During a speech at the Economic Club of New York, former President Donald Trump suggested the establishment of a U.S. sovereign wealth fund to finance infrastructure projects that would benefit all Americans. Trump emphasized the importance of such a fund, questioning why the United States does not already have one when many other countries do. The proposed fund would be financed through tariffs on specific goods and other revenue sources, managed by private managers, and used to make strategic investments in national infrastructure.
Despite his enthusiasm for the idea, Trump did not provide specific details on how the sovereign wealth fund would operate. Additionally, he expressed doubts about the choice of the term ‘sovereign wealth fund,’ indicating that a different name might be more suitable. Nevertheless, the overarching goal of the fund would be to support national development projects, ranging from highways and airports to advanced defense capabilities and medical research.
While some states in the U.S., such as Alaska, Texas, and Montana, have successful sovereign wealth funds, the country as a whole has never established such a fund. Internationally, many countries have national funds, and investments in infrastructure have been on the rise in recent years. However, experts caution that most sovereign wealth funds focus on existing, revenue-generating assets rather than new infrastructure projects.
Critics of Trump’s proposal, like Michael Likosky, argue that the primary obstacle to large-scale infrastructure projects in the U.S. is not financial resources but rather political and jurisdictional complexities. Likosky points out that the country already struggles to allocate and spend federal infrastructure funding effectively, highlighting the challenges of navigating various political interests and regulatory frameworks.
Alternatives to a Sovereign Wealth Fund
Likosky suggests that the taxable and direct-pay municipal bond market could serve as a more efficient mechanism for financing infrastructure projects at the national level. Municipal bonds have been successful in addressing local and regional obstacles, offering a decentralized approach to funding that may be better suited to the diverse landscape of American infrastructure needs.
While the concept of a U.S. sovereign wealth fund for infrastructure investment has merit, its implementation would require careful consideration of logistical, political, and financial challenges. As the country continues to grapple with aging infrastructure and the need for modernization, exploring alternative financing mechanisms, such as municipal bonds, may offer a more practical and sustainable way forward.