Opinion – Samuel Pessôa: Technocratic Left

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The neoliberal era represents a defeat of the project of the left in First World countries to raise the tax burden to values ​​much higher than 45% of GDP.

There is a lot of variability—in English-speaking countries, the burden is lower; in continental Europeans, it is larger. However, from the 1980s onwards, voters did not endorse new rounds of tax increases.

In Brazil, voters imposed a ban on raising the tax burden from the 2000s onwards. Since the rejection of provisional measure 232, in 2004, which increased taxation on service providers and was rejected, the National Congress has refused to approve projects that increase the burden of taxes.

The Brazilian left is now trying to employ another strategy. In an act of almost giving up on politics, he seeks to create a fait accompli: raise spending without providing revenue — and wait for the new fiscal crisis. The bet is that, when it comes, Congress will deliver the taxes required to finance the state in a non-inflationary manner.

It is exactly the same strategy (with the sign changed) employed by the American Republican Party on several occasions. Republicans, when in power, reduce taxes, relieve —consequently, they promote a sharp rise in public debt. In the next cycle, there needs to be a fiscal adjustment, and there isn’t much room left for the Democrats to spend. Clinton had to deal with this reality.

The strategy works there, because, in the North American bipartisan presidential system, if there is a lack of macroeconomic control —low growth, inflation, high unemployment or a generalized drop in wages—, the Executive is responsible. Given that there are only two parties, the deputies and senators of the president’s party are seen by voters as being co-responsible for the crisis. Afraid of being punished by the voter, the Legislature also sees itself in the obligation of tidying up the macroeconomy.

In Brazilian multiparty presidentialism, there is no attribution of responsibility to the Executive’s support base in Congress for problems in the management of macroeconomic policies. Responsibility is fundamentally concentrated on the figure of the president and his party.

Whenever there is a lack of macroeconomic control, the deputies and senators of the president’s coalition parties can abandon ship and throw the fiscal crisis in the lap of the Executive and his party. That’s exactly what happened in 2015.

By trying to start his government with a fiscal hole —the difference between the primary surplus needed to stabilize the public debt and the existing one— of 4% to 4.5% of GDP instead of the current 2% to 2.5% of GDP, Lula could quickly produce a fiscal crisis. When you go to ask Congress for more tax burden, it will probably refuse to deliver.

We have been experiencing an open distributive conflict since 2015. Society, through Congress, has given rights to individuals and companies over Budget revenues, and that same Congress has established tax bases that, under normal conditions of functioning of the economy, do not correspond to expenses. There is a structural fiscal deficit. The spending cap was the policy response to this dilemma.

The left’s way out has been technocratic, a technique generally employed by the right. “Let’s discuss tax rules.” We are exposed to a profusion of papers and working papers from the IMF, ODCE etc., all demonstrating the problems and how outdated the spending cap is.

The conversion of the left to technical knowledge is great news. But first, it would be better for the left to return to its origins and face the relevant issue: who will pay the bill? The result of inaction is known: more inflation whose impacts will be paid, as always, by the poorest.

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