Matthews: What Biden can learn from economic reforms of Argentina’s Javier Milei  

What do you call a once-prosperous but now nearly bankrupt socialist-led country when a new president takes office who is passionate about reform? Plan to cut government jobs by 70,000 people As part of an effort to return the country to fiscal health? That’s a very good start!

Or maybe it’s the US model.

Argentina’s President Javier Millay took office on December 10 amid uproar from the Argentine people and general skepticism and disdain from the left and the media, including US media.

Millais, a liberal economist who calls himself an “anarcho-capitalist” campaigned using a chainsaw He promised to reduce the size of the government, curb inflation, switch the currency from the Argentine peso to the US dollar, and close the central bank.Millais won the presidential election Voter turnout 56%including an impressive showing of young voters.

Here’s what he faced when he took office. His inflation rate rose 276 percent over the past year, the highest in the world. According to The Economist. The government owed $263 billion to foreign creditors. And an estimated 50 percent of Argentines lived in poverty.

So, how is Milais doing just a few months into his presidency? Promises made and promises kept.

Voice of America writes:“After taking office, he cut the cabinet in half to nine ministries, cut 50,000 public jobs, suspended all new public works contracts, and stripped generous fuel and transport subsidies.” I like this person!

And now he’s planning the next Cut another 70,000 government employeesHowever, this is only a fraction of the country’s public sector workforce of 3.5 million people, and more than 200,000 social welfare programs have been abolished due to corruption.

Importantly, Millais cut government spending to balance the budget; Foreign exchange reserves increase to $7 billion.

The inflation rate in December was 25.5%, which dropped to 20.6% in January and 13.2% in February. It’s still an outrageously high standard, but it’s rapidly moving in the right direction.

Public confidence up from 20% in December 47.7% in mid-March.

Millay’s reforms are a shock to Argentina’s economic system and are causing financial pain for many families, but they must be implemented quickly so the people can begin to see positive results. did not become.

Coming soon, Mirei plan to shut down the country’s central bank, if he dollarized the economy, there would be no need for it. Central banks should act independently of politics. When politicians have significant control over central bank policy, as is often the case in socialist and authoritarian countries, including Argentina, they force banks to print more money so they can spend (or steal) money. Instruct them to do so. That is one of the reasons why Argentina’s inflation rate is so high.

But how did Argentina, once one of the most prosperous countries in Latin America, become such an economic basket case? Simply put: Juan Peron. populist socialist dictator.

Peron became president of Argentina in 1946, but was overthrown in 1955. He was elected president again in 1973, but died during his term in 1974, and his wife, who was his vice president, became president.

Peron expanded the power of labor unions, raised wages arbitrarily, nationalized many industries (including railroads, utilities, public transportation, etc.), instituted government retirement and health benefits, and They tried to reduce foreign trade in favor of foreign trade. Manufacturing industry. In other words, he accepts roughly the same policies as every other progressive, including Sen. Bernie Sanders (D-Vt.), Rep. Alexandria Ocasio-Cortez (D-N.Y.), and President Biden. It was.

Peron had to find money to pay for government expansion, wages, and benefits, which meant raising taxes on the wealthy, spending more money than the government received, and sending money to the central bank to cover the deficit. It means to have it printed.

Sound familiar? It should. That’s similar to what Biden has done or is trying to do.

Of course, Peron has been gone for decades. However, Peronist Nestor Kirchner was elected president in 2003, and his wife Cristina Kirchner ran for president in 2007 and won. She remained president until 2015 and served as vice president from 2019 to 2023.

After years of populism and socialist corruption and fiscal mismanagement, Argentine voters decided enough was enough and gave Milay, who promised a free market economy, limited government and fiscal responsibility, a chance.

Although the first three months have been encouraging, Millais has a long road ahead and is facing obstacles at every turn, especially from trade unions. But if he succeeds, he could serve as an example for U.S. politicians who want to challenge the Peronist policies of Biden and his fellow progressives.

If Argentina can return to free markets and fiscal responsibility, so may the United States.

Merrill Matthews is a resident researcher at the Institute for Policy Innovation in Dallas, Texas. Follow him on X@MerrillMatthews.