Cecilia Machado: Economic blank check

The debates and interviews of the candidates in the first round were marked by discussions (and aggressions) on the themes of combating corruption and guaranteeing democratic values. There is no doubt that the position of candidates on the functioning of institutions is a matter of great priority for society at this moment, but the centrality that these themes gained in the electoral race prevented the economic agenda of the candidates from coming to the fore.

In recent months, very little has been said about the proposals for the economy and concrete policies that will be implemented for the country’s growth over the next four years.

As they are well-known candidates, the view is in the air that good economic intentions are enough, since the population is well acquainted with each one’s style. But there is a huge range of well-meaning policies that work poorly in practical terms. Examples of this type abound in Brazil and show that just the will to do the right thing is not enough.

Misguided economic policies distort the efficient allocation of the economy, prevent investments (and adjustment) of physical and human capital in activities with the highest return for society, make social mobility difficult and overcome the poverty of vulnerable populations, among many other undesirable effects.

In the social sphere, there are uncertainties about Auxílio Brasil. Is the amount of R$ 600 valid only until the end of the year? The 2023 Budget does not include the additional R$ 200 that are being paid now, but the two candidates make it clear that they want to maintain this amount without indicating the source of funding and without explaining how to adjust the assistance budget to the still-current spending ceiling.

Furthermore, the design of Auxílio Brasil, with a minimum per family, diluted the focus of the former Bolsa Família, since the same minimum is paid to more or less poor families, with more or less members, with or without children in the household. In the next government, will we continue with income transfers without any focus?

In Bolsonaro’s program, planning for assistance includes “accelerating the process of combating inequality and creating new actions, including technology and education, considering regional characteristics”, while Lula’s program advocates “a renewed and expanded Bolsa Família program, to recover the main characteristics of the project that has become a world reference in the fight against hunger and child labor, in the direction of a universal system and a basic income for citizens”.

So generic, the programs are similar. Because both the continuity of payment of the minimum amount for families, as in the current Aid, and the establishment of a basic income program, which transfers income to all, are policies that give little attention to children in situations of vulnerability, who need substantial investments in early childhood so that they are able to accumulate human capital to productively enter the labor market throughout their lives.

A second example of vagueness is on the tax front. Successive spending expansions via the PEC have completely de-characterized the spending cap as a rule, and it will be necessary to establish a new fiscal framework regardless of who emerges victorious at the polls.

The matter is serious and urgent: under the current rule, the 2023 Budget does not include a series of expenses that must be executed in the year, in addition to overestimating the space for expenses.

Some of the current government’s proposals for the new fiscal rule are already making the news, but it should be noted that Bolsonaro’s program is completely silent on fiscal discipline, violations of the current ceiling and the need for a new rule. Lula’s program, on the other hand, explicitly talks about “revoking the spending cap and reviewing the current Brazilian fiscal regime”, but goes on without giving further details on how this will be done.

There are other issues at stake in these elections. But the superficiality with which the content of economic policies is being debated is frightening. Even if the economy is a secondary objective in the voter’s choice, this does not imply that we should let the scrutiny of the economic proposals of the two candidates go blank.