What Milei said about the State

But it's interesting... because you all, deep down, look, the big reality is... you have to acknowledge that competitiveness depends on your costs and you have labor costs, tax costs, which is nothing more than what relates to the size of public spending... if you want, you can add infrastructure and the cost of capital; well, we have decided to lower taxes, lower the cost of capital, deregulate the economy, and support infrastructure built by the private sector. In fact, we have tendered 9,000 kilometers of roads, we are moving forward with another stretch of 6,000 more, we deregulated the waterways; thus, we are doing the same in terms of trains.

And I say this as Head of State. Therefore, not only have we lowered public spending, but we have lowered it to the extent that we additionally reduced more than three points of GDP; we lowered almost four points of GDP in taxes.

If we manage to maintain our program and the Argentines decide to support us next year, until 2031 we would be returning to Argentines 500 billion dollars in tax reductions. That indeed is freeing them from the burden of taxes, which are theft.

Having said this, let’s go to the issue... Oh, well, there was another option regarding the deficit. Yes, there was the option to raise taxes. Well, not for us. In fact, we lowered them. So the only alternative was to reduce public spending; there was no other option. In fact, the true fiscal pressure that a government faces is the size of public spending. So, you will have to finance it somehow.

And in all this, the task of the State is very simple and I have already explained it: stop being a nuisance. Keep removing obstacles, continue lowering taxes as the surplus allows, and provide the rules so that no future government can roll them back. When it comes to tax reduction, we have not only lowered it by four points of GDP. If we manage to consolidate in the elections and validate the model, starting to have growth consistent with all we are doing, think that the country risk for what is our management, that is, what matures by 2027, is very, very far below the general country risk.

Yesterday, in an extraordinary talk given by Minister Sturzenegger, one of the things he said is, under no circumstances should you consider presenting a project to the president that involves generating a fiscal deficit; that is wonderful; and furthermore, in no way should you consider presenting the idea to raise taxes, and in fact, we made the fiscal adjustment by lowering public spending, and we have lowered public spending so much that it has also allowed us to reduce fiscal pressure by three percentage points of GDP.

In order to have a frame of reference, we reduced public spending in real terms by 30%, which is to say an adjustment of 5 points of GDP, something that was claimed to be impossible to achieve over a term, and we did it in one month. Because in a gigantic State that exploits its citizens, it is only right, above all, to reduce the weight of the State. Although everyone said it was impossible, six months into our mandate we eliminated all sources of monetary issuance to stop deceiving Argentinians with seigniorage and thus restore confidence in our currency, a fundamental condition for being able to grow economically.

That is, the goal is not for the RIGI to converge with the rest of the economy, but for the rest of the economy to eventually have the same treatment as the RIGI. In parallel, we have managed to reduce the state workforce by 20%; we have reduced senior positions in the Public Administration by nearly 40%, saving society 2 billion dollars a year, without affecting the quality of a single service or competition. We have also returned most state companies to equilibrium.

We lowered internal taxes on cars and motorcycles, tariffs for hybrid and electric cars, tariffs on cell phones and internal taxes on electronic products and the internal tax on insurance. Now all that’s left is for the provinces and municipalities to do their part, for which we have facilitated a tool to report excessive fees, checking it on a page.

At the same time, we have just approved the RIMI, for partial investments, which will enhance the expansion of a large part of the SMEs in the country, allowing them to quickly amortize the purchase of capital goods. This measure was approved as part of the labor reform, which will modernize for the first time in over 50 years labor regulation in our country, in line with the dynamics of the present.

Furthermore, the reduction in spending that allowed for the reduction of both explicit and implicit taxes leads to greater economic freedom and thus greater levels of prosperity.

This also explains why the historical ups and downs of prime time television do not result in economic tremors, much to the disappointment of petty politicians and monkeys. When the foundations of the program are maintained, the noise of the moment is nothing but that: just noise. At the same time, we set out to absolutely reduce the State. That is how we closed more than 200 areas of the Executive Branch with duplicated or obsolete functions, and dismissed more than 40,000 public employees, whose salaries weighed heavily on the already burdened shoulders of the private sector.

Consequently, we must make fiscal balance mandatory for any state budget, whether national or subnational, but fiscal balance alone is not enough; it must be accompanied by a severe reduction of public spending in order to return to society what the State currently confiscates through taxes.

Therefore, we must also establish a fiscal target so that by 2027, consolidated public spending in Argentina is a maximum of 25 percentage points of GDP, as all of us committed to in the May Pact, where both the National State and the provinces and municipalities will have to fulfill their part. Because the smaller the size of the State, the greater the economic freedom, greater economic growth, higher per capita income, and, therefore, fewer poor people in Argentina. In other words, the true trade-off is whether we are willing to accept more public spending to have more poor people. I prefer to reduce the State and have fewer poor people in Argentina.

Of course, this cannot be achieved simply by managing the State better as it exists or by properly administering its resources. The only rational path is to shrink the State to the smallest expression possible. Reducing the size of the State is, in itself, an act of justice, because every reduction of the State is a subtraction from the taxpayer. From our perspective, the only acceptable State is the smallest one possible, to return to the citizen what belongs to them.

The interesting thing is that this process of justice has a political correlate because, by its nature, the State party has historically financed itself with poorly allocated public spending and shady deals with the State. That is why shrinking the State is cutting off the hose to the State's clients entrenched in it, who exercised fierce resistance to change, using taxpayers' money to keep them subjugated.

On the other hand, if the economy does not grow and revenues are lower than estimated, automatic spending will also fall and we will reduce discretionary spending until we still reach zero deficit. Therefore, this time it will be the public sector and not the private one that will absorb the effects of the disturbances that the economy suffers. In summary, our budgeting methodology will achieve three unprecedented goals: one, it will shield fiscal balance forever, ending the punishment of debt and issuance; it will compel the state to take charge and absorb the effects of disturbances in the economy; and when there are better times, as there will be in the coming years, it will force us to return the excess collection to society through tax reductions.

This means that, if this methodology is maintained from now on, we will not only be able to reduce taxes but also the size of the state, which is the real tax pressure. I want to repeat it to be clear and devoid of doubts: this methodology we are presenting in the national Budget safeguards the fiscal result, whatever the macroeconomic scenario may be. No matter what happens to the economy, no matter if our estimates are right or wrong.

Just as the deficit is the heart of the problem, the reduction of spending to achieve a surplus will be at the center of the solution. Why? Because it is the only way to return to Argentines the fruits of their labor that the State today steals with taxes. Zero deficit will make the debt sustainable, the sustainability of the debt will lower the country risk and reduce the financial cost, contributing to an increase in investment and savings, and consequently to the rise of real wages, which is the only way to reduce poverty and indigence.