Milei Raises Government Spending While Pledging Zero Deficit

Argentine President Javier Milei has built his presidency around a single rule: zero deficit. Yet even as he vows to keep the budget balanced, his new 2026 plan raises pensions, health, and education spending. The shift comes just a month before midterm elections, testing whether his austerity brand can survive political reality. 

Since taking office in December 2023, Milei slashed billions in spending, froze public works, and cut federal funding to provinces, among other austerity measures. University and health budgets were hit especially hard, leading to layoffs and reduced services. Retirees saw their benefits shrink as inflation eroded payments, while tighter rules limited access to pensions. As a result, Argentina reached its first primary surplus in more than a decade and its first full-year surplus in 123 years. But the cost was steep: Consumption plunged and poverty spiked above 50 percent before easing in recent months.

The political backlash hit hardest in the province of Buenos Aires—home to nearly 40 percent of voters—where Milei’s coalition suffered a defeat earlier this month. In response, Milei rolled out a 2026 budget that expands spending in areas he once vowed to shrink.

The plan increases pensions and disability payments by 5 percent, boosts health spending by 17 percent, and lifts education spending by 8 percent—all above projected inflation. As Martín Rodríguez Yebra of La Nación put it, the package amounts to “a white flag in the three battles that eroded his popularity this election year.”

Milei insists fiscal balance remains “set in stone.” The numbers partly back him up: total revenues for FY 2026 are projected at 15.6 percent of gross domestic product, up 0.2 percentage points from 2025. On paper, the budget still balances.

The biggest challenge is political. Without a congressional majority, Milei has relied on vetoes to block deficit-boosting bills. By conceding targeted increases, he hopes to blunt those challenges while courting centrists who dislike Peronist populism but remain wary of his radical cures. The October 26 legislative elections will decide whether he grows his foothold in Congress or stays boxed in.

At the Conservative Political Action Conference (CPAC) earlier this year, Milei handed Elon Musk a chainsaw—a symbol of his vow to slash the state. Now, with midterms looming, he is testing whether that brand of austerity can withstand political reality. Voters will decide whether the chainsaw keeps buzzing or runs out of fuel.

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