Milei’s chainsaw cuts: Slashing Government waste and stopping inflation

A year ago, controversial economist and occasional rock singer Javier Milei was sworn in as President of Argentina.  

He campaigned with a chainsaw in hand, promising deep government cuts, balancing the budget, radical economic liberalization, and ending one of the world’s highest inflation rates.  

Argentinians, who were facing 25% price hikes every month, decided to give the eccentric libertarian a chance and elected him President.  

The story of Argentina is one that many Latinos have either lived or heard about it. A Latin American country condemned to economic mayhem due to bad economic policies, corruption and a chaotic political system.  

Yet, for once, it looks as if Argentina might be turning the page on decades of disastrous economics.  

Just a year after taking office, Milei is clearly fulfilling his first promise: He has brought inflation under control, as prices are projected to rise by only  2.7% a month at the end of this year.  

How did he do it?   

He kept his promises.  

Argentina: A history of lousy economics 

But before we get to Milei’s first year in government, we need to understand just a bit of Argentina’s infamous economic history.  

In 1913, Argentina was one of the world’s ten wealthiest economies, as the country was an agricultural powerhouse. Yet, over the last 100 years, waves of nationalizations, government regulations, price and currency controls, financial collapses, and inflationary cycles have taken Argentina down to the 74th highest GDP per capita in the world.

When Milei got elected last year, the government’s out-of-control spending threatened to bankrupt (once again) millions of Argentinians, and it seemed like the country was heading unstoppably towards hyperinflation.  

With an economic catastrophe looming, Milei got to work. His first and most urgent task was curbing inflation.  

‘Afuera’: Stamping out inflation and government waste  

Milei’s recipe to slow inflation was simple: get government spending under control. Like he said in a viral campaign video, useless government spending would go “afuera” (out) during his presidency.   

He stayed true to his word.  

Milei dissolved or merged many government departments, reduced the size of the bureaucracy, ended government subsidies in gas, electricity, and other public utilities, and temporarily paused the funding of public works.  

In total, Milei reduced government spending by 28% and did something many people thought impossible: he balanced the budget.  

The result? 

For the first time in over a decade, Argentina reported a budget surplus. 

With less government spending, the Argentinian Central Bank didn’t need to print millions of Argentinian pesos to finance the government. With less money in the market, prices went down.    

Challenges ahead and lessons for America 

Milei and Argentina still have a long road ahead.  

After years of being artificially pumped by massive government spending, the spending cuts needed to bring inflation under control also slowed down official estimates of the Argentinian economy.  

While experts expect the economy to rebound next year after the initial shock from the spending cuts, but there are still many reforms needed to achieve sustainable growth.  

After decades of top-down government control of the economy, doing business in Argentina is a nightmarish labyrinth of red tape and bureaucracy. One that Congress (which Milei’s party doesn’t control) and Milei will need to sort out if there’s any chance for future prosperity.  

If Milei is half as successful as he’s been in his first year and implements substantial freedom-minded economic reforms, then Argentina might very well be on its way to sustainable prosperity.  

What we’ve seen in Argentina is a powerful reminder of how out-of-control government spending and regulations can drive even one of the world’s most prosperous countries to ruin — and how sound, freedom-based policy solutions are the only way to build it back.  

This is true whether you are in Washington, D.C. or Buenos Aires.  

Many Latinos either lived or had families that came to America to escape disastrous policies like the ones that condemned Argentina or Venezuela to economic mayhem.  

That’s why The LIBRE Initiative is pushing for sound economic policies that will protect American prosperity and ensure its success for generations to come.  

If you want to stay up to date on how LIBRE is rallying thousands of Latinos around economic freedom, sign up to our ¡¿Qué Pasa, LIBRE?!  newsletter here.