The Republican presidential candidate Trump and his benefactor, billionaire Paulson, both mentioned an ambitious plan on Thursday that the United States should establish the largest sovereign wealth fund in the world, even surpassing the current $1.7 trillion Norwegian sovereign wealth fund.

However, many industry insiders believe that this is almost an impossible goal for a country that has been striving to control a huge deficit, like a dream.

When Trump spoke in New York on Thursday, he vowed to establish such a fund using the revenue from trade tariffs. It is reported that Paulson has been advising Trump on this idea, but he said in an interview after the speech that they have not discussed the details of the plan.

In the interview, Paulson said, "To see the United States join this group, no longer having debt but savings, that would be a great thing. Over time, its scale will surpass any existing fund."

Countries with large commodity exports and budget surpluses usually have such sovereign wealth funds.

Currently, these sovereign wealth funds, such as Saudi Arabia's $760 billion Public Investment Fund (PIF) and Singapore's $847 billion GIC (Government of Singapore Investment Corporation), have become increasingly influential players on the global stage, especially in the private market. Their long-term investment and ability to make quick investment decisions make them coveted clients for private equity, venture capital, and infrastructure companies.

"Why don't we have a major wealth fund? Other countries have wealth funds. We have nothing, we will establish a sovereign wealth fund, or we can give it a different name," declared Trump confidently at the New York Economic Club on Thursday.

Where does the money come from under such a heavy burden of debt?

However, the major reality test that Trump will face is undoubtedly where the money comes from!

His tax reduction proposal is estimated to cost as much as 10.5 trillion US dollars over a period of ten years. And currently, the US annual budget deficit has exceeded one trillion US dollars - with still two months before the end of this fiscal year, the US budget deficit has exceeded 1.5 trillion US dollars.

Sovereign wealth funds are equivalent to state-owned investment funds, and like traditional investment funds, they can invest in stocks, real estate, bonds, hedge funds, etc., in order to establish a fund pool to protect the government and the people from economic pressures. However, almost all countries that have sovereign wealth funds have huge budget surpluses, including trade surplus, government-owned natural resource income, forex operations, and government transfers.

The first country to establish a sovereign wealth fund was Kuwait, which established an investment management bureau in 1953 to manage its oil income. Norway's Government Pension Fund Global was established in 1967, and Abu Dhabi Investment Authority was established in 1976 - all intended to manage the surplus oil income.

However, the United States has had a budget deficit for many years and has long relied on borrowing for government spending. Many industry insiders believe that due to the already huge budget deficit, the United States may only be able to raise funds for the establishment of a sovereign wealth fund by increasing net borrowing. However, at the current rate of development, the scale of US government debt may reach a astronomical figure of 36 trillion US dollars in three months.

Although Paulson and Trump are trying to fill some of the gaps through tariffs and cutting unnecessary expenses, it is obviously not a long-term solution. Moreover, it is currently unclear how the sovereign wealth fund proposed by the two will operate, and if a separate government department is set up, it may even affect the operation of the Federal Reserve.

Sarah Keohane Williamson, CEO of FCLTGlobal, said that traditionally the United States does not need a sovereign wealth fund because the Federal Reserve and the US Department of Treasury have the ability to manage similar long-term investments as wealth funds. Both government agencies actively supervise economic stability, foreign exchange reserves, and government financing.

Of course, the United States is no stranger to state-level sovereign wealth funds. Texas, New Mexico, Alaska, and other states have previously had billions of dollars in funds centered around real estate, education, and oil drilling.

Editor/ping