In his February 3 Executive Order, President Trump directed his minions to begin planning for establishment of a “Sovereign Wealth Fund” that he originally touted in a speech to the Economic Club of New York last September. The fund would be on the order of $2 trillion, investing in things like manufacturing hubs, defense, and medical research. The order states:
It is the policy of the United States to maximize the stewardship of our national wealth for the sole benefit of American citizens. To this end, it is in the interest of the American people that the Federal Government establish a sovereign wealth fund to promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish economic security for future generations, and promote United States economic and strategic leadership internationally.
This order reflects a new anti-capitalist economic orientation of the Republican Party, embracing fallacies that government can somehow be made efficient, that tariffs can perform miracles like saving the fiat dollar from destruction, and that selecting the right executive personnel is a substitute for rule of law. Republicans have evidently forgotten the eternal economic truth that planning not driven by free markets doesn’t work; government shouldn’t be trying to pick winners and losers in the business world. Whatever claim Republicans had to being pro-liberty, pro-Constitution, pro-free market, etc. is gone now.
To be sure, it is undeniably true that America is not on a path towards fiscal sustainability and future economic security, and it is losing its economic and strategic leadership in the international arena. However, one does not “maximize the stewardship” of American wealth by forcing the American people to hand it over to presidential appointees. The fact that numerous other states possess such collectivized investment arrangements (a talking point that Trump repeatedly stresses) is not a valid excuse for America to commit a similar blunder.
If one wants to get serious about improving the stewardship of wealth in America and empowering its citizens to have their interests prevail, that wealth should be transferred back into the possession of its rightful owners. Wealth also needs to be liberated from the sort of tax and regulatory regime that favors concentration of stewardship in the hands of Davosian-oriented stakeholders like BlackRock, Vanguard, and State Street and the funneling of funds into lower-yielding investments.
It would also help a great deal if the pursuit of future economic security were to become an individual responsibility again, not reliant upon the unsustainable entitlement obligations of the Social Security and Medicare trust funds and on the unsustainable inflation of the quantity of fiat dollars by the Federal Reserve. It is the capital-consuming nature of the welfare state and its fiat dollar-financing mechanism that has been steadily eroding America’s economic security and fiscal sustainability and forfeiting America’s leadership on international economic and strategic matters.
Rather than entrusting a lot of money to bureaucrats who could give a rat’s a$$ about profits, losses or even the fiduciary duties that they would have in administering such a fund, we should give all the responsibility back to the people who gave the money in the first place! We have dulled people’s perceptions of risk and reward by insuring the uninsurable. Good examples of this problem is the addition of Enron to the S&P500 when the risk of fraud was unknown and theoretically spread over the whole of the S&P500. When Enron went down for fraud all of the passive indices suffered greatly. Let the people who suffer from the losses and profit from the gains control their own money. The results will be totally different.