PEC dos Precatórios reserves R$31 billion for political and corporate interests

About a third of the open space for increased expenses with the approval of the PEC (proposed amendment to the Constitution) of the Precatório should not go to the neediest families, via Auxílio Brasil. The measure should set aside R$31 billion to meet political and corporate interests, through amendments, campaign financing and tax relief for large companies.

The calculations are made by economist Marcos Mendes, a researcher at Insper and one of the creators of the spending ceiling.

Contrary to what the government says, which estimates that the open space with the dribble on the ceiling would be around R$ 91.5 billion, Mendes estimates that it will be R$ 106 billion, calculating an INPC (National Price Index for the Consumer) of 9.5% this year, which would readjust the value upwards.

This opening would come from the change in the spending ceiling index and the non-payment of court orders. Of this total, R$ 26 billion would already be used to readjust social benefits, due to the increase in inflation.

Of the remaining R$80 billion, R$47 billion goes to Auxílio Brasil and R$2 billion to minimum health expenditures. Therefore, R$31 billion would remain for amendments by the rapporteur, campaign financing and extension of exemptions for large companies.

“The payroll tax exemption is another bad news. It is expensive, does not have the effect of creating jobs, increases the companies’ profit margin, distorts incentives and even encourages bureaucracy in paying taxes,” says Mendes.

To increase its popularity, President Jair Bolsonaro (no party) is working to make Auxílio Brasil, a social benefit that must have a minimum monthly value of R$400 and replace Bolsa Família, viable.

For that to happen, however, the president depends on the approval of the PEC dos Precatórios. The proposed amendment to the Constitution, which creates a ceiling for payment of recognized judicial debts, is considered the government’s plan A for the new aid.

The measure was approved in the first round in the early hours of Thursday (4), and the difference was only four votes. With the approval tight, the government fears it will be barred in the second round.​

The economist says that at a time of delicate fiscal situation, such as the current one, the government should have worked in other ways to make room to increase the benefits of the new Bolsa Família, offsetting part of the inflationary shock that affects mainly the poorest and that, in part, it is due to the problematic management of economic policy.

According to Mendes, it is also necessary to look at what is happening with the institutions, which established a system of rapporteur amendments that gave the president of the Chamber, Arthur Lira (PP-AL), unusual firepower.

“The approval of the PEC took another step towards destroying the spending ceiling and the regimental rules of the Chamber.”

“They invented amendments, they made the devil, everything without limits. The rules in democracy exist so that the game is balanced, not to concentrate power in a group that does what it wants. With money in hand and the ability to destroy rules, the parliamentarians who they control the government, they do everything with short-term interests,” he adds.

For him, in addition to the economic effects, the rapporteur’s amendments should have a negative effect on the renewal of political representation in next year’s elections, since it will be easier for parliamentarians to be reelected after benefiting their bases.

EVEN WITHOUT PEC, YOU CAN REINFORCE THE FAMILY BORROW, SAY ECONOMISTS

Although critical of the spending ceiling, economist José Luis Oreiro, from UnB (University of Brasília), points out that the government would not need to break the ceiling and resort to court orders to increase aid to the poorest.

“Former President Michel Temer himself said recently that the constitutional solution to make Brazil Aid viable would be to declare a state of public calamity, without forcing the government to break the spending ceiling.”

What would not be possible, in this way, would be to approve the rapporteur’s amendments, says the economist. “The deputies who approved the PEC dos Precatório would not have the money to do politics in their electoral strongholds. Their concern was never the people going hungry.”

“By the end of 2020, I and other economists were already saying that it was necessary to renew the state of war amendment, to allow the payment of emergency aid. If that had been done, we would not be in the current situation of seeing people looking for food in the garbage. “

UFRJ (Federal University of Rio de Janeiro) economist Tatiana Roque assesses that the spending ceiling no longer worked, even before the pandemic.

“The government is using the blackmail of fighting poverty in a deceitful way, destroying an excellent program, such as Bolsa Família, whose adjustment could be made by making the ceiling more flexible and ending the rapporteur’s amendments”, says she, who is also deputy. president of the Brazilian Basic Income Network.

“They’re buying up the entire Congress and using low-income people as an excuse.”

She points out that just the agreement to recalculate inflation that readjusts the spending ceiling — moving the reference months from June to July to January to December — could already be useful to recalculate the aid of the new Bolsa Família.

The economist also considers that the current discussion about the break in the spending ceiling already demonstrates that the fiscal rule should not have been approved by then-president Michel Temer.

“Constitutionalizing a fiscal measure in this way does not exist. Brazil already has laws in this regard, and the ceiling was placed to put social expenditures in dispute against each other.”

Roque emphasizes that the vote in the second round of the PEC dos Precatórios is a chance to prevent the government from defaulting on creditors who have already won their rights to receive in court.

“All this confusion proves that economic policy is totally adrift and nothing of what was promised by the [ministro da Economia] Paulo Guedes, even if I disagree, it was done. It’s a catastrophe.”

The basic text of the PEC dos Precatórios was approved in the first round at dawn, by 312 votes to 144. Now, deputies must analyze proposals that modify the document, which goes through a second round of voting.

Then, the text goes to the Senate for consideration, where it must have the support of at least 49 senators, also with two rounds of voting.