Mark Cuban, billionaire entrepreneur and outspoken critic of government inefficiency, recently took to Twitter to express his strong opposition to the idea of a U.S. sovereign wealth fund. He didn't mince words: "A sovereign wealth fund, while a country is running a deficit, is stupid. Period, end of story."
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Cuban's critique comes as both Democratic and Republican leaders discuss the potential creation of a U.S. sovereign wealth fund. Such a fund would allow the government to invest in areas like technology, infrastructure, or energy security and use the profits to help fund national priorities.
Other countries, like Norway and Saudi Arabia, already use these funds, often backed by surplus oil revenues. But for Cuban, the U.S. has no business even considering the idea – at least not in its current financial state.
“It Makes No Sense At All”
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Cuban's main argument is simple: Norway can afford a sovereign wealth fund because it has a surplus. In contrast, the U.S. is running a deficit, which makes the whole idea nonsensical in his eyes. “If the government had a surplus, maybe. But with a deficit, it makes no sense at all,” Cuban tweeted. For him, it's like borrowing money to make risky bets, which is far too dangerous when you're already in the red.
Norway, for example, has a massive sovereign wealth fund, financed by its oil revenues. The fund is worth about $1.7 trillion and helps ensure that future generations of Norwegians benefit from today's oil profits.
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Alaska also has a fund, the Alaska Permanent Fund, which invests oil revenues and even pays its residents annual dividends. According to Cuban, these examples are a world apart from the U.S. situation, where taxpayer dollars, not surplus revenues, would back any sovereign wealth fund.
Cuban agrees with economist Justin Wolfers, who also argued against the U.S. creating a sovereign wealth fund in its current financial situation. Wolfers said a deficit government would borrow money to gamble with it. Cuban fully supported that point, adding that taxing people to invest in a fund that might not even earn solid returns is, in his words, "stupid."
Despite his criticism, Cuban admitted that a sovereign wealth fund might work under certain conditions. In his view, if the U.S. had a surplus – like Norway or Alaska – it could make sense to establish a sovereign wealth fund. In those cases, the government wouldn't need to heavily tax citizens or borrow money to invest. Instead, it could use surplus revenues to grow the fund responsibly.
Although politicians from both sides seem interested in the idea, Cuban's criticism points out the risks of pursuing this plan while the country is already in debt.
As former Treasury Secretary Larry Summers told Bloomberg, it's "hard to believe that setting aside lots of funds for unspecified investments made in unspecified ways, where you don’t even know what it’s going to be called, is a particularly responsible kind of proposal."
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