President-elect Donald Trump and Argentina’s President Javier Milei at Mar-a-Lago on November 14, 2024
Courtesy presidential office of Argentina
Self-described anarcho-capitalist President Javier Milei of Argentina became the first foreign leader to visit President-elect Donald Trump since he won a second term, arriving in Florida Thursday to attend a gala dinner at Trump’s Mar-a-Lago resort, where Milei was a VIP speaker.
“The world is a much better place, and the winds of freedom are blowing much stronger,” now that Trump had been elected, said Milei.
He called Trump’s Nov. 5 victory, “The greatest political comeback in all of history, defying the political establishment even at the risk of his own life.”
Milei also name checked another attendee in the gala crowd: Tesla and SpaceX CEO Elon Musk.
“I would like to thank the great Elon Musk for the wonderful job he has been doing to save humanity,” Milei said through an interpreter.
Milei’s presence in Florida Thursday, and his warm words for Trump and Musk, offer a glimpse of what is an evolving, and important, dynamic between the two American billionaires and a leader who has promised to save Argentina’s long struggling economy through “shock therapy” — deep spending cuts and slashing regulations.
Musk and Milei are already big fans of each other. They’ve met several times, and Milei has been to the Tesla factory and posted photos of the two together.
A photo Milei posted in September shows Musk sporting a “dark MAGA” hat, Trump’s campaign logo written in black on black.
Photos from the Thursday gala posted on social media showed Musk, Milei and Trump together, all smiles.
Musk has spent the last week at Mar-a-Lago, acting as one of Trump’s closest advisers as the president-elect fills his Cabinet with unexpected picks — several of whom have promised to bring their own kind of shock therapy to the federal agencies they’ve been chosen to lead.
Trump has also announced that Musk and entrepreneur Vivek Ramaswamy will lead a “Department of Government Efficiency,” that will be dedicated to drastically cutting the federal budget.
The announcement fulfilled Trump’s campaign promise to give Musk a major role advising his administration on government spending. Despite the name, the DOGE will not be a federal agency, acting instead as an outside advisory panel to the White House Office of Management and Budget.
Still, Musk claims he can cut $2 trillion out of the roughly $6.75 trillion U.S. budget. The only place where cuts on this scale have been implemented in recent years is Argentina, under Milei.
“All government spending, it either becomes inflation or direct taxation. The Department of Government Efficiency is going to fix that,” Musk said at Trump’s Madison Square Garden rally last month.
To understand the origins of Musk’s notion of reducing the federal budget by a third, consider what Milei has accomplished.
Since taking office last December, Milei has cut Argentina’s federal spending by 32%, according to the Center for Argentine Political Economy (CEPA).
In a country where annual inflation rates have topped 300% and destabilized the nation, this October, inflation in Argentina hit its lowest level since 2017: 2.7%
Much of Milei’s agenda comes down to eliminating federal spending. And according to Milei, Musk has turned to Argentina’s leadership to find out how.
“The U.S. has noticed and is following our example,” Milei said at a META Day Argentina conference Tuesday in Buenos Aires. “Musk is speaking to [Minister of Deregulation] Federico Sturzenegger about how to deregulate the U.S. economy.”
In Argentina, Milei reduced the number of ministries by 13, leaving only nine. More than 30,000 public sector workers were fired. He halted all infrastructure projects.
The drastic cuts have had equally drastic consequences, throwing Argentina’s economy into a deep recession. Argentina’s GDP fell by more than 5% in the first quarter of 2024.
However, the World Bank estimates that the worst is over, and that by the end of the year, the overall contraction will be roughly 3.5%. The bank also predicts that Argentina’s GDP will grow 5% in 2025.
To be sure, cuts of this magnitude would likely be much harder to execute in America than they were in Argentina. To start, Argentina’s national budget is much smaller than the U.S. at approximately $101 billion, which is less than the budget of New York City.
But unlike Milei, it’s not clear whether American voters have given Trump a mandate to cut spending like Argentine voters gave their president.
Reducing the federal budget was Milei’s number one campaign promise; he frequently carried a chainsaw around with him on the campaign trail as a symbol of his determination to eliminate bloated government spending.
Milei won his election last year by 10 points, suggesting that a significant majority of voters were on board with his plan.
Trump, meanwhile, campaigned on securing the border and improving the economy, but mostly through tax cuts and tariffs. Fiscal restraint did not figure prominently into Trump’s campaign platform.
This reality has not gone unnoticed by the markets.
Since Trump’s election, there’s been a notable rise in long term U.S. interest rates, suggesting the possible return of the so-called “bond vigilantes.”
Coined by Ed Yardeni of Yardeni Research back in 1983, the phrase “bond vigilantes” refers to notion that if fiscal and monetary authorities won’t control their spending, the bond market will, by imposing much higher borrowing costs.