US Should Implement Argentina's Economic Policies

Argentina has been in the news lately, first for its economic problems and more recently, for the impact its president, Javier Milei, has achieved in combating these problems.

To put the severity of this situation in perspective, Argentina’s annual inflation rate ended in 2023 at 211.4%, the highest since the early 1990s. Unfortunately, the same economic challenges plaguing this South American country are just as prevalent right here at home in America. The only difference is that they’re further along than we are.

Inflation is through the roof, wages are stagnant, and the interest payment alone on our nation’s debt now exceeds that of our entire defense budget. We haven’t even begun to feel a fraction of the financial pain rapidly heading our way.

I’ve been watching Argentina with particular interest lately because the campaign promises made by Milei are along the same lines as what I’ve recommended for decades. Personally, I knew these policies would work because they’re what America was built on. They’re the same policies that transformed our country from a rag-tag startup into the undisputed economic powerhouse leading the world. And while we’ve fallen quite far from our once lofty perch, the same policies can help us return to that position.

That’s what makes the situation in Argentina so important. You see, for generations, students have been propagandized into believing that capitalism is bad and socialism is good. They’ve been convinced that the myriad of problems in our economy caused by government intrusion can somehow be fixed by more government intrusion.

During that time, there haven’t been many cases of countries actually reducing the size of government, so this now serves as a perfect and current real-world example proving that these kinds of policies are actually better, by a long shot, than so-called progressive, big government policies.

That being said, let’s break down the top three policies implemented by Argentinian president Javier Milei, how that has unfolded there, and why we should do the same here in America.

Cut government spending across the board

During his campaign, Milei promised to “attack the system with a chainsaw” to cut wasteful and corrupt government spending, and since he took office on December 10th last year, he’s done exactly that.

Once in office, he immediately cut the Cabinet in half to just nine ministries, slashed another 50,000 public jobs, suspended all new public works projects, and eliminated fuel and transport subsidies. Now, because of widespread waste and corruption, he plans to cut another 70,000 government jobs and terminate over 200,000 social welfare programs.

This was a critical step in turning the country’s economy around because government spending is the single most significant factor driving inflation. That’s because government spending takes money out of productive use in the economy, and most of the time, it’s an infusion of capital created out of thin air, essentially diluting the money supply and causing its devaluation.

Think about it like this—the value of a thing is based on its scarcity. We all understand that when we’re talking about things like gold, diamonds, or even baseball cards, but for some reason, many people don’t seem to understand that the same applies to currency as well.

Cutting government spending will bring about two things. The first is that inflation starts to come down, making everything more affordable. The second is that it makes room in the budget to cut taxes, letting everyone keep more money from their own paycheck.

Prior to cutting spending, Argentina’s inflation was sitting atop a staggering 25.5% perch—the highest in the world, but over the last few months, it has plummeted to 13.2%. Meanwhile, in America, the Federal Reserve is rearranging the deck chairs on the Titanic with meaningless policy changes in an attempt to whittle a few tenths of a percentage off our inflation rate.

Deregulate industry to create a true free market

“The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”

There’s no question we’re facing a housing affordability crisis in America today. The average salary is $59,384, while the income required to afford the average home is $115,000 according to Redfin. These numbers just work in the real world.

Understandably, many people are demanding that the government “do something” to fix this imbalance. The problem is that government involvement only makes things more difficult and expensive instead of actually fixing the issue. Rent-controlled areas in New York and California are examples of how this plays out in the real world.

Argentina faced this same problem, but rather than trying to artificially manipulate the housing market, Milei deregulated it. Contrary to the claims by naysayers of the disasters that were sure to come, the supply of apartments doubled, and prices fell by 20%. This scenario has consistently produced the same outcome both abroad in numerous countries and here at home as well.

This doesn’t just apply to real estate, though. Burdensome regulations add unnecessary cost and complexity to every industry and slow down innovation. It’s one of the key reasons that the overwhelming majority of medical and tech advancements have historically come from America rather than other countries.

Eliminate the central banking cartel

One of the core tenets of Milei’s campaign was to completely eliminate Argentina’s central bank, which he had not yet accomplished but plans to do later this year.

This is an essential step in restoring Argentina’s economy because of the role its central bank plays in its economy. Central banking is also a core part of the American economic system today, and as in Argentina, it has an oversized influence on economic policy, but that wasn’t always the case here.

America’s central bank, known as the Federal Reserve, is a recent development at barely over a century old, established in 1913. And despite what the name might indicate, the Federal Reserve, or simply the Fed for short, isn’t even part of our government—it’s a private entity that’s not subject to oversight by voters despite it controlling our fiscal policy. 

Our Founders vehemently warned against a central bank, and Thomas Jefferson even said a prohibition on central banking was the only thing missing from the Constitution. With a track record now spanning more than a century, it should be easy to see the damage caused by the Federal Reserve’s intrusion into our economy. To put that in perspective, the US dollar has lost over 96% of its value since 1913 when the Federal Reserve took over control of our currency.

Turning the ship around

While I am somewhat pessimistic about human nature, I am ever the optimist when it comes to the human spirit.  There is a quote by G. Michael Hopf, “Hard times create strong men. Strong men create good times. Good times create weak men. And weak men create hard times.”

I believe that we are in the midst of what have been good times in recent decades, but complacency, greed, and corruption will soon put us back into hard times. And the cycle will continue. We will indeed face hard times ahead. Strong leaders will need to emerge, and the citizens will have to endure some levels of pain and austerity for our country to re-emerge as the superpower that it once was.

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Dr. David Phelps created Freedom Founders to help its members achieve the freedom they wanted in their lives by building the necessary financial foundation. He is a noted financial expert who is regularly cited by the media, and recently helped the FL Dept. of Education develop its new financial literacy curriculum.