Opinion – Vinicius Torres Freire: Haddad launches a counterattack to the idea of ​​a fiscal turmoil under Lula 3

With less than a fortnight in office, Fernando Haddad has mounted a reasonable counterattack to the idea that there will be a breakdown in government spending. At least one goal could come out of this, a reduction in the deficit forecast for this year, now equivalent to 2.16% of GDP (almost R$ 232 billion), to 1% of GDP.

The Haddad 1 plan should reduce the damage that the transitional government did in November and December, when Lula da Silva kicked the idea of ​​debt control, which resulted in an increase in interest rates, already somewhat attenuated, but still very bad .

It’s progress. The turn of the game will depend on a change in tactics and strategy, in particular the new fiscal rule (the “ceiling” in Lula 3), but not only that.

Measures that curb spending on Bolsa Família, for example, without reducing social effectiveness, measures that accelerate growth (facilitation of private investment) or reviewing expenses in ineffective programs can improve accounts and contribute to lower interest rates. That is, they may recover the optimism that was seen until the beginning of November.

Arminio Fraga draws attention to the fact that the government can avoid a greater increase in the minimum wage (which affects INSS expenses), as well as a possible reduction in expenses and an improvement in the quality of expenses with Bolsa Família, savings that were not in the spreadsheet of the Haddad plan, which the economist generally considered “positive”.

In the Treasury spreadsheet, the package would even produce a small surplus, of 0.1% of GDP. It is unlikely for several reasons. Haddad recognized that a deficit between 0.5% and 1% of GDP would be realistic.

The Treasury can expect higher tax revenue in 2023 than forecast by the Budget, although it is not yet known how much the economy will cool down. The government can still spend less than allowed by the budget law. It can prevent companies from using undue ICMS credits. Or get some reduction in the prices of federal government contracts, never a big deal, and use money left over from PIS/Pasep. If all goes well, the deficit drops to close to 1% of GDP, unless more skeletons appear in the cabinet of horrors of the Jair Bolsonaro administration.

Moreover, the savings in the Haddad plan would come from changes in the management of taxpayer conflicts with the Revenue and with the return of the government’s right to tie-breaking votes in CARF, the administrative court of federal taxes.

After the government lost the right to that casting vote, litigation increased (bidu) and the Union began to lose votes that contradicted even higher court decisions, as Haddad said.

In this tangle of tax disputes, the government also came up with a kind of Refis, debt forgiveness with the aim of making taxpayers pay part of what, in theory, they owe. Fraga called this Refisinho “doubtful”.

The change in Carf depends on Congress, which will prune part of Haddad’s plans. The gains from these changes are uncertain, however.

It is also not known whether money will come from the return of taxes on fuel, depending on Lula. Other “reonerations” dropped out of the conversation.

Haddad said his plan is to keep spending and revenue at the 2022 level. In the 12 months through November, revenue was 18.9% of GDP; the expense, 18.3%. That is, a surplus of 0.6%, therefore.

It shouldn’t happen in 2023, apart from a miracle, as spending jumped in the “transition” and revenue should suffer because of the PIBinho. But the 2022 numbers, with some correction around April, serve as a goal. Alongside a decent fiscal rule, they can turn the macroeconomic game around.