Sovereign Wealth Fund or Sovereign Wish Fund?

February 24th, 2025

Ian Cheng

The most famous part of Plano, Texas is no longer its extemp speakers! Kentucky Fried Chicken will now move their corporate headquarters there, away from well, Kentucky. The federal government has also enacted a significant change.

Donald Trump and his Secretary of the Treasury Scott Bessent recently announced a plan to create a federal sovereign wealth fund (SWF) for the United States. A SWF is a big pool of money that a country sets aside for foreign investment. For example, Saudi Arabia’s iteration of this, the Public Investment Fund (PIF), is worth about $930 billion. It owns a lot of different assets, like soccer teams, real estate ventures, and large shares in companies like Uber and Disney. The government hopes that the new SWF, which will materialize in the coming year, will improve America’s economy by giving them a big source of income.

However, this is nothing new. 21 states in the US already have their own SWF. The biggest one hails from Alaska, and it is worth more than $80 billion. It sets aside 25% of its oil revenue for investment. Using part of the money it makes, it pays a yearly dividend to every Alaskan, which was about $1700 last year.

Trump’s new plan may all sound great, but there are consequences. SWFs only work when a government has extra money to put into the fund, and that is absolutely not the case for the United States and its $36 trillion federal debt. Financing it will only mean having to loan more money. The country will pay nearly $14 trillion in interest over the next decade, and this hefty figure will offset any revenue that a SWF could bring in. The biggest of its kind in the world, the Government Pension Fund of Norway, brought in $222 billion in profit in 2024.

As a result, to raise funds quickly, the federal government is treating land and natural resources like cold hard cash, completely ignoring other factors that these resources involve, such as tourism. Doug Burgum, Secretary of the Interior, projects all land owned by the federal government to be about $200 trillion. The government is looking more and more like a business.

Furthermore, just leasing natural resources like oil for use is not viable for the insanely expensive SWF. This process only made the US government 17 billion last year, so the US would have to sell entire patches of land off. This approach is already there in the Republican controlled state of Utah, which filed a lawsuit to the Supreme Court. It sought a ruling that would give the state government control over half of the land in the state. The federal government currently controls 70%. This move was likely to make it easier to sell land and make it private, which makes for a quick source of income, but has widespread environmental concerns.

Another fear over why a federal SWF would fail is because Donald Trump’s approach would be to use the revenue for more tax cuts. But, these funds rely on constant investment into developing sectors like AI to increase in value.

In conclusion, a sovereign wealth fund is a very ambitious plan. Unfortunately, it does not look like the right path to take for the United States. This move makes less sense than KFC not being located in Kentucky, and all extempers will likely see why.