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Thursday, December 1, 2022
HomeEconomyOpinion - Samuel Pessôa: The 'waiver' thing

Opinion – Samuel Pessôa: The ‘waiver’ thing

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For some time now, there has been a strange conversation regarding the 2023 Budget based on the English word “waiver”, whose best translation would be, in this context, a license to spend or a waiver of observing the spending ceiling.

According to the national president of the PT, Gleisi Hoffmann, “the current Congress will have good will. The people decided at the polls that they want to have aid of R$ 600 and that they want to have a real increase in the minimum wage. President Bolsonaro also promised that. So I don’t think we’re going to have a hard time getting it approved by December.”

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The PT president’s statement is technically wrong. Society would only have approved the maintenance of Auxílio Brasil at R$ 600 in 2023 and the increase in the real value of the minimum wage if politicians had contracted the financing conditions with the population.

The problem is that there is no authorization from society for a new round of increasing the tax burden. I don’t recall any presidential candidate in the elections advocating a tax hike.

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It seems to me that the PT wants to reproduce here a strategy of the American Republican Party with the opposite sign. There, Republicans, when in government, reduce the tax burden and raise debt to prevent increased public spending in the Democratic cycle.

Here, it seems that the PT wants to increase spending without a simultaneous increase in revenue to force Congress, given the fait accompli of the expansion of the public deficit, to accept the increase in the tax burden at a later time.

This was exactly Dilma’s strategy in her first term. He created a structural public deficit that he thought could be adjusted in the second term.

The strategy is not new. FHC had done the same in his first term. In other words, it seems that Lula 3 wants to follow the path of FHC 1 or Dilma 1, not the path of Lula 1. FHC 1 was half right: with the efforts of Federal Revenue Secretary Everardo Maciel, FHC 2 built a structural primary surplus of 2.5% of GDP, but failed to elect Serra. With Dilma 1, it went wrong. Faced with the fait accompli of the fiscal imbalance, Congress bet on impediment instead of helping the president to get out of the acute fiscal crisis in which she had gotten herself.

The strategy runs counter to the political science textbook: typically, in the first half of the term, the president puts his foot on the brakes on public spending to ease fiscal restraint as elections approach.

The strategy is also contrary to the macroeconomics textbook. The projected growth of 3% in 2022 brought the unemployment rate close to 8.5%, that is, we have an economy that is practically at full employment.

Inflation is above target, real interest rates and public debt are very high. Under these conditions, promoting fiscal expansion will only add fuel to the fire of inflation. And with it, more interest and more debt.

I know that “those who are hungry are in a hurry”, but I also know that an acute fiscal crisis has even more serious impacts on the lives of those most in need. Acute fiscal crisis exacerbates hunger.

The only way out is for the PT to face the political dispute it never wanted to face. As FHC said in a speech at Itamaraty in 1998, “the main problem is simple: the State has not been able to live within the limits of its own means. And that is why it does not fulfill its role in the Brazilian development process and weakens our economy”.

The PT needs to convince society to hand over more resources to the State in the form of taxes. This is the only way to guarantee economic stability and simultaneously resume the policy of valuing the minimum wage and increasing spending on programs to combat poverty.

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