Opinion – Vinicius Torres Freire: Change in the adjustment of INSS pensions is a subject that will heat up

The Ministry of Economy is studying the change in the method of correcting the value of the minimum wage and, therefore, of social security benefits from the INSS, as reported by this Sheet. The minimum readjustment would no longer be based on the inflation of the previous year, but based on the expectation or inflation target.

First of all, let it be said that a re-elected Jair Bolsonaro would have to propose an amendment to the Constitution in order to make the change. If, until the second round, he does not make it clear that he is going to do so, he would be a monstrous electoral fraud.

Moreover, even with this Congress elected, between conservative and reactionary, it will be difficult to pass. About 37.1 million people receive benefits from the INSS, with an average monthly amount of R$ 1,522.39 (the majority, 24 million, receive a minimum wage, R$ 1,212).

It could be a fight that would affect the interest of half of the country’s adults. Adding those who receive minimum wage at work, much more.

Even if he is re-elected, Bolsonaro would still be rejected by almost half of the electorate. Would you add this suspicious vote to a revolt with the possible reduction of the minimum purchasing power and the benefits of the INSS? Everything is possible in this world without God and with Bolsonaro.

But spending on Social Security and civil servants is a subject that is on the mind of almost any economist who is not from the PT; even in a PT government, it will be a difficult problem to manage.

The readjustment formula being studied by the Ministry of Economy is strange. Paulo Guedes often says he wants to de-index and unlink expenses. But it wants to index the INSS minimum and benefits, it seems, to some indicator of future inflation.

The measure of inflation expectations that we currently have is the median of estimates from more than 130 projections from financial and similar institutions, compiled weekly by the Central Bank. It can be higher or lower than the inflation rate that corrects the minimum wage.

The inflation target should stay close to 3% for many years to come. It is quite difficult for the inflation rate to be routinely lower than the target. The INSS minimum and benefit would then lose purchasing power.

Readjusting INSS benefits only for inflation, as has been the case in the post-PT period, maintains the purchasing power of those who receive them, but reduces the value of these expenses in relation to GDP and government revenue, if GDP grows and “everything more constant”.

But there are things that will change. After the initial effect of the Social Security reform (the postponement of pensions, etc.), this expense will increase again in relation to GDP, even without real adjustment of benefits. Or rather: unless the economy grows by 3% or more a year, which for now is a mirage.

Expenditure on social security and assistance benefits from the INSS accounts for almost 48% of total federal government spending. Server expenses, almost 20%, after being flattened for a biennium without readjustment. Auxílio Brasil takes 4% (and growing). Unemployment insurance and salary bonus, 3.6%. Health and education, 12.4%. And then almost 88% of the expense is gone.

The discussion, at least outside the PT, is how to contain the relative increase in these expenses and still increase taxes to compensate for the deficit and have some money for investment in works, scientific research and improvement of the SUS, for example.

The Ministry of Economy is cooking something, perhaps strange, who knows, a monstrous electoral fraud, in case Bolsonaro is re-elected. But this conversation is around and would be a thorny issue in a PT government. The country is oblivious of its serious problems, given the years of darkness. But problems have not forgotten us.