Speaking Thursday to the Economic Club of Recent York, former President Donald Trump proposed the creation of a U.S. sovereign wealth fund to pay for infrastructure projects.
“We’ll create America’s own sovereign wealth fund to take a position in great national endeavors for the advantage of the entire American people,” Trump said. “Why don’t we’ve a wealth fund? Other countries have a wealth funds. We’ve nothing. We’ve nothing. We’ll have a sovereign wealth fund, or we will name it something different.”
Trump didn’t provide specifics on the proposal and added that the name ‘sovereign wealth fund’ might not be “appropriate.” But the thought can be to create a fund, supported with tariffs on certain goods and other revenues, that will be managed by private managers and make strategic investments in U.S. infrastructure.
Former President Donald Trump said he would create a U.S. sovereign wealth fund to pay for infrastructure projects if he wins the presidency in November.
Bloomberg
“We’ll construct extraordinary national development projects and every part from highways to airports and to transportation, infrastructure, all of the long run. We’ll give you the option to take a position in state-of-the-art manufacturing hubs, advanced defense capabilities, cutting-edge medical research, and help save billions of dollars in stopping disease in the primary place.”
The concept marks the newest proposal for a national fund or bank that will be used to finance U.S. infrastructure. Supporters of a national infrastructure bank two weeks ago lobbied Democrats at their convention in Chicago to support a bill that will create a $5 trillion bank.
Several states, including Alaska, Texas and Montana, have successful sovereign wealth funds and lots of other countries have national funds, however the U.S. has never had one. For international funds, infrastructure has change into an increasingly popular investment over the past several years, in line with the International Forum of Sovereign Wealth Funds.
“In 2018, [funds’] direct investments in infrastructure accounted for $6 billion, representing 13% of the annual total. Nonetheless, by 2022, this figure had risen to over $17 billion, or 25% of total investments,” the IFSWF said in its 2022 review.
But most of those investments are in existing, cash-generating assets, and never latest projects, said Michael Likosky, partner at strategic advisory firm Results who has worked for years on national, state and international infrastructure banks. “Sovereign funds usually are not used generally to fund for what Trump’s talking about,” he said.
Trump’s sovereign wealth fund proposal, like lots of the national infrastructure bank proposals, fail to deal with the major problem with constructing big national projects within the U.S., Likosky said.
“Money is just not the issue,” Likosky said, noting that the country is already struggling to spend the entire federal infrastructure money within the Infrastructure Investment and Jobs Act.
“What’s stopping our big projects? It’s that no one can handle the political problems with crossing jurisdictions. There’s been a long time of underinvestment within the country, and the issue is for big projects we handcuff each other,” he said. “If people think a Wall Street banker goes to get people on board, better of luck to them.”
The taxable and direct-pay municipal bond market would prove a more efficient mechanism than the national models, Likosky said, noting that muni market is commonly adept at ironing out local and regional obstacles.
“If the taxable bond market could get more into these difficult policy questions at a bigger scale or with direct pay, simply to get the market going, then that is a way more preferable option.”