Opinion – Marcos Mendes: PEC dos Precatórios leaves fiscal policy adrift

The Senate approved the ​PEC dos Precatório, which dismantles the spending ceiling. The changes made to the text coming from the Chamber do not fix the damage.

The main change was the requirement that the open fiscal space in the ceiling be used only to finance the expansion of income transfers and the correction of social security and assistance benefits for inflation. It is argued that this will prevent their use in electoral expenses, such as parliamentary amendments by the rapporteur. It would then be an improvement, in the name of fiscal responsibility.

Fool’s gold. Just use the old “source switching” of budget resources gimmick. The new fiscal space will be used to finance the expenses for which it was allocated, but part of what was already allocated for these expenses may be redirected to other items.

It is naive to believe that the leaders who control Congress, so eager for their amendments, would passively accept to give up control over the Budget.

Even acknowledging that the final text is bad, some analysts see the approval of the PEC as positive. They argue that a “horror end” is better than an “endless horror.” Implicit in this reasoning is the idea that there was an increase in the ceiling, which will allow for a higher level of spending, but that the episode is over and that the Executive Branch maintains control of fiscal policy, albeit with a higher deficit and debt. tall.

In fact, the executive branch lost control over fiscal policy. Any extra spending that has political support will find a way to become viable.

For those who argue that there will be no space on the roof for this, it is good to remember that there are artifices to spend outside the roof, which have already been used, such as pushing public policies to be carried out by state-owned companies, as was already done in the law that authorized the privatization of Eletrobras or the capitalization of Engepron.

Other tricks can be created without the need for PEC. There is also fiscal disruption on the revenue side, which is not reached by the ceiling, such as the renewal of tax benefits about to expire, which have already been approved by Congress, and PL 4,728/20, which institutes yet another Refis, a new priority of the Chamber’s agenda.

There are also those who argue that there is no problem in relaxing the ceiling, after all, the income would be improving, and there would be resources available to spend. Now, one of the benefits of the ceiling was precisely to improve the primary result and reduce public debt in periods of revenue growth, generating room for maneuver to deal with moments of crisis.

We are returning to the fiscal regime of “spend all the money you come in, the moment you come in” and we will be left vulnerable and without the tools to react when the next negative shock hits.

This puts us in a vicious cycle of loss of credibility and fiscal predictability, which leads to more inflation and less growth, which, in turn, increases the demand for more spending to mitigate the effects of deteriorating living conditions.

Projects such as PL 4.367/20, which institutes payment of the 14th salary to INSS retirees and pensioners, or PL 1.472/21, which proposes the use of public resources to subsidize fuel prices, gain strength. The pressure for the inclusion of more families in Auxílio Brasil becomes incessant.

Afterwards will come the demand for the return of interest subsidized by the BNDES, as the increase in inflation is accompanied by an increase in interest rates. The account goes to the Treasury and feeds back on the impoverishing spiral.

The lesson for the next President of the Republic remains: either your Excellency builds and controls a majority coalition in Congress or someone will build it and make your government unfeasible. And Your Excellency will already have a bad starting point, having to undo the errors that are now accumulating.