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Musk wants his crusade to radically slash federal spending to resemble what is underway in Argentina, where the leader's name is now synonymous with drastic budget cuts.

Why it matters: Musk previewed last month how influential he might be on Trump-era fiscal matters.

• His admiration of the "chainsaw-like" approach in Argentina shows how hard he could push to axe the size of America's government — maybe with some success.

What they're saying: "The example you are setting with Argentina will be a helpful model for the rest of the world," Musk told Argentine President Javier Milei in an exchange on social media platform X.

• Vivek Ramaswamy, tapped by Trump to lead the Department of Government Efficiency (DOGE) alongside Musk, said late last year: "A reasonable formula to fix the U.S. government: Milei-style cuts, on steroids."

The big picture: The U.S. fiscal situation is starkly different from that of Argentina, a nation prone to financial and economic crises stemming from government overspending and sovereign debt defaults.

• Milei, a self-described "anarcho-capitalist," has been cheered by U.S. right-wing politicians who see his rise as an example of Trump-like populism spreading beyond America's shores.
• Most appealing to Musk and others might be how the eccentric economist — known to pose with a chainsaw to signal his affinity for spending cuts — has defied global naysayers with unconventional policies that look successful.

"Milei has changed the conversation about economic policy — not only in Argentina, but I think maybe a little bit more generally, too," Steve Hanke, a Johns Hopkins University professor who advised Argentina's economic officials in the 1990s, tells Axios.

• "But there is a tremendous amount of low-hanging fruit to pick in Argentina — it's just a different system," Hanke adds.

Between the lines: Milei cut government spending by about 30%, roughly in line with the share of spending DOGE wants to eliminate in the U.S.

• But spending cuts in Argentina happened in a very different context. Milei's austerity measures aimed to arrest double-digit inflation after years of failed economic reforms.

"There's a real sense of urgency in Argentina, that something dramatic has to be done to save them from the abyss," Cato Institute's Johan Norberg, who interviewed Musk and Milei in Buenos Aires last year, tells Axios.

• "Musk almost single-handedly has shifted the debate in the U.S. — suddenly there is a discussion about spending and whether things can be reformed," Norberg says.
• "That doesn't mean there is a popular mandate to do it, because I'm not sure that sense of urgency is there."

Milei laid off thousands of federal workers, scrapped many of the subsidies supporting Argentinians, eliminated government agencies and halted public works projects.

• Inflation has plunged as a result of Milei's shock therapy: In November, it was 2.4%, well below the 25% when he took office.

Yes, but: Milei's shock therapy comes at a steep cost to the real economy. Poverty rates last year soared to the highest in 20 years, according to the government's statistics agency.

Before DOGE is implemented, US debt must be restructured. You cut GDP before you restructure debt, you collapse revenues, you increase defaults.

Debt:

[ATTACH=full]190627[/ATTACH][ATTACH=full]190626[/ATTACH][ATTACH=full]190624[/ATTACH][ATTACH=full]190620[/ATTACH][ATTACH=full]190619[/ATTACH][ATTACH=full]190618[/ATTACH][ATTACH=full]190617[/ATTACH][ATTACH=full]190616[/ATTACH][ATTACH=full]190615[/ATTACH][ATTACH=full]190614[/ATTACH]

[ATTACH=full]190628[/ATTACH]

Which would drive a stronger USD...exactly what we don't want. Stronger USD causes selling of US assets (outlined above by foreign holders).

[ATTACH=full]190629[/ATTACH]

Very choppy market.

I've made a few trades today but mostly sitting tight waiting for a trend to develop. It will likely remain choppy until Trump takes over and the chump Biden is relegated to the history books.

US markets are closed for Jimmy Carter's funeral on Thursday.

jog on

duc