President Trump is not the first world leader to insist that the government take stakes in private corporations. But outside of crisis moments such as the Great Depression and the 2008 financial meltdown, the idea has mostly been rejected in the United States — until now.
Since taking office 18 months ago, the Trump administration has turned Uncle Sam into an eager shareholder, announcing investments worth $26.7 billion in equity in 30 companies, according to research by Jonathan E. Hillman of the Council on Foreign Relations. Through the 2028 fiscal year, the administration will pump about $14 billion more in federal money into the stock market through government-subsidized “Trump Accounts” for children. These experiments pose some risks, particularly that the corporate investments will distort competition.
Mr. Trump and corporate chief executives are nevertheless contemplating an even larger — and more economically perilous — idea to mix the government’s interests with those of private businesses: having the public hold shares in artificial intelligence companies to build popular support for A.I.
OpenAI’s chief executive, Sam Altman, has reportedly proposed that his company donate 5 percent of its shares to a “public wealth fund,” with other A.I. companies encouraged to follow. “Returns from the fund could be distributed directly to citizens, allowing more people to participate directly in the upside of A.I.-driven growth, regardless of their starting wealth or access to capital,” an OpenAI policy paper explains.
This idea would fail to stanch public skepticism of A.I. or protect workers from A.I.-fueled disruption in their industries, and it would also weaken the U.S. economy. There is a better option to socialize the benefits of A.I.: The government should simply tax companies instead.
At OpenAI’s latest private valuation, $852 billion, 5 percent of the company would be worth $42.6 billion — about the same as the administration’s 30 industrial-policy investments plus its Trump-account subsidies. If the government took 5 percent of the top dozen tech companies involved in A.I. — Nvidia, Alphabet, Microsoft and so on — its new public wealth fund would be stocked with shares worth well over $1 trillion, dwarfing its other experiments in corporate investing.
“It almost becomes a partnership with the American public,” President Trump mused about the idea. “The American people can benefit from the success of A.I. … It would be a beautiful thing. And it would make them rich.”
But the risk of distorting the business playing field would be severe, as illustrated by the Trump administration’s largest equity bet so far: its purchase of an $8.9 billion stake in the chip company Intel. Around the time of that investment, Commerce Secretary Howard Lutnick reportedly began pressuring tech leaders to award contracts to Intel.
According to The Times, those on the receiving end included Jensen Huang of Nvidia, Elon Musk of SpaceX and Tim Cook of Apple. All three heavyweights now do business with Intel. The fact that Intel’s stock has soared is seen by the administration’s sympathizers as a vindication of its decision to take an equity stake. It could also be seen as a red flag signaling cronyism.
At least in the case of Intel, there is a national-security justification for Mr. Lutnick’s arm-twisting. The United States relies dangerously on semiconductor plants in Taiwan; it needs to foster its own national champion. In the case of OpenAI, however, no such rationale applies: Most of the world’s top A.I. model providers are American.
But the temptation for the government to help its portfolio companies would remain. If some A.I. companies donate stock to the wealth fund and others don’t, the government may bias corporate customers in their choice of A.I. partner rather than letting them choose the best one. That would be great for the A.I. companies that have the Commerce Department as an ally — but not great for the economy.
The wealth fund would also fall short of making all Americans wealthy, contrary to presidential speculation. In the minds of tech enthusiasts, the future value of OpenAI and its peers will be so astronomical that even a 5 percent stake could transform citizens’ living standards. But if those projected supervaluations come true, A.I. companies will be so menacingly powerful that they will probably be regulated, heavily taxed and might even be nationalized.
Consider a bullish but less extreme scenario. The shares of A.I. companies rise 20 percent per year for the indefinite future, beating the 11.5 percent annual return on the S&P 500 index over the past two decades. Ten years hence, an initial endowment of, say, $1.5 trillion worth of stock would be worth $9.3 trillion, or a bit less than $30,000 per U.S. citizen. That is a lot less than the Alaska Permanent Fund, a similar scheme built on the state’s oil and mineral revenues, which has about $124,000 per inhabitant and pays out a dividend of over $1,000 per year to each of the state’s eligible residents.
The A.I. fund, buoyed by its high-growth portfolio, might pay out a more aggressive annual dividend — say, 15 percent. Still, each citizen would receive roughly $4,400 per year, or $3,600 in today’s money after adjusting for steady 2 percent inflation. Even under bullish assumptions, in other words, the public wealth fund would be miles from offsetting the fallout from any A.I. jobs apocalypse.
The better response to the A.I. jobs threat is tax reform, which, to be fair, OpenAI also advocates. Rather than redistribute resources from a narrow roster of tech companies, the government would impose heavier levies on all companies through higher, across-the-board corporate taxes, capturing the upside of the technology both from A.I. builders and from A.I. customers.
Higher company taxes — especially on the huge windfalls that some companies earn above the normal return on capital — would pay for lower taxes on workers’ labor. This would wean the government off revenue it raises through taxing workers’ payrolls, which will decline as workers are replaced by machines. And by making it less expensive to hire humans, the policy would slow their displacement.
Unfortunately, the Trump administration seems to relish taking public stakes in private companies. Announcing a flashy new public wealth fund is politically attractive, whereas tax reform is difficult. Rather than the remedy that works, we might end up with the one that the president and his people find more seductive.
Sebastian Mallaby is a senior fellow at the Council on Foreign Relations and the author of “The Infinity Machine: Demis Hassabis, DeepMind, and the Quest for Superintelligence.” He co-hosts the council’s podcast “The Spillover.”
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