Let’s give credit where credit is due.
Facing down a record-high budget deficit and an entrenched inflation problem, the government is finally embracing fiscal responsibility in a significant way.
Thanks to sweeping spending cuts enacted this year, the government has posted three consecutive monthly budget surpluses – leading to a reduction in money supply growth and a marked lessening of inflation pressures.
This hopeful state of affairs doesn’t apply to the government of the United States, of course. It describes what the government of Argentina is achieving under its new president, Javier Milei.
The free-market economist turned politician had campaigned with a chainsaw in hand, vowing to cut government bureaucracy and bring down Argentina’s triple-digit inflation rate.
The media dismissed him as an eccentric protest candidate. Then when he shocked everyone by winning the election decisively, the media said he couldn’t or wouldn’t actually follow through on his bold campaign promises.
Rare is the politician who does.
But after just a few months in office, Milei has actually abolished dozens of agencies and fired thousands of state bureaucrats. He has slashed government bureaucracy by as much as 50%.
Milei has declared there will simply be no more deficit spending in Argentina: “Zero deficit isn’t just a marketing slogan for this government, it is a commandment.”
Conquering inflation remains a work in progress. After decades of rule by socialist politicians who promised endless streams of benefits that were never fully paid for, Argentina’s economy was careening toward ruinous hyperinflation.
Last month, the monthly inflation rate in Argentina fell below 10% for the first time in years.
The official inflation rate in the United States has never reached Argentinean proportions. But its spiraling debt is starting to draw comparisons to countries that have seen their currencies and economies collapse due to reckless fiscal and monetary policy.
Washington, D.C. has been warned over and over again that it needs to change its spending habits. U.S. government debt has been downgraded twice by major credit ratings agencies. Its own central bank has called its fiscal path “unsustainable.”
The Congressional Budget Office, Social Security and Medicare trustees, and other independent watchdogs within the government itself have also sounded alarms.
All to no avail.
Now the International Monetary Fund is warning that unsustainable growth in U.S. government debt – which is projected to soar from $34 trillion to $46 trillion within a decade – poses a threat to the global financial system.
Meanwhile, Congress has just refused to even consider the recommendations of a bipartisan commission on tackling the debt.
Legislators have decided that they don’t want to be told they are spending too much money they don’t have and are promising too many people too many benefits that cannot be paid.
It seems clear at this point that politicians will not act to avert a crisis. They will only act in response to one when they have no other alternative.
For a brief period in the late 1990s, it appeared as though federal finances were on a sustainable path. Republicans in Congress pushed hard to balance the budget. And President Bill Clinton famously declared, “The era of big government is over.”
The era of big government wasn’t over, of course. It continued to grow year after year regardless of which party controlled the levers of power in any given year. And despite former President Donald Trump’s vows to “drain the swamp,” the D.C. swamp is now bigger and murkier than ever.
Nobody in Washington even talks seriously about balancing the budget anymore.
For decades, fiscal conservatives have been trying to axe funding to the National Endowment for the Arts and the Corporation for Public Broadcasting.
Cutting these non-essential programs wouldn’t balance the budget, obviously. But the fact that they seem to be untouchable even though they are unaffordable symbolizes the broader failure of U.S. fiscal policy.
By contrast, Argentina’s Javier Milei wasted no time in cutting off funds to state-sponsored media outlets.
Will the United States become the next Argentina? It’s looking like the U.S. will have to experience a much worse inflation problem before the government feels compelled to change course. Things will likely have to get worse before they get better.
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