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according to reports from multiple media outlets, the white house is preparing to establish a u.s. sovereign wealth fund to make large-scale investments in key strategic areas.

on friday (september 6th) local time, a white house official revealed to the media that senior members of the biden administration, including us president’s national security advisor jake sullivan and his deputy daleep singh, have been "quietly" developing this plan.

according to media reports, sullivan and singer have been working on the project for months, conducting a series of weekly brainstorming sessions and meeting with economic experts from the national security council to discuss the size, structure, funding, leadership structure, protection measures, etc. of the proposed fund.

the official said the fund's structure, funding model and investment strategy are still under active discussion. he stressed that the project has entered a stage of "sufficient attention" and other government agencies have been involved, and they plan to "discuss the next steps with key stakeholders in congress and the private sector."

another source said planning documents for the sovereign wealth fund have been circulated among white house staff and key agencies, and those working on the effort expect to formalize the proposal in the remaining months of president biden's term.

trump first mentions sovereign fund

while white house sources claim that “discussions have been ongoing for months,” the idea first hit the political stage when former u.s. president donald trump unveiled his economic policy proposals on thursday. prior to that, there had been little coverage of sovereign wealth funds.

on the same day, trump mentioned at the new york economic club that if he is elected, he will inject tariff revenue into a sovereign wealth fund. "we will be able to invest in state-of-the-art manufacturing centers, advanced defense capabilities, cutting-edge medical research, and help save billions of dollars in disease prevention costs."

the idea was backed by hedge fund billionaire john paulson, who was at the event and said: "it would be great to see the united states join the group and not have debt but have reserves."

“over time, this fund will be larger than anything that exists today,” said paulson, 68, who is one of trump’s potential picks for treasury secretary.

acceptance has increased

for a long time, the united states has not had a national sovereign wealth fund, which is mainly related to its economic structure, fiscal policy and historical tradition. first, the united states has a developed and complex capital market, and corporate financing mainly relies on private investment, stock market and bond market.

this means that the us government generally does not need to make large-scale investments or reserve management through sovereign wealth funds like other countries. since the united states has always relied on issuing bonds for financing, it has been in a fiscal deficit state most of the time and does not have a large fiscal surplus to establish a sovereign wealth fund.

secondly, the establishment of a sovereign wealth fund means that the government will play a more active investment role in the economy, which is not entirely consistent with the traditional american free market concept. in addition, due to the special status of the us dollar, the us faces less pressure on foreign exchange reserves and does not need to manage foreign exchange assets through sovereign wealth funds.

it should be noted that some us states have their own funds, but this mechanism has not yet been implemented at the national level because the establishment of a sovereign wealth fund requires bipartisan support and collaboration between the private sector and the government, which may be difficult in the current political environment.

but in recent years, with the changes in the global economic landscape, especially under increasing competitive pressure, more and more voices believe that the united states can benefit from establishing a sovereign wealth fund to strengthen investment in strategic industries and the stability of the supply chain.

the white house official mentioned above said that the original idea of ​​establishing a sovereign fund was because the united states lacked patient and flexible capital to advance its strategic interests. the proposed fund could be used to strengthen the resilience of the supply chain and provide funding for "illiquid but solvent companies."

he also said the fund could also inject capital into industries with high barriers to entry, such as specialized shipbuilding and nuclear fusion, and could be used to finance the creation of "synthetic reserves of critical minerals." last year, a bipartisan group of senators in the u.s. congress proposed creating an investment fund to use its profits to increase social security benefits.

skeptical opinion

however, critics say potential sovereign wealth funds could be used by the incumbent president to promote political projects and would be difficult to finance, especially as the united states continues to run huge deficits and its total national debt has exceeded $35 trillion.

jared bernstein, chairman of the white house council of economic advisers, told the media that he was very cautious about the idea. he added: "i certainly haven't talked about it in any of the meetings that i've been in."

american economist douglas holtz-eakin also questioned the necessity of setting up the fund. "what problems can this fund solve? in my opinion, it can't solve any problems. no matter who proposed it, it has no value."

“it would just remove the process from political scrutiny and oversight, which is the last thing we need,” holtz-eakin said.