Ceiling is fiction and caused a deep cut in investment, says Ciro economist

Economist and federal deputy Mauro Benevides Filho (PDT-CE), 62, economic advisor to pre-candidate for president Ciro Gomes, says that the spending ceiling is a fiction that generates the main consequence of cutting investments. The rule limits the increase in federal spending to inflation.

He says that current expenditures — civil servants’ salaries, pensions and the cost of public machinery —, seen by him as of poorer quality, continue to expand.

Meanwhile, the government has tried to meet the ceiling by sacrificing funds for investments, which include building roads or schools, for example.

To correct what he sees as a problem, Benevides proposes in an interview with leaf two different limits for each type of expense.

Current expenditures would be linked to GDP (Gross Domestic Product), with more limited growth. Investments, on the other hand, would be corrected based on the real expansion of federal revenue, which would provide a greater expansion, since, normally, revenue grows more than GDP.

For him, public investments need to rise again to a level of R$ 90 billion a year, but without leaving reforms, such as administrative and tax, aside.

“Fiscal adjustment needs to take place to provide the State with resources to meet the demands of the population,” he said.

This interview is part of a series of leaf on the five-year spending cap, with interviews with the economic advisors of the main candidates for Palácio do Planalto in 2022. The order of publication follows the performance in the latest Datafolha survey.

Did the spending cap bring more benefit or harm to the country? Loss. Brazil has no spending ceiling. Today it is a fiction. Personnel and Social Security expenses represent 85% of the total.

Between 2017 and 2019, they continued to grow in real terms, therefore breaching the ceiling. Then the government cuts investment to meet the ceiling.

In other words, what the supposed spending cap did was to reduce the volume of investments in Brazil, which in 2010 was R$ 100 billion and this year [2021] should not exceed R$ 20 billion. In other words, all the adjustment that is claimed for the spending ceiling is found in the deep cut in investment.

Congressional attempts to appropriate the Budget, such as through rapporteur amendments, were limited by the ceiling. Does the rule have a positive side in this regard? On the contrary. The spending ceiling came into effect in 2017. In 2020, the rapporteur’s amendment was created, which should not exist.

But was it a consequence of the spending cap? No. And Congress, although it has the autonomy to define its priorities, cannot after that discipline and determine where these resources go. But when the Budget grew, the rapporteur’s amendment appeared and investments were cut.

To meet the rapporteur’s amendment, they cut investment.

Interest fell from the implementation of the measure. In this sense, was the ceiling rule positive? No. Interest rates fell temporarily, as they did with Dilma [Rousseff, ex-presidente] also. It was a short-term momentary thing. the same thing with [o presidente Jair] Bolsonaro.

Changes to the roof are often justified as a way of opening up more space for social programs and investments. Within a budget of almost R$ 2 trillion in primary expenses, excluding interest, is it really impossible to fit new measures with cost cuts? Brazil does not have a spending ceiling, but an investment penalty. [Com a existência do teto] I increase current expenditure and cut capital expenditure [investimentos], which is the best it has.

Is it over there [despesa primária total] it started with 19.5% of GDP when Bolsonaro joined and it will end like this, then people say that the thing was under control. It didn’t, no. The current rose and investment fell.

In a possible Ciro administration, all expenses will be re-examined, including financial expenses.

Is the interest rate calibration right? Is it right to treat repo operations like today, with zero cash in the daily financial system so that they don’t sleep with resources without financial investment?

THE country should adopt another tax rule? Brazil must modify the current primary expenditure control rule. Put a ceiling on current expenditure.

And what would that ceiling be on current expenses? The correction would be for real GDP growth. Instead of correcting by the IPCA [como funciona o teto hoje], can also grow by real GDP growth. If GDP grows by 1%, for example, inflation will grow by another 1%.

Would the investment be free or would it also be limited? The investment will be linked to real revenue growth. Inflation more [a variação] real [da receita].

In theory, revenue grows much more than GDP when there is growth [da economia], then you’re going to limit investment to 80%, 90% of actual revenue growth.

What is the consequence of this? Would current expenses be more controlled than investments? Exactly, the currents will be more controlled. And the investments, more roomy to grow, since the revenue grows a little more.

Mr. Do you have any idea how much investment can go with this new rule? The idea was to return at least to what it was, of R$ 90 billion a year. must have more [do que hoje].

The fiscal adjustment needs to take place to provide the State with resources to meet the demands of the population.

We said in the campaign that we would solve the primary problem in two years, the [ministro da Economia, Paulo] Guedes was not satisfied and said he would do it in a year [o que não ocorreu]. But in Brazil, in campaigns, people want to discuss names and not programs.

Ciro is the only one that has a defined program, a form of fiscal adjustment, a published book, a proposal for pension reform. And what is known about the other candidates? Nothing. You have to discuss how we fix the country.

Mr. would it also change the concept of what investments are? No. Investment is what is enshrined in Law 4,320, which is equity growth. It’s building a school, hospital, road. There’s nothing to change, that’s naughty. For a serious government, there is no need to talk about changing this.

What reforms does the country need? First, tax reform. Do you think it’s fair for a car to pay IPVA and a plane or helicopter not? You must have a change in equity.

Do you think it is fair for an inheritance tax to be levied at a rate of 8%? In the United States, the most capitalist country in the world, the minimum is 20%. So it’s not charging the poorest, it’s improving justice.

There must be a higher rate on the IRPF [Imposto de Renda da Pessoa Física], also has to put an end to pejotization. Including taxation in tax havens, income has to be taxed even outside the country.

And on the expense side? Administrative reform, for example, Mr. propose to do? In this case, you have to look at lower career entry values ​​than we have today and you have to extend the arrival to the last level of the professional career with more time than today. Most careers, after 18 years, you are already at the top of the career, a total of 30, 40 years of exercise.

Mauro Benevides Filho, 62

Economic advisor to pre-candidate Ciro Gomes (PDT-CE) and federal deputy. He has been Secretary of Planning for Ceará more than once. Graduated in economics from UnB (University of Brasília), he holds a PhD in the same area from Vanderbilt University (USA)