Copying Trump's homework? Biden was exposed to be studying the establishment of a US sovereign wealth fund

Donald Trump, who is currently running for President of the United States, has just announced plans to launch a US sovereign wealth fund. The incumbent President, Biden, has also been reported to be considering introducing such a fund.

On Friday, September 6th, Eastern Time, Bloomberg reported, citing sources familiar with the matter, that Biden's senior aides - US National Security Advisor Jake Sullivan and his deputy Daleep Singh - have been drafting a proposal to establish a sovereign wealth fund. This fund would allow the US government to invest in areas related to national security interests, including key aspects of technology, energy, and supply chain.

Insiders revealed that Sullivan and Singh have been working on this fund project for several months, holding brainstorming sessions weekly and meeting with economic experts from the National Security Council to discuss the fund's scale, structure, funding, leadership, and potential protective measures. Progress on this work has reached the stage where planning documents are circulating between White House staff and key government agencies. Currently, key details including the fund's structure, financing model, and investment strategy remain unclear.

Interestingly, just a day before news broke about Biden's aides studying the establishment of a sovereign wealth fund, on Thursday, Trump called for the creation of a government-owned investment fund to fund "great national projects" during a speech at the New York Economic Club. He pledged to kickstart such a fund with the proceeds from tariffs. Trump said:

"Why don't we (the US) have a wealth fund? Other countries have wealth funds. We have nothing. We will have a sovereign wealth fund, or we can give it a different name."

Bloomberg reports that the behind-the-scenes work of Sullivan and Singh at least spiritually reflects Trump's call on Thursday. Trump openly supporting the establishment of a sovereign wealth fund may provide momentum for this initiative from both the Democratic and Republican parties. For the Biden administration, the main motivation for establishing a sovereign wealth fund is to compete with other countries in critical materials and emerging technologies. Biden's aides are particularly concerned about whether capital can be utilized at the speed and scale of other countries.

Following Trump's speech, on the same Thursday, one of his presidential campaign's "big donors," Wall Street hedge fund tycoon John Paulson, stated that he and Trump have not yet discussed the details of the sovereign wealth fund plan. He mentioned that over time, the fund's size "will exceed any existing fund."

However, subsequent comments pointed out a key issue with establishing the large sovereign wealth fund mentioned by Trump and Paulson: where will the money come from. The US government's annual budget deficit has exceeded $1 trillion, with a huge deficit that has been financed by borrowing to sustain government spending. Countries that currently have sovereign wealth funds almost all have significant budget surpluses, including trade surpluses, government-owned natural resource revenues, foreign exchange operations, and government transfers.

A report by Fortune also noted that it is currently unclear how Trump's proposed US sovereign wealth fund would operate, especially in the absence of a clear source of funding.

Justin Wolfers, an economics professor at the University of Michigan and a senior researcher at the Peterson Institute for International Economics (PIIE), commented on Trump's call, stating that operating a sovereign wealth fund means the government will be injecting additional cash into financial and other assets, typically overseas assets When a country has extra cash reserves for future needs, a sovereign wealth fund can be useful. However, the U.S. government currently owes money to others, and Trump's suggestion is to borrow money to buy stocks/bonds/cryptocurrencies/real estate.

Apart from countries with large commodity exports and budget surpluses, such as oil-rich Middle Eastern oil-producing countries, the establishment of such funds is a relatively rare proposal for other countries at present. Supporters of setting up such a fund believe that it can be used to support high-threshold emerging technologies, including shipbuilding, emerging geothermal and nuclear fusion projects, and quantum cryptography. A Bloomberg report this Friday mentioned that Biden's aides also have similar ideas, believing that the fund can create synthetic reserves of critical minerals by purchasing futures contracts