Why We Can't Have Nice Things, Part Gazillion: Sovereign Wealth Funds
It isn't because the United States lacks valuable publicly-held assets. It's because we possess too much publicly-held debt. The good news is that we've made THAT a sort of sovereign wealth fund.
Read it and weep. Source: U.S. Treasury department.
I’m pleased to report that our bitterly partisan politics are still able, on occasion, to stumble onto ideas that draw enthusiastic interest from both parties. The latest of these is the creation of a sovereign wealth fund. Donald Trump talked up the idea in a recent speech to the Economic Club of New York, and President Biden’s national security advisor, Jake Sullivan, has lately been circulating White House memos about creating a sovereign wealth fund.
What is a sovereign wealth fund? It’s a big pile of money, created by a government, dedicated to some high-minded purpose: economic security during downturns, a hedge against falling prices in a certain commodity, investment in promising new technologies, and so on. The money gets invested in the private market so the fund can grow. There are 176 sovereign wealth funds around the world, managing $11.5 trillion in assets. Two decades ago, sovereign wealth funds managed a mere $1 trillion in assets. Indeed, the phrase “sovereign wealth fund” didn’t even exist until it was coined in 2005 by Andrew Romanov, senior manager of Official Institutions Group, a division of the asset management firm Black Rock, in an essay titled “Who Holds the Wealth of Nations?” The nations of the world looked around, saw that the financial sector was able to realize returns on capital that more obviously useful economic enterprises could not, and decided to play.
Many people have argued that a sovereign wealth fund is not an easy fit with the United States government, because such funds are usually created by countries that own tangible wealth-creating assets (oil fields, diamond mines, etc.) The United States, such people argue, is not similarly gifted because its most valuable assets are in private hands. But that isn’t, strictly speaking, true. The United States possesses lots of valuable assets, most obviously the vast quantity of land the federal government owns out west. It just acts like these aren’t valuable assets by charging fees to use them that are well below market value (when it charges fees at all). If we got smart about extracting something resembling a fair price from use of these assets, we could have a sovereign wealth fund.
Except probably not, for an entirely different reason.
The true obstacle to the United States creating a sovereign wealth fund is that we’re in hock up to our eyeballs. Countries that have sovereign wealth funds have more revenue than they know what to do with. That doesn’t describe the United States. To deal with our debt problem, we’ve created something very much like a sovereign wealth fund through the international marketing of our most plentiful asset, which is debt. You might call the market in U.S. Treasury bonds a sovereign debt fund. It’s hugely valuable because, for some strange reason, our national debt ($35.2 trillion and counting) is prized more highly than anybody else’s. I explain all this in my latest New Republic piece. You can read it here.
I think you're right that our politics are too dysfunctional to implement it right now. But I've long thought that if you made me dictator for a day, a SWF would be one of the reforms I'd introduce.
(1) Take the existing "social security trust fund" concept and generalize it to a Sovereign Wealth Fund that invests in a bit of everything. Stocks, bonds, even some small slices of higher risk/return stuff. (Like the DoE loan program that was pilloried by dishonest Republicans for having made a bad loan to Solyndra, but actually turned a profit, and among other things saved Tesla from bankruptcy.)
(2) Give everyone a Postal Bank account, tied to an investment account that makes claims on target-date tranches fo the SWF.
(3) End the "401k revolution". Nobody's allowed to put money into those types of accounts anymore, the SWF target date funds are the only game in town. Tweak some tax rules to incentivize rolling stuff out of the private account system, and eventually the brokers will give up on running them, since as the scale declines it won't be profitable to serve the remaining customers.
(4) Do Cory Booker's "Baby Bonds" program. Universal Basic Wealth. Everyone starts out life with a bit of money invested on their behalf, enhanced if their parents were on lower rungs of the economic ladder. Everyone reaches young adulthood with a bit of a nest egg that they can use to help buy a first home, invest in a business, spend on college education, etc.
(5) Start a UBI that drops payments into the Postal Banking account. Set some "automatic stabilizer" guidelines that boost the UBI payment when certain economic indicators get bad, maybe give the Fed some discretion to outright do "helicopter drops" in an emergency, where they can just *poof* add a thousand bucks to every single account.
You could even convert the income tax to a progressive consumption tax, if you want, by requiring all wages to be direct deposited to the Postal Banking / SWF investment system, and then calculate tax liability based on the amount that's taken _out_ of that system -- either spent, or transferred to private investments. (This could be part of the dis-incentivization for the existing private account schemes. Keeping the money within the public investment system defers tax, whereas putting it in a private account doesn't.)
The problem is most people think money is real ,, do people really think Elon Musk is a trillionaire, is a little company that makes a computer graphic card worth trillions .do you think if I told Warren Buffett he made a million dollars yesterday,, would he run out and buy a new car , Warren like a lot of us old geezers know , time is running out , and that's what makes money so interesting,, because we all like money because we think it keeps going on after we're dead , maybe we should print Jesus on the dollar bills , and the Pope wouldn't have to work so hard to sell people on his program , love your fellow man, spend wisely and give to the unfortunate.
It's that what the guy on the dollar bill would tell you , now that would be a real sovereign wealth trust fund .
Have a great day my friends
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