The President of the Argentine Republic Javier Milei speaks for the first time to all Argentines from the balcony of the Casa Rosada. December 10, 2023. Photo courtesy of the Office of the President of Argentina.
According to Daniel Raisbeck and Gabriela Calderon de Bugos of the Cato Institute, the recent defeat of President Javier Milei’s legislative omnibus bill opens up the perfect moment for him to advance one of his signature campaign promises, the dollarization of Argentina. They write:
Since Milei ordered the bill to return to committee, the government will start from square one when it comes to measures that, unlike the content of the December “mega‐decree,” require legislative approval. At the moment, therefore, the government’s ability to pass its agenda has become more uncertain.
A Blessing in Disguise
Regardless, Milei should treat his recent legislative defeat as a blessing in disguise. The contretemps offers an opportunity to rethink his political strategy. Milei should focus on the one, fundamental measure that is most urgent for Argentina, and at the same time neither requires the approval of Congress nor is liable to being reversed by any future government.
That is, Milei should finally act on his flagship campaign promise of dollarizing Argentina’s economy and shutting down the central bank.
As we argued recently, the government’s current strategy of keeping the peso in order to dilute both the debt and the deficit might serve to solve Argentina’s fiscal problem on paper. The corollary is the necessary dilution of peso holders’ savings and purchasing power. The dilemma exposes the fundamental flaw of Finance Minister Luis Caputo’s economic plan: it involves maintaining high inflation levels—the most pernicious of taxes— for the sake of the government’s balance sheet. This despite Milei’s unequivocal campaign promise of “destroying” inflation, which had already reached triple digits when he won the presidential election in November.
Balanced budgets are, of course, desirable and necessary, to the extent that, as Warren Buffett has proposed, politicians who run deficits should be ineligible for reelection. Nonetheless, the methods through which balance is achieved matters as much as the achievement itself. After all, the Soviet Union reported fiscal surpluses for over 60 years prior to its eventual economic and moral collapse.
In Argentina’s case, the root cause of the country’s economic problems is politicians’ unfettered fiscal profligacy, with chronic deficits monetized by means of a subservient central bank. At this point, however, addressing the fiscal question without taking the monetary problem head on is a mistake. We are not alone in our assessment.
Read more here.
Milei in Italy 2024: This Is How You Reduce the State.
About: Afuera, status quo, corruption, ministries, social programs, public employees, public works, discretionary funds. pic.twitter.com/EBcBHUCxdK
— Milei Explains (@Milei_Explains) February 13, 2024
If you’re willing to fight for Main Street America, click here to sign up for the Richardcyoung.com free weekly email.
