fund for? Trump said it would be "to invest in great national endeavors for the benefit of all of the American people." This sounds like the famous scam during the South Sea Bubble 300 years ago, when a huckster gulled investors to buy stock in "a company for carrying on an undertaking of great advantage, but nobody to know what it is."

Good luck with that. "Were not the fact stated by scores of credible witnesses," historian Charles Mackay later wrote, "it would be impossible to believe that any person could have been duped by such a project." But duped they were. It showed, Mackay added, "the utter madness of the people."

It is no coincidence that most of the leading sovereign-wealth funds around the world are run by corrupt oligarchies, mostly in the Middle East and Asia, riddled with cronyism of the worst kind.

Meanwhile, Norway runs its own sovereign-wealth fund pretty much as an index fund to minimize the risks of cronyism and corruption.

The idea of creating an American fund raises a long list of unanswerable questions.

Why, for example, would anyone think money would be invested more successfully by people in Washington than it would by private investors or fund managers? Why would they think such a fund would add any value?

Consider: Fund analyst company Morningstar lists about 350 U.S. mutual funds of significant size that have been around for at least 20 years. Of those, just eight seem to have outperformed a simple S&P 500 SPX index fund over that period. That would be about 2%, give or take. (This doesn't even count the many funds that did so badly they closed, and dropped out of the screening.)

So what are the odds that political appointees in Washington will do so?

This is the point where I have to remind you that this is supposed to be a Republican administration.

Trump suggested Monday that this fund could use taxpayers' money to buy TikTok. No, I'm not kidding.

Meanwhile, there's another problem. Many of the countries that have created sovereign-wealth funds, most notably oil-rich Norway, have done so in order to handle their government surpluses.

America doesn't have government surpluses. It has deficits. Massive, massive deficits, stretching as far into the distance as the Congressional Budget Office's eye can see.

The CBO reckons that U.S. national debt, already $29 trillion, is going to skyrocket to $52 trillion in just 10 years' time. That would be 118% of gross domestic product, an all-time high. Oh, and that's not even counting the effect of extending the 2017 Trump tax cuts, which would add an estimated $4.6 trillion to the debt.

And this doesn't even include the tens of trillions of dollars that taxpayers are going to have to find to support Social Security and Medicare.

If somehow the government is able to get hold of $2 trillion, they should be putting it toward the debt. Watching a bankrupt Uncle Sam get suckered into gambling his last nickels on a venture sold to him by a guy in a shiny tie from New York City sounds like something straight out of Mark Twain or O. Henry.

Hard pass.

-Brett Arends

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February 05, 2025 10:58 ET (15:58 GMT)

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