An American Sovereign Wealth Fund Could Be the Missing Piece in Supporting Working Families

In my global travels, it sometimes feels like everyone from the UK to Singapore has a sovereign wealth fund—except the United States. These once-rare funds are now plentiful and represent over $12 trillion in assets. The idea of an American sovereign wealth fund, a state-owned and managed investment fund that operates separately from central banks, has faced its fair share of skepticism. But the potential to strategically align government funding with long-term national interests can drive broad-based economic progress, benefiting the nation and building domestic wealth. It could be a new chapter in our long history of public-private and philanthropic sector collaboration and innovation and another example of global leadership. An American sovereign wealth fund could address a critical gap by supporting capital investments in innovative ideas that generate quality jobs, finance new affordable housing development, catalyze private sector capital to overlooked geographies like Appalachia, finance the relocation of international supply chains to geographies like sub-Saharan Africa with is massive land and young population and create more opportunity for everyone—all while expanding our economy, increasing the resilience of our supply chains and strengthening our national security. 

Critics may underestimate the potential a government-sponsored investment fund could offer to taxpayers and society at large, but there are three key practical advantages to consider:

• A sovereign wealth fund would have a natural competitive advantage, benefiting from the informational insights available as a government entity. Aligning investment activity with government policy could enhance financial returns, signaling to the private sector where to direct its efforts.
• It would allow for quicker investment in critical opportunities, enabling swift responses to urgent needs faster than many private funding mechanisms can manage.
• The fund could begin on a smaller scale as a pilot program, starting with a few billion dollars and be reassessed after five to seven years.

By catalyzing investments often overlooked by traditional commercial banks, private equity and venture capital, a U.S. sovereign wealth fund could unlock massive potential: it could create and preserve jobs for fossil fuel workers as their companies transition to renewable energy over the coming decades; support the development of more affordable housing to free up income for hard-working families to spend on essentials and leisure; invest in new U.S.-based manufacturing facilities to provide job opportunities for young workers; and invest in energy resources in places like sub-Saharan Africa to gain ground on Chinese and Russian investments in the region. The possibilities are vast, with long-term economic and social impacts.

In reality, the U.S. government is already an investor, though it often doesn’t receive credit or capture the full returns of the value created by its investments. One issue is how we frame it: over time, government funding has gone from being viewed as an “investment” to being labeled as “spending,” a shift that has unfairly stigmatized government-backed initiatives as wasteful. Another issue is perception. We celebrate the risk-taking of young entrepreneurs and Silicon Valley, where success often comes from just one in 20 ventures. These days, lots of capital chases the promise of high returns through venture capital firms when the honest truth is that only 2 percent of all VC firms achieve their expected returns. A more sustainable investment strategy might be to pursue opportunities that generate positive returns over the long term at lower risk.  That is especially true of government investment. As Thomas Edison is famously believed to have said, “I have not failed. I’ve just found 10,000 ways that won’t work.” Yet, government efforts are held to a much higher standard, with every failure condemned and little acknowledgment of the importance of experimentation and innovation.  

History shows that the U.S. government has made investments that have generated trillions in economic value. It has captured some of that benefit through reduced costs from a stable society and tax revenues from corporations — at least those that haven’t fully exploited tax loopholes or offshore strategies. Despite the criticisms, the government has taken risks by investing in semiconductors, the Internet, the human genome, GPS, microwave technology, satellite systems, aeronautics, electric vehicles and many others. It is essential to recognize that the government already operates a type of sovereign wealth fund through its support of venture capital and private equity: the Small Business Investment Company (SBIC) program under the U.S. Small Business Administration. The SBIC program is a federal initiative providing venture capital and private equity funding to early-stage and growing small businesses nationwide. Over the past 60 years, SBICs have financed thousands of small businesses, injecting billions of dollars into the economy. Small businesses, in turn, are the backbone of job creation and play a vital role in driving U.S. economic growth. Remarkably, the program has operated for decades at no cost to taxpayers.

There’s also affordable housing subsidy. It’s hard to lose money when demand outstrips supply.  More investment in affordable housing can free up more consumer spending.  Our economy is dominated by consumer spending, so more discretionary income means a stronger America. A sovereign wealth fund would embody the principles of Patriotic Capitalism as an entity designed to prioritize the nation’s interests, democracy and the common good. It represents a bright bipartisan opportunity to align government investment with the broader goal of advancing economic progress and societal well-being for all.