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Could there be a sovereign wealth fund established in the United States? More difficult to accomplish than to talk about. Establishing a U. S

Investment fund to compete against those in China and the Middle East could create more problems than it would solve.
Updated 2024-Oct-06 10:00

Creating an American sovereign wealth fund may seem like a solution to some of the country s competitive and financial problems but it would actually be difficult to establish.
Congress would likely need to act and the federal government would have to stop running annual deficits to address the national debt exceeding $35 trillion.
According to Douglas Holtz Eakin president of the American Action Forum and former Congressional Budget Office director the solution would involve imposing taxes not spending money and creating a fund.
The federal government imposes taxes spends more than it collects and has accumulated debt. Sobel pointed out that setting aside tariff revenues for a sovereign wealth fund could create budget challenges if other spending remains unchanged.
Norway and Middle Eastern countries use oil and gas revenue for their funds China uses foreign exchange reserves but the US may have to sell assets at Fort Knox or federal lands.
Many economists believe that Trump's vows to reduce inflation are not feasible
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Former President Donald J. Trump and the Biden Harris administration have little common ground on the policy front but one unexpected area of agreement is the idea that the United States might be ready for a sovereign wealth fund.
Such government investment vehicles are popular in Asia and the Middle East. They allow countries like China and Saudi Arabia to direct their budget surpluses toward a wide range of investments and wield their financial influence around the world.
While some individual states have their own versions of wealth funds the United States which runs large budget deficits has never pursued one.
Last week Mr. Trump suggested during a speech at the Economic Club of New York that if elected he would like to create an American sovereign wealth fund that could be used to invest in great national endeavors for the benefit of all of the American people.
After Mr. Trump’s remarks the White House indicated that senior officials had been quietly working for months on a proposal for a sovereign wealth fund that Mr.Biden and his cabinet could review. Despite the newly bipartisan appeal of a national sovereign wealth fund creating one might not be so simple.
It would need the approval of Congress where lawmakers are likely to be skeptical about authorizing the creation of a fund that could essentially circumvent its own powers to approve federal spending.
And then there is the matter of how a nation with perpetual deficits would fund such an investment vehicle.
Establishing a U. S. S. W. F. Would raise highly complex technical and conceptual questions and on its face would appear to be a dubious value proposition for America said Mark Sobel a former Treasury official who is now the U.S. Chairman of the Official Monetary and Financial Institutions Forum. None of the tough questions has been answered so far.
What is a sovereign wealth fund?Sovereign wealth funds are national investment funds that operate separately from central banks and finance ministries.
They generally aim to take trade surpluses and invest the money in potentially risky asset classes that could generate high returns.
There are more than 100 sovereign wealth funds around the world with combined assets worth over $10 trillion.
Saudi Arabia Kuwait the United Arab Emirates China and Norway have some of the largest funds in the world.
The funds invest in areas such as infrastructure and technology often playing constructive roles in financing new projects.
 
The dilemma of managing the American sovereign wealth fund and preventing misuse as a political slush fund is raised.
Can it also be used as a tool for American industrial policy and is that beneficial for the U. ? Nonetheless the United States has not reached a surplus since 2001.Instead of reducing spending the government has been increasingly borrowing money and is expected to continue running budget deficits in the long term.
Economists continue to doubt that.

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