Trump’s SWF size envy not grounded in reality
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Sept 6 (Reuters Breakingviews) -Presidential candidate Donald Trump lamented on Thursday in a speech at The Economic Club of New York that the United States does not have a sovereign wealth fund unlike other nations. So he proposed creating the “greatest” one of all, which would approach, or exceed, a $2 trillion pot. At the center of this idea, however, is half-baked goo.
Sovereign wealth funds ideally turn budget surpluses and other windfalls into stable long-term income for a country. Take Norway, which has accumulated a $1.7 trillion war chest thanks to prodigious gas and oil exports. The country’s overall budget surplus, including petroleum revenue, was 16% of GDP last year according to Fitch. Because oil fields will eventually go dry, the country needs to have a method to fund itself. Generations to come should reap dividends.
The U.S. economy is hardly in the same position. Sure, it’s the worlds’ biggest oil producer. The trouble is that the country also consistently spends way above its means. Last year the deficit of $1.7 trillion equaled about 6% of GDP. It has contributed to around $36 trillion of total debt, making it equivalent to more than 120% of gross domestic product in total.
Trump has intentions to get the budget in check. He wants to increase tariffs and do “other intelligent things”, like adopt Tesla chief Elon Musk’s plan to cut extraneous spending. But he also plans to significantly reduce taxes. Researchers at the Wharton School of Business estimate Trump’s proposals already would add $4 trillion to the deficit. Additional debt would potentially stoke inflation and raise borrowing rates.
And sovereign wealth funds aren’t necessarily everything Trump cracks them up to be. They often create honey pots for administrators to siphon off sweetness for themselves, or politicians to reward the connected. Norway is the fourth-least corrupt country according to nonprofit Transparency International’s annual perceptions index. But Angola has oil wealth and ranks 122 on Transparency’s corruption scale – that government said in 2019 that $3 billion had been stolen from its fund. Trump’s sovereign wealth fund envy isn’t grounded in reality.
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CONTEXT NEWS
Republican presidential candidate Donald Trump said he would create a U.S. sovereign wealth fund if elected in a Sept. 5 speech at The Economic Club of New York. He said it would be created through “all this money we will be taking in through tariffs and other intelligent things, and we’ll have the greatest sovereign wealth fund of them all, and we should have, and that will be used to do things that will be great for our country”.
He made several other pledges as well. He said he will reduce the corporate tax rate from 21% to 15% for companies that make their products domestically. Trump said he would set up a government efficiency panel headed by billionaire Elon Musk to eliminate federal government waste. Trump also said he would ban mortgages for illegal immigrants in California, saying they pushed up housing prices.
US debt has risen over the past four decades https://reut.rs/3XyL5Ry
Editing by Lauren Silva Laughlin and Pranav Kiran
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