President Trump abruptly fired Erika McEntarfer, head of the Bureau of Labor Statistics, in reaction to the weak July payroll report. This has triggered frightening flashbacks to the Argentina of nearly two decades ago: a populist leader whose flawed policies are ruining the economy; the firing of the head of an agency producing key economic data; mounting discrepancies between benign official statistics and downbeat independent estimates; and an erosion of trust and credibility leading to further economic deterioration.
America is still a long ways from that nightmare scenario, but any attempt to follow in the footsteps of past Argentinian policies does not bode well for our economic future.
Argentina, of course, is a byword for chaotic economic policy and financial turbulence. Following its hyperinflation of 1989 to 1990, Argentina achieved a modicum of stability during the remainder of the ’90s under the “convertibility plan,” a currency board that fixed the value of the peso against the dollar and kept inflation down to low single digits. However, mounting fiscal deficits forced a devaluation and default that pushed the economy back into crisis in 2001 to 2002. After some gyrations, inflation was still as low as 4.4 percent in 2004 but started rising to 9.6 percent in 2005 and 11 percent in 2006.
Over the course of 2006, the Peronist government of Nestor Kirchner put mounting pressure on the government’s statistical agency, INDEC, to lower its inflation estimates. It tried to gain access to confidential source data and even hired a private firm to create an alternative consumer price index.
Finally, in February 2007, Kirchner — still unhappy with the worrisome inflation numbers being produced — fired Graciela Bevacqua, the head of INDEC’s prices department, and many of her senior staff soon followed. With their replacement by more pliable officials, and under the new leadership of Kirchner’s wife Cristina, INDEC proceeded to tweak the methodology used to construct the consumer price index data in order to minimize estimates of rising price pressures. And for good measure, the wages of INDEC employees were cut and some staff were even roughed up by government supporters.
With the new management, the official estimates came to drastically understate the extent of Argentine inflation. In the years following the changeover, the official numbers cited inflation of 10 percent or lower. However, as it became apparent that the official numbers were being distorted, unofficial independent estimates emerged that topped 20 percent or higher, despite strenuous efforts by the government to suppress them.
Unsurprisingly, the government’s efforts to fake the data backfired. The public wasn’t fooled by the fake numbers — survey measures of inflation expectations were much more closely aligned with the unofficial inflation estimates than the official numbers, and in fact they were often higher. Moreover, the publication of biased official statistics appears to have led the public to be unduly pessimistic about the future, adjusting their inflation expectations more when inflation rose than when it fell. Far from assuaging the public’s worries about inflation, the government’s actions accentuated them, likely adding to actual price pressures in the economy.
But the damage done by the government’s duplicity went well beyond inflation, reinforcing its many other policy missteps — widening budget deficits, constricting regulations, an overvalued exchange rate and the legacy of earlier defaults — and eroding trust in the country’s institutions and economic management. In 2013, Argentina became the first country to be censured by the IMF for failing to produce accurate data on prices and GDP. Other international institutions, banks and investors routinely ignored official price data in favor of independent estimates, doubtless leading to higher interest rates on the Argentine government’s mounting debt.
To keep the economy and financial system from imploding outright, the regime progressively deepened its controls over prices, trade and foreign exchange trading. The economy flat-lined, and ultimately the deteriorating situation led to replacement of the Peronists in the 2015 presidential election by the conservative Mauricio Macri, who reformed the statistics agency and restored its credibility.
Returning to U.S. policy in 2025, the points of similarity with Argentina go well beyond mere meddling with price statistics. They include costly trade barriers, widening fiscal deficits, harassment of the central bank and a reactive, chaotic style of economic management. By themselves, these considerations point to America following in Argentina’s footsteps to high inflation, recession, financial crisis and default. An erosion of trust in U.S. economic leadership, combined with counterproductive trade, fiscal and financial policies, would lead to higher interest rates, lower investment, lower productivity growth and ultimately greater instability.
However, America’s private sector possesses many strengths that Argentina’s lacked, including dynamic and competitive firms, an educated and innovative workforce, world-class research and educational institutions, and the deepest, most liquid capital markets in the world. The next few years will see a tug-of-war between the dynamism of the private economy and the disruptions of public policy. My money — and my 401(k) — is on the private economy, but it will be a close thing.
Steven Kamin is a senior fellow at the American Enterprise Institute, where he studies international macroeconomic and financial issues.
