The deception of the American sovereign wealth box

President Trump has commanded the CEO of the establishment of an American sovereign wealth fund (SWF) is a bright object looking for a useful job. The idea that Washington should create an investment box when it cannot even manage its own budget to be funny at best and the seriousness of the worst case.

Unlike some other countries that have a successful SWS that the president seems to like – such as Norway, Singapore and the Gulf states – the United States does not have an excess revenue for investment. Instead, it drowns into debts, with an estimated $ 80 trillion dollars of unprofible obligations.

The main disadvantage of this proposal is that SWF, the United States, will not generate a new fortune; The capital from the private sector will be redirected to the government. Looking at the government’s financial position, this fund ultimately depends on government debts to make investments. This is true even if it depends on a dedicated financing stream, such as customs tariffs, revenues of natural resources or asset sales. The negative negative position of the government will not change.

To generate capital to the fund, some supporters propose “to liquefy the assets in the American public budget” – a mysterious phrase that probably means selling or renting federal assets, such as public lands or infrastructure. But even if this is possible, why should the government be in the field of investment portfolios when private capital markets are already more efficiently? Instead, Congress must use any revenue from federal assets to reduce deficit and debt outside control and lock low taxes for Americans.

Even if the fund is outperforming the costs of borrowing to the government, this will be simply a transfer of economic activity, and not an actual increase in national prosperity. Worse than that, it will invite political intervention in the capital markets, and open the door to favoritism, favoritism and incompetence. Looking at Washington’s record, does anyone think that the government’s investment fund will be free from political intervention?

Do not look further than the American International Development Finance Corporation (DFC) to inspect the American SWF misleading. This agency has been created, a copy that has been renamed and expanded from the previous private investment institution (OPIC), under the Trump administration to finance private sector projects in developing countries. Its mission? To enhance American economic interests and support global development. To achieve this goal, it meets with the risks of investment, using guarantees supported by taxpayers to support investments that may struggle in another way to secure financing in the market.

American officials DFC justify by claiming that it enhances economic development and supports US foreign policy goals. However, in practice, it reduces foreign governments from the need to implement reforms that will attract investment on its own. Instead of securing property rights, imposing contracts and adopting sound economic policies, recipient countries can rely on Washington -backed plans to support their investments.

The American sovereign wealth fund in the same trap – the allocation of capital on the basis of political priorities instead of economic merit.

Moreover, SWF would create serious incentives for government interference in the economy. Does the government -controlled fund invest in politically favorite industries such as green energy or biotechnology while avoiding sectors that are considered “unacceptable” by the administration in power? Will her influence as a shareholder to pay political business schedules on American companies? These risks are not default. They are the natural consequences of the state’s investment.

If there is anything, the administration should look forward to eliminating a development financing company, not repeating it on a larger scale. Instead of protecting foreign governments from the need to create attractive investment environments, the United States should encourage reforms that depend on the market that enable local economies to prosper without Washington’s artificial support.

The same logic applies locally: If the United States wants a prosperous economy, it must reduce the deficit, reduce waste spending and create a stable economic environment for private investment-and not to launch a new bureaucratic experience in government management assets.

American sovereign wealth fund is not just a bad idea; It is an illusion. America’s strength lies in its dynamic private sector, not the government -run wealth plans. The administration should focus on reforming its public budget, not pretending to be a hedge box.

Romina Bukia is the director of budget and entitlement policy at the Kato Institute.