Why, with the expenses, Javier Milei deprives himself of having a "permit"

“Expense after expense. None of them is definitive. But the whole is.”

The phrase is from Pablo Gerchunoff in a highly recommended recent dialogue with Juan Carlos De Pablo at the National Academy of Economic Sciences , on the occasion of the 50th and 40th anniversaries, respectively, of the Rodrigazo and the Austral Plan.

Gerchunoff made this comment regarding the challenges faced by Raúl Alfonsín's economic team in 1985 when the president himself requested pension improvements ahead of that year's legislative elections. "Alfonsín's priority was to stabilize the democratic process, and he asked the economic team to grant pension increases before the 1985 legislative elections. He also asked for a budget increase for YPF because it had announced the Houston Plan. There is one expense after another; none of them is definitive, but the whole is definitive , " he explained.

For many, this may be the DNA of the distributive struggle that ignites the spark of inflation: a configuration of social conflicts with a budgetary impact . For others, however, these are the weaknesses of democracy that are neutralized by strict control of monetary aggregates to prevent any leakage into prices.

Be that as it may, the current government seems to be indifferent to an increase for retirees or the Garrahan pension . Perhaps because it understands that fiscal balance is not only not guaranteed but also because the economy continues to rest on weak foundations . The government committed to the IMF to achieve a fiscal surplus of 1.6% of GDP this year. It quietly argues that the various proposals circulating in Congress, both in the Chamber of Deputies and the Senate, would erode savings . Hence, Javier Milei would veto any approval in Congress that threatens the 1.6% threshold.

For example, on Thursday in the Senate, a majority met to discuss and forward to committee approval bills promoting a pension increase, a pension moratorium, and declaring a disability emergency, all of which have already received preliminary approval from the House of Representatives.

The Ministry of Economy is doing the math. They estimate that the cost of these items amounts to more than 2% of GDP, meaning they would wipe out the fiscal surplus in one fell swoop. The numbers are as follows: 1.3% for pensions (including updating the $70,000 bonus), 0.2% for the moratorium, and 0.5%-0.8% for disability.

But the 1.3% figure doesn't take into account other bills currently circulating, such as those discussed in a session in the House of Representatives on Wednesday, such as new educational funding channels and the pediatric emergency (aid for Garrahan). If we take into account that last year's educational funding bill, vetoed by Milei, was equivalent to 0.4% of GDP, the list of expenditures currently circulating would not only neutralize the fiscal surplus but would also turn it into a deficit of even more than one percentage point of GDP.

Let's go back 40 years. Let's go back to Gerchunoff.

"The Austral Plan was born with a very fragile fiscal balance and very temporary measures. Any concession the economic team made to a president who wanted to consolidate democracy weakened the economy ."

And what would a non-fragile fiscal balance be?

It could be said that Néstor Kirchner inherited a more robust government, not only because of its size but also because the definition of robust is perhaps associated, among other things, with economic growth: it's easier to maintain a balanced fiscal system when the economy is growing than when it's not. In fact, Kirchner increased the fiscal balance in his first year.

Now let's return to the present, echoing Gerchunoff's reflection. Will any concessions from a president to consolidate pre-election demands weaken the economy, or is Milei's chainsaw overkill?

There are theories that explain the rise in inflation for the same reasons Milton Friedman would suggest: the role of monetary issuance. However, these same explanations can add a twist when they point out that the reason the Central Bank ends up issuing excess money has to do with fights over the distribution of public spending, or in other words, Gerchunoff's "spending for spending."

Recurring crises and failed stabilizations are often the epilogues of fights, struggles between different social sectors and political leaders: farmers versus industrialists, industry versus services, exporters versus importers, oligarchy versus workers, and so on. Black or white.

Fiel economist Fernando Navajas, along with Daniel Heymann, discussed in a paper what he called "Doctor No"-style leadership—which today would be "there's no money" —to achieve stability in contexts of conflict. But the question is: is Doctor No sustainable? Can it be relaxed at some point?

A new veto in Congress will be proof that Milei believes no permitted, fraudulent spending should be allowed under a strict disinflation regime, because one expense doesn't mean anything, but the whole thing does, as non-fiction economics shows.