The United States spends trillions of dollars annually on military and foreign aid. Yet, it lacks the financial tools necessary to secure its economic future. While the Inflation Reduction Act and CHIPS Act provide welcome investments in clean energy and semiconductors, they fail to address the more significant, long-term need for sustained and strategic industrial policy. The United States needs a sovereign wealth fund (SWF) — a national investment vehicle capable of turning tax dollars into high-yield returns that can reshape the economy for decades to come.
Countries like Norway, Singapore and Saudi Arabia have used SWFs to turn resource wealth into economic resilience. Though the United States does not have a similar natural resource windfall to fund such a vehicle, we have something even more potent: a $6 trillion annual budget. By reallocating even a fraction of the nearly $900 billion spent annually on military and homeland security, we could build an SWF to drive growth in industries like semiconductors, clean energy and manufacturing.
This is not about replacing the IRA or CHIPS Act; it’s about going beyond them.
The IRA and CHIPS Act are legislative milestones, but they are time-limited and narrowly focused. They aim to solve specific problems, such as spurring domestic semiconductor production or incentivizing clean energy adoption. However, they rely heavily on subsidies, tax credits and grants — mechanisms that encourage private-sector investment but don’t give the government a direct financial stake in the returns.
An SWF would flip this dynamic. By acting as an investor rather than a subsidy provider, the United States could ensure that taxpayer dollars catalyze economic growth and also generate financial returns. These returns could be reinvested to fund future initiatives or offset national debt. Moreover, an SWF offers flexibility, something the IRA and CHIPS Act cannot. As industries evolve and new opportunities emerge, a SWF can pivot its investments to stay ahead of global trends.
This approach is not unprecedented. Agencies like the Defense Advanced Research Projects Agency (DARPA) have shown how targeted government investment can lead to transformative innovations like the internet and GPS. However, DARPA’s mission is focused on early research and development, primarily for military purposes. It cannot scale these innovations into entire industries. An SWF could fill that gap by funding infrastructure, commercialization and large-scale production — essential steps to secure long-term economic strength.
Funding an SWF doesn’t require gutting the military budget. Redirecting 5 percent to 10 percent of the $800 billion defense budget — $40 billion to $80 billion annually — could seed a robust SWF. This would still leave the United States with the largest military budget in the world while unlocking significant resources for economic investments.
Some areas of military spending are ripe for reallocation. Take the F-35 fighter jet program, which has ballooned to $1.7 trillion in lifecycle costs. Or the maintenance of Cold War-era nuclear weapons systems increasingly disconnected from modern security threats. Even reducing administrative inefficiencies — the Pentagon’s overhead costs exceed $100 billion annually — could free up billions.
The potential returns on these investments are staggering. Consider the semiconductor industry, where the CHIPS Act is trying to close a $50 billion funding gap. Or clean energy, where large-scale investments in battery technology, wind farms and green hydrogen could ensure energy independence while creating high-paying jobs. An SWF could fund these initiatives not as a one-time expenditure but as part of a sustainable investment strategy, ensuring that these efforts yield long-term economic and financial benefits.
The idea of an SWF may seem politically ambitious, but it holds bipartisan appeal. Democrats could support an SWF to bolster green energy, manufacturing and high-tech industries — aligning with climate and labor priorities. For Republicans, the emphasis on generating financial returns and reducing dependence on foreign suppliers aligns with fiscal conservatism and national security.
An SWF also reframes the conversation about national security. For too long, the United States has equated security with military spending. In a world increasingly defined by economic competition, strategic industries like semiconductors and renewable energy are as critical to our security as tanks and fighter jets.
Skeptics might argue that countries with SWFs are poor compared to the United States due to their smaller size and dependence on natural resources. However, the United States can look to other examples. Canada’s Alberta Investment Management Corp. and Australia’s Future Fund demonstrate how governments in complex, resource-rich economies can successfully manage investment vehicles to secure long-term prosperity.
Of course, the United States faces unique obstacles. Its federal system makes coordinated economic planning more difficult. High national debt limits the appetite for new spending. These are not insurmountable challenges. A modest, phased approach — beginning with a small reallocation of military funds — could test the concept and build political momentum.
The stakes could not be higher. The global economy is entering competition over clean energy, semiconductors and emerging technologies like artificial intelligence. Meanwhile, geopolitical tensions threaten the stability of supply chains. The United States has the resources to lead, but only if it uses them strategically.
A sovereign wealth fund offers the best way to secure America’s economic future. By transforming short-term expenditures into long-term investments, it ensures that taxpayer dollars not only meet today’s challenges but also prepare us for tomorrow’s opportunities. The time to act is now.
