A new U.S. Department of Government Efficiency (DOGE) is headed by Elon Musk and Vivek Ramaswamy. Its goals include administrative reductions, cost savings, regulatory cutbacks, and reducing federal spending by nearly $2 trillion. President-elect Donald Trump has called DOGE the "Manhattan Project of our time," and has indicated that DOGE will reduce regulatory burdens to firms and individuals. But is the act of cutting rules and regulations the same as cutting spending? Does it unleash the economy in a way that benefits everyone or just a select few who don't want the rules in the first place? Right now, it’s impossible to know what DOGE will be able to accomplish, but there is another remarkably similar example we can learn from. Argentinian President Javier Milei took office a year ago with a promise to “take a chainsaw to the state.” As part of that promise, he appointed economist Federico Sturzenegger – a former classmate of Luigi's at MIT – as the Minister of Deregulation and State Transformation of the Argentine Republic. Within a year, Sturzenegger has overseen the review of approximately 42,000 laws, and as confirmed by Milei, is in "direct contact" with Musk. Bethany and Luigi talk to Sturzenegger to understand, most importantly, what Argentina's experience might foretell about DOGE's upcoming role and impact on the United States government and economy.
A new U.S. Department of Government Efficiency (DOGE) is headed by Elon Musk and Vivek Ramaswamy. Its goals include administrative reductions, cost savings, regulatory cutbacks, and reducing federal spending by nearly $2 trillion. President-elect Donald Trump has called DOGE the "Manhattan Project of our time," and has indicated that DOGE will reduce regulatory burdens to firms and individuals. But is the act of cutting rules and regulations the same as cutting spending? Does it unleash the economy in a way that benefits everyone or just a select few who don't want the rules in the first place?
Right now, it’s impossible to know what DOGE will be able to accomplish, but there is another remarkably similar example we can learn from. Argentinian President Javier Milei took office a year ago with a promise to “take a chainsaw to the state.” As part of that promise, he appointed economist Federico Sturzenegger – a former classmate of Luigi's at MIT – as the Minister of Deregulation and State Transformation of the Argentine Republic. Within a year, Sturzenegger has overseen the review of approximately 42,000 laws, and as confirmed by Milei, is in "direct contact" with Musk.
Bethany and Luigi talk to Sturzenegger to understand, most importantly, what Argentina's experience might foretell about DOGE's upcoming role and impact on the United States government and economy.
Elon Musk has proposed cutting $2 trillion from federal spending
>> Federico Sturzenegger: By putting all those safety measures, what is it that you're destroying? Maybe you're destroying you. There are a lot of things that cannot occur in the economy because people cannot go through the hurdle of all this regulation. Okay? So what you kill is much more damaging than what you're trying to protect.
>> Bethany McLean: I'm Bethany McLan.
>> Luigi Zingales: Did you ever have a moment of.
>> Federico Sturzenegger: Doubt about capitalism and whether greed'a good idea?
>> Luigi Zingales: And I'm Luis Zngales.
>> Federico Sturzenegger: We have socialism for the very rich, r rugged individualism, M for the poor.
>> Bethany McLean: And this is Capital isn't a podcast about what is working in capitalism.
>> Federico Sturzenegger: First of all, tell me, is there some society, you know that doesn't run on greed?
>> Luigi Zingales: And most importantly, what isn't we ought.
>> Federico Sturzenegger: To do better by the people that get left behind. I don't think we should have kill the capital system in the process.
>> Bethany McLean: At this point, it's almost impossible not to have heard of doge. It's the acronym for the brand new Department of Government Efficiency, which is going to be headed by Elon Musk and Vivek Ramaswami. DOGE is also a play on the cryptocurrency dogecoin, I guess a favorite of Elon Musk. Clever.
>> Bethany McLean: The M name also serves to obscure the fact that DOGE is not in fact a government agency, but for sure its goals are grandiose, streamlining government, something that has alluded pretty much everyone who has set out to do it, including Ronald Reagan. Nor is Doge going for small. Musk spoke of cutting $2 trillion from federal spending, which is about 30% of the annual figure. Trump has called Doge the Manhattan Project of our time.
>> Luigi Zingales: In their oped maskre, Ramaswami said that at every step, DOGE would pursue three major kinds ofor regulatory resissions, ah, administrative reductions and cost savings. If you believe that the reduction in rules is in itself a good, then it does seem like there are rules to reduce. But if you believe that the government needs to get its pending under control, then may be a different issue. Especially given that under the first Trump administration, the national debt actually increased by 7.2 trillion.
>> Bethany McLean: Do they write with great fury about the, rules and regulations that are promulgated by unelected bureaucrats? Tens of thousands of them each year, they say. Maybe that's true, but that still begs the question of what cutting those rules does for most people other than those who don't want any rules at all.
>> Luigi Zingales: You might already see some realists creeping in. In is OP Pat Ro. Doge will help end federal overspending by taking aim at the 500 billion plus in animal federal expenditure that are unauthorized by Congress or being using way that Congress never intended for. So that's a lot of reduction from the beginning. there is also a question of whose spending is waste? The National Park Service seems be a particular target of conservatives, but why are national parks less valuable than space exploration? Given that Mask has made his fortune on the backs of government subsidy for electric vehicles in space, are those caable?
>> Bethany McLean: Which raises a bigger question that also ties into some of our previous episodes. This is certainly going to be full employment for lobbyists who are gearing up to protect their industries. Another question I have about Doge. My friend Justin Fox pointed out recently in a Bloomberg column that state and local government jobs together make up almost 13% of non farm payroll. So maybe that's too much, but taxpayers expenditure on those jobs is a lot of people's income. Can you cut those jobs without cratering the economy? And if you crater the economy, does Donald Trump's enthusiasm for Doge start to dissipate given that he views economic performance and the stock market's performance, which can be two different things, but as a barometer of his success? And while I have sounded skeptical about what it can accomplish so far, the big subject of government spending is and government regulation is near and dear to our hearts here at Capital isn't we don't believe, at least I don't believe that capitalism functions best with no rules at all. Because without rules, bankruptcy law for instance, free markets would simply be a free for all. But we need the right rules. I don't believe in no government spending, but I do believe that getting the deficit under control is incredibly important for the future of our country. The amount we're spending on interest is only sustainable under perfect conditions. I great economic growth but ultra low interest rates. So I'm big picture enthusiastic about Doge despite my skepticism. I think I'm just worried about whether the goals are possible and I'm worried about the mechanisms that Musk and Raosswami might use in order to accomplish them. And I'm worried that the whole thing will just end up being an exercise in political power rather than something that genuinely reshapes America in a way that allows everybody to thrive.
>> Luigi Zingales: Enthusiastic? I never heard you enthusiastic about anything, so I'm really surprised of this enthusiasm. I'm all in favor of cutting useless expenditures. I think everybody is. Certainly there are plenty in the federal government, but as you correctly pointed out, I think it's very Important to separate the two tasks. One is to cut down expenditures or if not raise taxes in order to reduce the deficit. But the second is to streamline regulation, which doesn't mean to destroy and eliminate regulation, but streamlined. A combination of the two seems a bit misleading in my view.
>> Bethany McLean: So right now it's impossible to know what Doge will do or if Trump and Musk will even still be talking by the time Trump takes office. bets on that.
Javier Millet is trying to turn Argentina into a freer economy
But there is another example of someone doing something similar in Argentina. The backstory here is the election of Javier Millet who became the president of Argentina about a year ago with a promise to take a chainsaw to the state. He actually wielded a chainsaw. Argentina needed it. It was on the brink of collapse with inflation running at over 17,000 annualized. As part of that, Milay appointed economist named Federico Sterzenegger as the Minister of State Deregulation and State transformation of the Argentine Republic. Now thats quite a title. The Financial Times wrote Federico Starzeneger has a big ambition to turn Argentina from one of the worlds most heavily regulated countries into the freest economy on the planet. And a lot of what Serirnaker is trying to do does sound a lot like what DOJ is setting out to do. And Milay said recently that he has spoken to Elon Musk after Trump' victory and that Musk is in contact with Starzenegger. So without further ado, here's Federico Sturzenegger.
Argentina has built a legal architecture which protects several interests
>> Luigi Zingales: So what I heard is that youi started writing a program way before Millet's election and then when, Mile was elected, they passed a law that created your minister and gave you the authority that now you're using. So can you tell us a bit how this was conceived and what was the goal of all this?
>> Federico Sturzenegger: Well, I think this starts about two and a half years ago. One of the presidential candidates asked me if I wanted to help her out with a presidential race. And I said I'm happy to help you out, but you have to understand that once you become president you will fail. I says what do you mean I'm going to fail? Yeah, you're going to fail because Argentina has built a legal architecture which protects several interests. Also you have the interest of the unions, you have the interest of part of the business community, you have the interest of the political class. So these interests have a lot of resources O and they have a lot at stake. They're pretty concentrated and they're not going to let go their privileges easily. O so I can go and try to fight with you against these guys. But it's a little bit like getting on a ring with Muham Ali. I mean I'm not going to be of much use you after, after two seconds I'm going toa be laying on the floor. So she says okay, but you're teasing me. You're actually teasing me. There has to be something that can be done against this establishment, against this status quo, against this system. The important thing in this thing is something which I call the Marx principle. It's I think the most important lesson I give my students. And Marx happens not to be Karl Marx. It happens not to be GR Marks. It refers to a guy called Daniel Marx who is just a friend of mine whose last name is Marx. Okay? The story is that in 2001 I was Secretary of political economy and he was secretary of Finance O below Minister Cavalo. And we have a discussion with Cavalo one day, a very lengthy discussion with Cabalo. The Cabalo was a big debater and okay, we have to do A or B A or B or bn. We discussed six hours and finally we conclude we have to do A. And then next day in the morning of signs the resolution doing B not A. But we had discussed six hours and we had concluded A. So I go to talk to Daniel Markx and say oh, we were fooled. I mean we discussed they did be and said no, no, he says we were not fullool. Orasioendo who was kind of the legal advisor of Cavalo had come that morning with the resolution written and the resolution was B. So when Cavalo had to decide, he said we had a big theoretical discussion about doing A and no paper on the table. And then they had this lawyer who put the paper on the table and said B so do B O. So I learned the most important lesson in politics is that if you want to shape a debate, you just have to put the paper on the table. You have to put the solution on the table. Ok? So I said I'm going to do this with this laws trying to carve out from the legal system in Argentina all the privileges for this. Well, these capitalists which are not capitalists, okay, which are rent seekers and for the unions which have a lot of perks. I mean the unions in Argentina take, you won't believe this, 3% of all formal salaries in Argentina monthly Oay. And that's in the law. It's written in the law. So my strategy is David versus Goliad. So I Told this presidential candidate, I'm going to prepare the stone of the bid for you. And she said, oh, and what is the stone of the beat? Oay? I said, after you have to throw it, okay? And you have to hit the guy, okay? So I say, okay, the stone is as follows. I'm going to read the last law that the government has passed and I'm going to tell you this law should stay, it should be repealed or it should be changed. And if it should be changed, I'm going to write how it should be changed. After reading the last law, I'm going to read the one that comes before the last law, ok? And then I'm going to read the one that comes before that one. And then I'm going to go all the way back to 1880 and review the whole legal structure of Argentina. And I'm going to be trying to carve out of this legal architecture all the privileges that have been built in the law. And so she said, you're totally nuts. I said, probably you're right. But okay, we're going to start. So I started doing a job which eventually involved around 100 people. Soina has 4,200 laws. They are divided in chapters. So let me give you an example. You have the environmental chapters. Say, for example, one important environmental law in Argentina is what we call the glacial's law, which is a law which protects and surface surrounding glaciers and prohibits economic activity in these areas surrounding the glaciers. In some cases, some provinces completely cannot do economic activity, in mining, for example, because of this law. Okay, so you think this law has a problem, download the law from the website and you start typing the changes that you want on the law. And what I'm going to do is I'm going to analyze the changes in the law, okay? Everybody who participated in and this was not paid, so it was voluntary. Everybody was. Of course we were working for Patricia Woolrich, which was the front runner candidate at the time. The Milay phenomenon was not so much in the horizon at the moment. Then comes the election, the morning after Mile wins that, this candidate that had been working for says, federico, don't get disillusioned. And we immediately decided to bring this program and this work that we had done and Javier loved it. He was like moaning O when we were actually describing the thing, ok, like he was having an orgasm. O. And when he became a president, we basically had everything there. Okay? So we started with an executive degree in emergency circumstances. The president can exercise legislative powers. So we should have very Sweeping theregulation decree which change. Repealed dozens of laws. Changed dozens of laws. And it had a tremendous impact right away. Oay deregulated entire markets, etc. And then a m few weeks later we presented to Congress comprehensive set of reforms. It was a 1000 article like omnibus bill. This law in IT s Article 3 grants the executive for a year the power to remove legislation which we think is obnoxious or useless or it'just a deadweight loss on the economy. So what happened is that initially I told me later I was going to help him kind of on the side, not taking a position. But when the law came into effect and we had one year of this what we call delegated powers to change legislation, he said now Federico, you have to become and become a minister and go full throttle with what remains to be done. Correct? Because we've already done quite a bit. And that's how I started in July as minister of dere regulation and state reform. The president has two very significant ideas which is economic freedom and fiscal balance.
>> Bethany McLean: So how did you find your way out of the conundrum as such between what you wanted to get done and the laws that were set in the constitution and the caste power? In other words, how did that get broken such that you were able to do anything? Because that seems like a conundrum that just could have stopped everything from moving whatsoever. And especially given that Malay, at least to my understanding, had only small majorities in Congress.
How did these sweeping laws get passed that allowed you to take action
How did these sweeping laws get passed that allowed you to take action?
>> Federico Sturzenegger: Well, I would say didn't have small majority, had even small minorities because for example, we only had 38 deputies out of a chamber which is close to 300 and only eight senators for a chamber of 70 something. So I mean the mandate was very strong, had a very strong electoral win. It's difficult for a president which is sworn in with such a mandate not to give him some initial support. Now of course we came in with a law and we left with a ah, completely different law. So we had to exercise a lot of well, basically discussions and things that we had to live along the way, things that we had to change. So I mean, I think we lost a lot of the things that I would loved to have seen. But I think it's tremendously impressive what the president has achieved in terms of the piece of legislation that we got. For example, if you take the unions, the union power is built from the fact that many, many years ago a military dictatorship did two things. First, he granted the unions, the ability to manage the health system, which is a unique institutional environment. And then the other thing is that there's, mandatory contributions to the unions, even if you're not unionized. Okay. So for example, in the executive decree, we remove that, but then the, unions got an injunction in the judicial system immediately. O which stopped that reform. Ok. Then eventually we brought the reforms to Congress because we got it stoped there. And then Congress passed very significant pieces of labor reform in the basis law. But for example, this issue which has to do with the financing was not touched. Oay so we couldn't get that through because these groups, I call them blocking agents. Correct. So it's blocking agents. So they weren't going to block the reforms. So how do you deal with the blocking agents? Well, for me, the only way dealing with the blocking agency is to reduce their financing. If you kind of drain them of resources, then you weaken their ability to block the reforms. O so but for example, one of a very significant thing in Argentina was support for the most vulnerable in the society. The government made transfers to them, okay. And they were typically made through what we called some intermediaries. So there were social organizations which take the money, who took the money from the government, gave it to the people. O so this intermed for 20 years it has been like that. This guy, of course, took a cut from that money. But then they forced people to march against the government so that they could tell the government, look, people are. They'marchgining against. You have to give me more money so I can calm the people. And so let's say that the protest against the government were financed by the government. Correct. You say, how do I get rid of this? Well, I transfer the money directly to the people, which has all sorts of benefit because nobody takes a cut their money. They're the most vulnerable. You want as much money as possible to get to them. They also don't have to spend five days, whole week, a whole labor week doing this protest against the government. They can work during those, during that week. but nobody dared challenged the system. And when Milay came into power, he said, I'm going to challenge the system. This is ridiculous. So they cut the financing, they transferred the money directly to the people. These guys lost their financing. And when they lost their financing, they lost their power. Maneu and I'm going to say one more thing which I think is very interesting because it's new. The president tweets a lot. That is one of his most important jobs. Because, say, for example, I Say, okay, this industrial group has this particular privilege. And I say it in a conference, and I named the group. Okay, the newspapers put that on their top cover. Correct? Because when you actually name the company, it's kind of. It's a good story. And Mil retweets that. So when he retweets that, he's sending a signal. Maybe he's just retweeting it because he's supporting his ministers. He likes the idea. But the guy who, who has to lobby against that reform says, what should I do? I mean, the president is supporting this. So I think it's a whole combination of things. O of which I think this last point, I think it's kind of interesting that Twitter may be one of the most important weapons and the most effective weapons to fight against these corporate groups which are trying to block the reform.
Interest groups have been much more effective in having Congress block the reforms
>> Luigi Zingales: Let's talk a bit more about this corporate group because, you went into details on the unions, and, I'm more interested in the industrial, because I heard this story that when Mil, went to the Casa Rosada, which is the White House of Argentina, there was a butler who was retiring after many, many years at the Casero Rosada. And so he asked the butler what was his experience? And the butler said, oh, I've seen a lot of presidents come and go, but the families were all the same. And sometimes they were the children because the old parents were dying, but the families were all the same. So what is the strength that allows the Mile to fight against those families? And can you give me an example, of what kind of big family that pressured the president, and the president stood up and, cut their privileges?
>> Federico Sturzenegger: I mean, there are different versions of stories that it was a chef here, it says, well, the presidents come and go, but those who come for dinner are always the same. O so it's the same idea in the case of, Milay. Let me just give you an example of these kind of things. For example, in Argentina, satellite Internet was forbidden. There are a few companies which provide Internet in Argentina associated with large media conglomerates. And these guys had blocked the axis of satellite Internet. that's why I say sometimes countries are poor not because they don't have the technology, they don't have the capital. They don't have the human capital. It's because there's a paper, okay? So look, there's a paper, and the paper says you can't be rich, because I'm telling you here that this you. You cannot do. So the only thing you have to do is pe up the paper and then you're rich. Okay? For example, so what we did in the executive dereeee, we opened up satellite Internet and immediately kind of several companies started operating. The one which is more visible of course is the Starlink. But the thing of Starlink is that suddenly you could get Internet wherever you wanted. In Argentina the state spent 00 pesos. Okay? It was just The only thing you had to do is the paper that you lost. Okay. In writing that you could do it. Okay. The pushback has been in Congress. These interest groups have been much more effective in having Congress block the reforms. I have a very funny story that I tell which is that we did the executive cre. The CEO of one of the largest corporations in Sanentina calls me and says feddererico, I want to congratulate you. Ten days later we sent the law to Congress where all the privilege of that industry of that company were removed. My phone, okay? It rings, okay. The same guy calls me and I say ah, Frerico, I always. I knew you are an academic because you know, when you hit their interest, the insult is you're an academic. That piece of the legislation lasted four days in the bill. Four days. Because four days later a governor calls us and says oh well, you need our votes for the base law. You have our votes. But that article, those articles have to go, ok? Because obviously it was an industry which was located in that province. So I think the business community is I think in Congress has been very effective and of course they have also a little bit of mixed feelings now because for example company valuations have doubled, have tripled. The business community is not homogeneous. You have the guys which are the How do you say that Capitala isn't o. You have those guys and then you have some guys which are victims. I mean I would say the agricultural sector is a victim of the system or, or the small and medium sized enterprises are victims of the c. So it's not a homogeneous thing. I mean that cap. Capitalaismens, those that are not capitalists, even though they say they are, are ah, generally the more concentrated groups.
>> Bethany McLean: That's funny. So now I know, Luigi, when you disagree with me, I'm just going to accuse you of being an academic. I have my.
>> Luigi Zingales: I think you already do that.
>> Bethany McLean: No, maybe.
Milay has spoken repeatedly with Elon Musk and Trump on deregulating regulations
But so seriously, it's been reported that either Milay has spoken directly to Trump or you've spoken directly with Elon Musk. Is that true? And can you give us any details on it? And more broadly, do you think there are any analogies or lessons in what Argentina is doing for what Mus and Ramaswami are going to try to do in the United States?
>> Federico Sturzenegger: Milay has spoken repeatedly with, Elon Musk and Trump on what he's doing. And I think thisregulation thing has captured the imagination of many people because of how massive and how strong it has been. The attempt and the change everywhere where you deregulate prices fall in real price around 30%. That's kind of my ballpark, figure. But to be honest, I think the inspiration of Elon Musk, because I'm a big admirer of Elon Musk, I wrote his biographyation, comes from the problems he's had with regulatory pushback for SpaceX. And he says something to the team, which I repeat in my regulation sessions here when I talk with other ministers, which is, it's not about, he says to the team, it's not about minimizing risk. It's about finding quickly when you have a problem and solving it. Because if in a rocket you want to make sure that in the first launch it doesn't fail, and then you have to put this machine, this machine, this machine to cover different risks. At the end of the day, you have a rocket which, weighs twice as much, takes you 10 years more to construct, and cost $2 billion. He throws the rocket. If it explodes, he figures out why it explodes and then he corrects it the next time. And it's a much cheaper procedure. And if you think about that for a second, it's very much the same with regulation, because the bureaucracy feels that their job is to reduce risks. So you go to a meeting and say, okay, I want to free this. And then the bureaucrats are saying, oh, but this could happen. O and this could happen. But I'm telling the guys, look, you're trying to solve a problem that we don't even know if it exists. Why don't we give freedom and then if there is a problem, we solve the problem. Because what you cannot assess is by putting all those safety measures, what is it that you're destroying, Maybe you're destroying. There are a lot of things that cannot occur in the economy because people cannot go through the hurdle of all this regulation. Okay, so what you kill it'much more damaging than what you're trying to protect. O and the other thing which I thought is very interesting of Elon, which I also used a lot, is that in the Tesla production, he said, we have to delete processes, delete process. We have to simplify. And the only way I know you've done enough is one day you come back to me and say, look, Elon, I've eliminated this. And now I realize I made a mistake. I should not have deleted this. Only when you asked me to put back something, then I know you've deleted enough. So I think his business experience already had the seed of this thing that he's trying to do in the US and we're going to be watching very closely to learn from that. I know that Javier gave him my contact and I'm definitely waiting for him to call, but unfortunately I have to report that it has not happened yet.
What is your test to say you've gone too far on environmental regulations
>> Luigi Zingales: Okay, we know that a lot of the regulation is, whent seeking, etc. But some is also, for good reason, especially environmental regulation to protect Leias might be excess in the area that they protect, but they need to protect against speculation, et cetera, etc. So what is your test, when you've gone too much, in the case of a line of the code you say, oh, I actually needed, so I go back. In some cases it'a rocket explore. In some other cases, maybe that some people die. What is your rule to say you've gone too far?
>> Federico Sturzenegger: There is. To be honest, I don't have a rule. I mean, it's kind of intuition, you know, each case is different in terms of assessing, the benefits and risk of each particular thing. So, I'll give you an example. For example, we have a discussion now. In most countries of the world, you have a guy who basically brings the boats into port. And now in Argentina, these guys are, almost like a monopoly. They charge $50,000. I told my guys, look, we have to leave the ministry and then all'become go to work with that, okay? Because if it's 50,000 to bring a boat into the port, I mean. So I said, okay, we're going to get rid of this, okay, we're going to make the use of this option. And people said, oh, you're totally nuts. You're absolutely nuts. Because when, the Exxon Vales came into Anchorage and hit the rocks, it created a catastrophe. Correct. But it so happens in the River Plate in Argentina, which is the river that you come, there are no rocks, there are only sandb bankanks. Ok, so we've never had in our history that you going into the port of Honenos Aires, you can break the hull. Correct? The most what you can get is you can get stuck in a sandbank and then someone has to pull you out, of course, which you get a big fine and everything. So it's a risk that you're taking. Now it's 50,000 per vote that you pay in every vote that comes for a. Okay. One has to. You have to make an assessment on this. Okay. It's a difficult one in each case, but I think we're so, so way to the tail of this, Luigi, you know, and we'll see how it works. Now if you say people will die, people will die. And certainly you're going to be more careful with that.
What has any of this made you think about what the line is between inappropriate use
>> Bethany McLean: Okay, so another big picture philosophical question. What has any of this made you think about what the line is between the appropriate use of the levers of power to achieve an outcome no one thought was possible and inappropriate use? You know, there's desperate times call for desperate measures. The end justifies the means. But even if the ends are, what everyone wants, are there some means that aren't okay as a way of getting there?
>> Federico Sturzenegger: Not really. I mean, we have a republic and it's a constitutional republic. So we have kind of operated fully within the margins of the law. We've respected all the judicial. I mean, as I was tolding you a while ago about the labor reform. And then the labor reform got an injunction injustice. Okay, okay, fine. We got the injection. Okay. We waited to see if the Supreme Court would reverse that. They didn't. We took it to Congress. So. But beyond that, it's all by the book.
President Milay wants to reduce government expenditures and reduce taxes
>> Luigi Zingales: So President Milay has declared that he want to minimize this size of the state, even getting out of, role like antit trst or stuff like that. So what is yourandund where you want to go? Are you really a minimalist in which, you only. The state should only do administration of justice or even lessnesscess sometimes. Milays said he's in anarcho capitalist. Anarcho capitalist, as you know, would like to privatize even, sor law enforcement. Where do you stop?
>> Federico Sturzenegger: Well, I would say that, now we truly believe that the state is totally overblown in size. We did an exercise which I thought was a very interesting because initially we cut about 15% of the public employees. We got 30% of the, bureaucratic structure. And now we're doing the deep motoierra, the deep chainsaw. Oay. We go from chainsaw to deep chainsaw. What is the deep chainsaw is that now we want to go into every area and ask the people, what do you do? And then we figure out if that should continue or not okay. When we started doing that, I immediately realized that I needed a framework to have that conversation. What are the things that we think this government should do or what should not do? So I kind of ask the president to use one meeting of our cabinet meetings to have this discussion. What should a deliverarian government do detached from every specific area. Correct. it's more like a conceptual thing. So we drafted a list of the things that we thought the government should do and the, things that the government should not do. Ok, but for example, if something is something that could be done at the municipal level, the national government should not do it. Okay? If it's something that should be at the provincial level, it's something that the private sector could do, why should the government do it? Okay. If it's credit, why should the government give credit to people? If there's a financial sector to do that, the government has to provide macroeconomic stability. So that's the national government. And we have a little bit of a problem, which is not our problem. But Argentina is a federal country, okay? So you have the national government, you have the provinces, and you have the municipal. And over the last, I would say 15, 20 years, both the provinces and the municipalities also. Greru. Now, the president has a very, let's say, respectful approach to federalism. So he says in a particular province, the governor supports very big government expenditure and has to charge people a lot of taxes. And people are willing to vote for that. It's their problem. O It's not something that I should kind of make a statement. I basically propose for the national government a small government. People voted for me. I'm going to implement it, okay? And I'm going to put candidates in the next elections which are going to carry the message. I want to reduce government expenditures, say to a third or 40%, and reduce taxes. And then people will decide if they want to go that way or not. But there's one thing that is interesting, which is that over the last 20, 30 years, the provinces and the municipalities get their resources through mechanisms that are managed by the national state, by the federal government, for example, the municipalities get their taxes from adding them to the electricity bill. So of course everybody pays it. Correct. Because, who's not going to pay for the electricity? So it's a fantastic way of collecting taxes with. It brings up the base. But the problem is that it works so, so well that this guy doubled the size of government expenditures. It has been so effective as a means of tax collection at the provincial and municipal level. We're basically thinking about the fact that maybe it's time to say, well, if you're going to spend this, you have to take responsibility for this. Okay. And if you are going to be, it's going to be visible that you are charging this, then maybe this will reduce. I'll give you an example that we discussed in cabinet, which was that in, municipality here in the greater Buenos Aires area, mayor added a tax on gasoline, you go to fill the tank, you were paying a municipal tax which was added onto the price of gasoline. Correct. Imagine how different that would be if when you pull into the gas station, there's a little bit like a little thing there. The, mayoral says, oh, sir, how much pump are you going to charge here? Oh, 50,000 pesos. Okay, you have to give me 10,000 pesk. And you see the difference? No, one thing is you go to the pump, you charge, you pay 10,000. Nobody. There's no one from the municipality there, and there's so many says you have to put them. I think they burned, you know, they burned that in two minutes, the thing is burned and obviously that service station blows up to pieces and everything. Okay, you can imagine the whole scene. O so we're kind of thinking how can we make the provincial governments and the municipal governments more accountable for their expenditure? Because today it's kind of like their tax collection is a little bit, kind of with low political cost. But to be honest, beyond that, we think that the provincial and municipal decisions, I think many governments have made a big effort to change the way provinces and municipalities behave. And the President Milay says, guys, we have to make the national government work. That's a responsibility. That's what people voted us for.
Tess Viigland: I disagree with you about Argentina's deregulation efforts
So we're going to focus on this thing here.
>> Matt Hodap: If you're enjoying the discussions that we're having on this program, there's another University of Chicago podcast network show that you should check out. It's called the Pie. Economists are always talking about the pie, how it grows and shrinks, how it sliced and who gets the biggest share. Join veteran NPR host Tess Viigland as she talks with leadanning economists about their cutting edge research and key events of the day. Hear how the economic pie is at, the heart of issues like the aftermath of a global pandemic, jobs, energy policy and much more.
>> Luigi Zingales: I think that the first thing we need to tell our listeners is that we shouldn't necessarily transpose everything from Argentina to the United States because Argentina is a particularly bad scenario. what is the expression to extreme, pain Extreme remedies. So I think that when the situation is really desperate, people do extreme actions. I'm not so sure that we need the same kind of actions in the United States.
>> Bethany McLean: I was thinking the same thing, but I actually disagree with you a little bit in the sense that I think there's obviously a lot of low hanging fruit in Argentina and obviously the problems were dire. So you had a population that was willing to go along with Milay's proposals out of exactly that. Desperation in the US Isn't there yet. And I'm actually not sure how much low hanging fruit we have. I mean if you talk to Elon Musk or another conservative and they talk about shopping funding for Planned Parenthood and talk about getting rid of the National Park Service, okay, but none of that is going to fix our budget deficits. So I'm not sure the low hanging fruit is there. But I guess the place where I disagree with you more is that I thought m the mindset was very revealing and I think that, that that mindset is very Trumpian or very indicative perhaps of how Trump and maybe Musk think about this. And listening to Federico talk, I thought that I could hear them all in a room together. And so I did feel like listening to him that I got a little bit of insight into the mindset.
>> Luigi Zingales: I have to disagree with you that in the United States there is not a similar demand. After spending a Thanksgiving with my wife's relatives who are old Trumpion, I feel that there is a big chunk of America with a huge demand to deregulate. Deregulate rigol. Fortunately the situation of americcca is not as bad as the one of Argentina. But certainly there is a huge pent up demand for this.
>> Bethany McLean: Well, let me be clear. I think that gets back into the modddle of what Doge has presented which is yes, I agree there's a huge demand, to deregulate but, but that's different from spending cuts and whether there's a huge demand to cut spending and how I suspect they're probably lower hanging fruit on the regulatory front than there might be on the spending side, at least on the spending side in a way that makes a meaningful difference in the budget. But you know what, I'm actually guessing and so I guess it'll be interesting to see what Doge comes up with.
>> Luigi Zingales: But on the insights that I got to apply to the United States, one thing that where I was quite impressed by him is the fact that he prepared this plan for a year and a Half before the elections. I don't know to what extent Ramaswami and Elon Musk have done that or had a team of people doing that in advance because now would be much more difficult to do it now that everybody knows that this is in play. And the pressure is going to be enormous. And imagine the poor employee of this, dolge that would be pressured by enormous amount of people all over the place. I think that the ability to walk under the radar for a year and a half is priceless. And so they already start with a big disadvantage vis a vis, Argentina.
>> Bethany McLean: I thought he was very upfront about the way corporate interests have tried to protect, their own pork as Argentina has attempted to dismantle the regulatory state. And I thought that too was abso for the United States and perhaps, ah, a roadmap of here lie dark places or here in these dark corners, danger lies, for anybody trying to do this in the US because you can only believe that special interests will be lobbying ferociously in order to keep the parts of the rules and regulations and government spending that benefits them.
>> Luigi Zingales: Yeah, to this point I'm not a legal as expert, so I don't know whether you could do in the States what that has been done in Argentina and what I know could be done in Italy, which is to give this legis power temporarily to the executive. I think that the separation of power in the United States does not allow this to take place. I stand to be corrected by somebody who knows more because I think this is very important. In a moment with a very strong mandate, you got Congress to pass basically to write a blank check that you can do whatever you want under certain of course parameters, but then you can implement it in a room without a constant assault of all the lobbyists and the blackmailing power of all the lobbyists. And it says the example of the governor that was blocking the law is very indicative. Imagine how many senators in the United States can block a law.
>> Bethany McLean: I actually started to wonder how much of what, Musk and Ramaswami might see as bloat is actually under the control of the federal government and how much is at the state level and how much control of spending, jobs, anything actually rests with the federal government versus the states and where the problem really is. And I thought that would be a really interesting topic for further exploration that I've not seen written about, although it's possible I just missed it.
Bethany: Do you think Trump will disproportionately cut money to blue states
>> Luigi Zingales: Let me break it to you, Bethany. The losers here is us from Illinois and people from New York, and other Blue states because the low hanging foods for the federal government is to cut transfer to states who are in structural deficit forever with the excuse of COVID the Biden administration, transfer a lot of money to states, particularly blue states. This is gonna end. These are low hanging fruits for the federal government, but is real pain for the state and local governments. And Chicago is number one target in this list.
>> Bethany McLean: I'm going to ask a really naive question just for the sake of getting you to it. Exp boound on that. Do you think that's true that more money perhaps than was necessary or disproportionately was steered to blue states? And do you think there's a risk now that Trump will be unfair and disproportionately cut the money going to blue states? I can't even, I can't even say that without starting to laugh.
>> Luigi Zingales: Yeah, why don't you go to the next question. This is such a softball that I didn't expect that from you. I think you didn't want to say you wanted me to say that. Yes, I did.
>> Bethany McLean: But it just actually is yet more evidence that the US has gone in the wrong direction because I asked that question tongue in cheek and I was laughing as I said it. And yet it's actually horrifying that I should have to ask that question and that I should be laughing as, as I said it because that's, allow me to sound idealistic, but that's just not the way it should work.
>> Luigi Zingales: No, I completely agree. But to be fair, some states are particularly poorly governed and Illinois is one of those. And there is no particular reason that other states subsidize this bad governance. So there is something to be said to reduce this even if we are on the losing side of that equation.
>> Bethany McLean: On a more humorous note, I thought it was really interesting. I wasn't aware until he said, until Federico said that Malay is so active on Twitter. Be fascinating to actually compare the Malay and Trump's Twitter accounts and see if his communication style is actually Trumpian. Who's more effective? Who says more outrageous things?
>> Luigi Zingales: I did know about the outrageous things, but I actually thought that the point he made was not just humorous, was really substantive. It is true if there is a strong executive, lobbyists are more afraid to go after and more often than not they don't even try because they don't want to waste time and money. The moment you see that there is weakness then is basically a feed in frenzy.
>> Bethany McLean: I agree with you. And while I made a light hearted comment, I was actually thinking the same thing, which is that I've always been adamantly opposed to Trump's use of Twitter as utterly unpresial. And how awful. And this actually made me think, maybe there's a purpose to the madness or a method to the madness, and even a method that we might all celebrate, which is that if it allows somebody access to an executive, access to the population that isn't mediated by lobbyists in the political process, maybe that can be a positive thing as well as, not just a negative thing.
>> Luigi Zingales: Wow, Bethany, you actually admit that disintermediating the journalist is a good thing.
>> Bethany McLean: Well, the journalists were disinter A long time ago. Believe me, I no longer have any illusions about that. Now, if the journalists had to be disintermediated, we need to disintermediate the lobbyists and the other politicians. So this is just. If I had to be disintermediate, then for sure I want the lobbyist disintermediate. Anyway. The only. I did wish that he had offered a more. A slightly different answer on this issue of authoritarianism, because I understand that everything they're doing is within the letter of the law and the Argentine Constitution. But at the same time, there is this interesting line that comes into play whenever you have somebody using the rules, and even if you are using the rules, not abusing them, but using the rules to get things done that no one thought you could do. The line between that and authoritarianism is a fine one. And I think it's worth. It's easy to celebrate it when it's the things that you want to see get done and, easier to see that the line has been crossed when the things that are happening are things you don't want to have done. This sort of intellectual consistency that it's necessary to have around authoritarianism, it can't be good when it's the things you want to see happen and bad when the things you don't want to see happen. You have to have a line.
>> Luigi Zingales: I agree, but I think it's a little bit excessive at this stage to call, mile, art authoritarian because.
>> Bethany McLean: Oh, I do too. I do too. But I still think it's an interesting philosophical question, even if it doesn't apply here.
>> Luigi Zingales: I think it is a very interesting philosophical question. But at some level, if you don't have some strong government, you have government by strong or powerful interest. And that's one of the reason why I was, a bit disappointed by, and I understand he's a politician in this phase, not an economy. So he didn't want to put a limit to what he's doing. But the fact that he was basically unwilling to say that there are some limits in how much you want to cut the government. And honestly it was pretty shocking when he said that he took the risk of polluting the Rio del la Plata that basically provides water for the entire city of Buenos Aires because he wanted to cut the power of those unions, or whatever. I think kudos to him that he'goting the power of the unions, but. But the risk is pretty big.
>> Bethany McLean: Yeah. What do you need to keep in space in place? And I'd actually love to hear people, in the US Answer that too. If you do want to strip away rules and regulations and you want to strip away government spending, what in your view should be left? What rules and regulations do we need? What spending do we need?
>> Matt Hodap: Capitalnism is a podcast from the University of Chicago Podcast Network and the Stieler center, in collaboration with the Chicago Booth Review show, is produced by me, Matt Hodep and Lia Czreen, with production assistance from Utsaf Gandhi, Sodom Kim, Sebastian, Burka, Andy she, and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. If you'd like to take our conversation further, Also check out Promarkket.org, a publication of the Stieler center, and subscribe to our newsletter. Sign up at Chicago Booth. Edu steier to discover exciting new content, events and insights. We hope you'll join our community today again at chicagobooth. Edu Stieler.