Group of women specialists in public finance proposes new fiscal rule

The group entitled Elas no Budget, which brings together women specialists in public finance, released this Tuesday (15) a proposal for a new fiscal rule. Elaborated in the form of a PEC (Proposed Amendment to the Constitution), the suggestion has three basic principles.

In place of the current spending ceiling, a medium-term public debt target would be adopted, aligned with an economic and social development strategy, and a new ceiling for primary expenditures within a four-year horizon.

That is, the ceiling would be four-yearly and compatible with the debt forecast.

This new ceiling would not include resources destined to programs to combat poverty. Auxílio Brasil or Bolsa Família, whatever the name, would be permanently outside the spending limit. This alternative is defended by some sectors of the elected government of Luiz Inácio Lula da Silva (PT), but has been criticized by market analysts and political groups from the center, who propose to limit the exclusion of the social benefit from the spending ceiling to 2023.

According to economist and professor at Johns Hopkins University (USA) Monica de Bolle, one of the members of the group, the initiative is a contribution to the debate on the transition of government which, so far, has been restricted to a group of men. The economists André Lara Resende, Persio Arida, Nelson Barbosa and Guilherme Mello are part of the transition team in this area.

“It is a proactive initiative by a group of women experts in public finance for the future government, but it is also an action to represent women, bearing in mind that the economic transition team only has suits,” said de Bolle.

By suggestion, the details of the new ceiling would be made by ordinary law, and no longer in a constitutional article, to facilitate and speed up adjustments to the rule in the face of changes in the economic context.

Under the proposal, setting the debt limit would follow the rule already defined in Article 52 of the Constitution. It would be up to the President of the Republic to define the overall limits of the consolidated debt of the Union, states, Federal District and municipalities, which would be validated by the Senate.

According to the group’s survey, most countries that adopt spending limits work with shorter horizons. Generally, the ceiling is set for a period of three years and the general rule is usually revised every five years.

The framework for the current Brazilian spending ceiling was designed for a 20-year horizon, with a review in ten.

One of the documents considered for the formulation of the suggestion is an IMF (International Monetary Fund) survey that evaluated the performance of different fiscal rules during the Covid 19 pandemic and demonstrates the importance of flexible targets.

Among the economists who make up the Ela no Budget group are also Virgínia De Angelis, federal auditor of External Control at the TCU (Union Court of Auditors), currently advisor to the General Coordination of External Control of the Economic Area of ​​the agency, Rita Santos, consultant of Budget in the Senate, Júlia Rodrigues, Budget consultant in the Chamber, Clara Marinho and Roseli Faria, Planning and Budget analysts of the Executive Branch.

Faria is also part of the Women transition group, which deals with gender issues.

This is the third proposal to change the ceiling that suggests the adoption of a public debt target associated with spending limits.

Last week, economist Felipe Salto, Secretary of Finance and Planning for the State of São Paulo, also presented a suggestion for reforming the fiscal rule that links the spending ceiling to the debt target. A draft was sent to vice president-elect Geraldo Alckmin and economist Persio Arida, who is part of the economy’s transition group, and is already under analysis.

This Tuesday, Salto met with Alckmin to address the suggestion.

On Monday (14th), the National Treasury also presented a proposal for a more flexible spending cap rule, which allows for real growth in spending depending on the level and trajectory of the public debt.

UNDERSTAND THE PROPOSALS FOR A NEW FISCAL RULE

• Proposal by the Elas no Budget group: Medium-term target for public debt, with economic and social development strategy; new ceiling for primary expenditures with a four-year horizon, in line with the debt projection; funds earmarked for anti-poverty programs, such as the Auxílio Brasil, would be permanently off-limits
• PT proposal: Lula’s team has not yet presented a concrete proposal for a fiscal rule, although it is negotiating the Transition PEC, which could remove Bolsa Família from reaching the spending ceiling. Economists who are part of the transition team defend changes in the fiscal framework. Among the options analyzed since the campaign are maintaining only a primary result rule, as it was before the expenditure cap, or even stipulating a more flexible expenditure limit, with expansion above inflation and possible exceptions for certain expenditures, such as investments.
• National Treasury Proposal: Authorize a real increase in the expenditure ceiling, above inflation, at rates defined according to the level and trajectory of the general government’s net debt. Furthermore, the existence of a positive and growing primary result (signaling revenue greater than expenditures) entitles the government to a kind of bonus in the expansion of expenditures.
• Felipe Salto’s proposal: the current finance secretary of São Paulo, former executive director of the IFI (Independent Fiscal Institution) of the Senate, is working on a proposal that has a limit for the public debt. There would also be a primary surplus target, calculated based on the debt trajectory, and a ceiling for different expenditures, set based on the previous variables. In the first year, however, there would be an extra license of R$ 120 billion.