Uncle Sam is investing now. What could possibly go wrong?
5 days ago
- #sovereign-wealth-fund
- #fiscal-policy
- #government-subsidies
- The federal government took an $8.9 billion equity stake in Intel, disguised as an investment, raising concerns about market distortions and conflicts of interest.
- Some policymakers propose expanding this into a U.S. sovereign wealth fund (SWF), despite economists from both sides warning against it.
- Most SWFs exist in undemocratic regimes or resource-rich countries with budget surpluses, unlike the U.S., which runs large deficits and has $37 trillion in debt.
- Advocates claim SWFs can exploit arbitrage by borrowing at low rates and investing at higher returns, but this ignores rising interest rates and displacement of private capital.
- SWFs often become politicized, favoring crony capitalism, lobbying, and ideological agendas, as seen in Australia, New Zealand, and South Korea.
- A U.S. SWF would risk regulatory favoritism, distort policy decisions, and entrench rent-seeking, with no guarantee of fiscal discipline.
- Instead of government-led investments, structural reforms—like deregulation, spending restraint, and entitlement fixes—would better strengthen the economy.