The presidents of the United States and Argentina are political allies, but that does not mean they share the same views on all issues.

The biggest difference is probably that Javier Milei is an ardent supporter of free trade and Donald Trump is an irredeemable protectionist.

But let’s not overlook their differences on fiscal policy. While they both favor lower taxes, there’s a big gap in their approaches to government spending.

• Javier Milei is very serious about shrinking the public sector.
• Donald Trump is lukewarm at best about controlling spending.

And because they have different views on the problem of government spending, that leads to dramatically different outcomes when looking at the symptom of government debt.

Here’s a chart, based on the IMF’s World Economic Outlook database, showing gross general government debt in both nations starting in 2023 – including projections of debt levels until 2031.

Let’s analyze what led to these numbers, starting with Argentina.

Milei was elected in 2023 and he immediately slashed the burden of government spending by about 6 percentage points of GDP and eliminated Argentina’s budget deficit.

Combined with an end to the economic crisis he inherited, this led to a huge reduction in the debt burden – relative to GDP – between 2023 and 2024.

Over the past two-plus years, Milei has maintained a balanced budget. Indeed, Argentina has had small budget surpluses.

The combination of small surpluses and economic growth means debt is falling, and will continue to decline, as a share of economic output.

In the United States, by contrast, fiscal policy is on an unsustainable trajectory. Simply stated, government spending is growing faster than the private sector and that means ever-rising levels of government debt.

And the problem is bipartisan. Every American president this century has presided over excessive spending growth, meaning ever-rising debt levels.

Which is why the first chart shows U.S. debt levels on an upward trajectory over the past three years and projections of higher debt over the next five years.

P.S. Today’s column is mostly about the difference between Milei and Trump, but there’s also an important fiscal policy lesson for the world.

As Milei has shown, there’s nothing inevitable about rising spending levels and rising debt burdens.

Spending restraint is the key. And you don’t even need to be super-aggressive, as Milei was in 2024. Here’s a chart I shared last year about the progress Greece has enjoyed thanks to post-2020 spending restraint.

By the way, assuming Greece continues with modest spending restraint, the IMF forecasts that government debt will decline to about 111 percent of GDP by 2031.

P.P.S. Since economists are lousy forecasters, I’m not particularly concerned about exact projections of debt in 2029, 2030, and 2031. But I do care about trend lines. The key to good fiscal policy is following the Golden Rule of spending restraint. Follow that rule – and there are plenty of examples from U.S. history and world history – and debt is not a problem.

P.P.P.S. I wrote in 2020 that the U.S. would have a budget surplus today if the federal government had limited spending this century so it grew no faster than population plus inflation (the formula in Colorado’s TABOR spending cap). And the surplus would be even bigger if we had the same spending restraint as Switzerland, which also has a formula-driven spending cap.