On March 30, Finance Minister Fernando Haddad presented the so-called new “fiscal framework,” the set of rules created to replace the spending ceiling. The measure was insistently demanded by the financial market, by a large part of the press, and set as a condition by the president of the Central Bank, Bolsonaro Campos Neto, for the reduction of interest rates.
The market reaction could not have been better. As soon as its main points were made known, the stock market rose, the dollar fell and praise came from Febraban (Brazilian Federation of Banks), which described it as an “important and meritorious step”, even from former president Michel Temer, who It is not without reason that he described the measure as an “adaptation” of the ceiling approved in his government. This consensus extends to sectors on the left who, when they criticize the set of rules, do so on the grounds that it would be an advance in relation to the ceiling. But is that really?
By: Diego Cruz
Expense ceiling 2.0
Constitutional Amendment 95, Temer’s spending ceiling approved in 2017, limited public spending to the inflationary correction of the previous period. The main points of the fiscal framework presented by the government include the following points:
“New” tax framework
– Expenditure growth can only go up to 70% of the INCREASE in income.
– Regardless of the collection, the growth of expenses must oscillate between 0.6% and 2.5% with respect to the previous year. In other words, if the country experiences an economic boom and an explosion in collection, spending will only increase 2.5%.
– If the primary surplus goal is not met, the following year there will be a “penalty” and the spending ceiling remains at 50% of the INCREASE in income. If it is repeated, the following year this variation drops to 30%.
Far from being a break with Constitutional Amendment 95, the “new” fiscal framework of the Lula-Alckmin government is more of an adaptation, as best defined by Temer. Even because it was practically a consensus that the ceiling, as approved, was unfeasible in the medium term, so much so that it imploded a long time ago. The new framework reaffirms as an absolute priority the payment of the debt to the bankers, through the search for a primary surplus (income minus expenses, discounting interest on the debt) to the detriment of public investment. As Haddad himself highlighted, the goal is to clear this account in 2024, to have a surplus (profit discounting interest) equivalent to 0.5% of GDP in 2024 and 1% in 2026.
It is, in practice, a more flexible ceiling, but it is still a ceiling that, once implemented, would reduce public spending to a level below that of the PT governments, and even that of the years of Fernando Henrique Cardoso (FHC). . To get an idea, public spending, in the best of worlds, would be limited to less than half the average of what was increased in Lula’s first two governments (5.2%), and that, in his moment, it was already insufficient. It puts a brake on any expectations of a real increase in public services, social programs such as Bolsa Família, an increase in the minimum wage and pensions, all to guarantee the primary surplus and the payment of the debt to bankers.
The government boasts of having recovered the constitutional minimum levels for health (15% of the budget) and education (18%). However, in addition to plastering this and making a significant investment unfeasible that really represents an effective change, what will happen, in practice, is that these expenses will put pressure on other sectors to stay within the new ceiling, following exactly the same logic. from the roof of Temer.
For his part, Haddad’s promise to collect revenue at a higher rate and speed than GDP growth, without a tax reform that discredits workers, which is what sustains this regressive tax structure, will not materialize, or it will do so, once again, taxing the class and the middle sectors even more.
It has no progress
Some argue: at least, in the worst case scenario of an economic crisis and a recession, with the consequent fall in income, the new rule guaranteed a minimum increase in real spending, even if it was only 0.6%, right? ? What is not said is that this “increase” does not even accompany the average growth of the population, of 0.7% according to the IBGE [Instituto Brasileño de Geografía y Estadísticas]. That is to say, per capitawe may have a reduction in public spending in the coming years.
In the speeches that point to the “lesser evil” character of such a framework in relation to the ceiling, there is a supposed “anticyclical” element of the measures. This is the name Keynesians give to increased spending as a panacea for combating an economic crisis. However, it is ridiculous to call an increase of 2.5% “countercyclical”, in a purely hypothetical exercise of a boom period, starting from a level already lowered and with the current level of economic and social degradation.
By the way, this is one of the mistakes even made by critical sectors, which compare the level of spending made possible by the new framework with that of previous years. Not only will it decrease, but it will do so after years of economic crisis, after a pandemic that reduced 10% of the average income of Brazilians to dust (reaching more than 20% in the case of the poorest), in a wake unemployment, informality and overwhelming precariousness, with the increase in poverty, misery, and the resurgence of the ghost of hunger. And even with the signs of a new crisis looming on a not so distant horizon.
The new fiscal framework thus maintains and perpetuates an economic policy aimed at transferring the wealth produced by workers and the population as a whole to bankers and billionaires. It is a continuation of the policy of plunder and looting, even eliminating the possibility of containment and cushioning mechanisms for the social impact, such as the Bolsa Família or the Emergency Aid launched during the pandemic.
Also read:
Bankers earn interest and “fiscal framework” at the cost of unemployment and the looting of the country
Article published in www.pstu.org.br, 4/3/2023.-
Translation: Natalia Estrada.