When he was running for president, Donald Trump declared that Social Security didn’t need to be touched. Last week, President Trump confirmed this premise, telling Fox News’ Sean Hannity, “Social Security won’t be touched.”
However, there’s one change the president wants to make that might have huge implications for Social Security if some Republicans get their way. Could a controversial plan by President Trump pave the way for the biggest Social Security change ever?
On his first day back in the White House, Trump signed an executive order directing the Treasury secretary and commerce secretary to come up with a plan to create a sovereign wealth fund. And he gave them 90 days to finish the task.
What is a sovereign wealth fund? It’s a fund owned by a government that invests in assets, including stocks, bonds, and real estate. These funds can be used to save for the future, help supplement government budgets, and/or make up part of a country’s core economic policy.
Several countries have had sovereign wealth funds for years. For example, Singapore has two sovereign wealth funds that help pay for education, healthcare, infrastructure, and more. Norway’s sovereign wealth fund enables the country to stabilize the economy when oil prices fluctuate. Saudi Arabia uses its sovereign wealth fund to help finance strategic commercial projects.
The president’s executive order immediately attracted supporters and detractors — from both sides of the political aisle. Dominic Pino, with the conservative publication National Review, wrote, “The potential for cronyism with a sovereign wealth fund is dizzying.” Romina Boccia with the libertarian Cato Institute argued that a sovereign wealth fund “would invite political interference in capital markets, opening the door to cronyism, favoritism and inefficiency.”
What does the creation of a sovereign wealth fund have to do with Social Security? Perhaps nothing. President Trump’s executive order mentioned using returns from investments “to promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish long-term economic security, and promote U.S. economic and strategic leadership internationally.”
However, Mark Warshawsky, a senior fellow with the conservative think tank American Enterprise Institute, suggested that Social Security’s trust funds were “a possible source for a large and quick infusion of funds” for a sovereign wealth fund. While Warshawsky explained how this funding might work, he expressed serious reservations about the creation of a sovereign wealth fund.
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