The spending cap is the ball of the day. Those who wave at infinite expenses want to eliminate it. Those who are concerned about fiscal balance — and see the ceiling being dismantled by the current government — think it’s time to look for another instrument.
It is important to warn against crooked arguments, which usually frequent this debate.
It is said that the ceiling would be suffocating the budget and the expense would be on the bone, with nowhere to cut.
It’s hard to believe that, seeing federal prosecutors split almost half a million reais that “left over in the budget”. State employees earn executive salaries with enviable benefits packages. Parliamentarians have R$ 36 billion in amendments in their pockets. Political parties enjoy the most public funding in the world.
The IMF points to primary expenditure of the three levels of government in Brazil, in 2019, of 40% of GDP. We are below lavish Greece (45% of GDP), but far above emerging countries such as Russia (34.5%), Turkey (33.5%), Costa Rica (25.4%) or Mexico (18.3%) . Not even close to our public spending has hit rock bottom.
Another argument is that the poor were excluded from the budget. It doesn’t seem right: the country’s main social program has just had its budget almost tripled. Returning to IMF data: in 2019, Brazil spent 18% of GDP on social security, assistance and worker protection. Above us, only the rich Europeans. Our emerging peers are between 5% and 13%.
Social policy reaches the poor, but it also serves non-poor people. New programs are created without extinguishing the old ones, which are outdated, expensive and have little ability to reduce poverty.
There really isn’t enough money. There is enormous resistance to, on the one hand, reform programs and, on the other hand, to cut privileges. Hence, there is a lack of resources for new priorities that arise. But this is very different from saying that public spending is on the bone or that the poor are ignored.
There are those who say that the ceiling is stifling public investment. But the ceiling was created in 2016 and investment has been falling since the 1990s. It falls because there is a political preference for short-term popularity, through increases in civil servants and social benefits, pushing investment into the background, which only brings long-term returns. deadline.
At the beginning of the last decade, for example, the federal government facilitated the indebtedness of states so that they could increase investment. And what they did was use the money to fund more personnel spending.
In the few episodes in which public investment rose, it did so at the expense of more fiscal imbalance or at times of atypical revenue growth. There will only be a consistent recovery of investment accompanied by fiscal balance if it is possible to tame the growth of current expenditures. It’s no use wanting to boost the economy with more investments if this will dig deeper into the hole of the fiscal crisis.
It is also heard that it makes no sense to have a spending ceiling when collections are breaking records and there is money available to spend.
It makes sense, yes. First, because there is no money left: the government still has a primary deficit. Second, because one of the functions of fiscal rules is to prevent the government from transforming temporary increases in revenue into permanent expenditure.
The last time, as now, we increased expenditures based on revenue gains from a commodity price boom, we had a fiscal crisis as soon as the boom died down. There followed the loss of investment grade and the recession from which we have not fully emerged to date.
We are in a vicious cycle. We have built a dysfunctional state, captured by private interests and focused on electoral populism, which spends a lot, spends badly and cannot form a consensus to get out of the jam.
This undermines economic growth. Stagnation breeds poverty and calls for more welfare spending. Opportunistic claims dress up as social demands (such as tax benefits in order to create jobs) and put even more pressure on the government’s accounts. There is a widespread belief that the solution to all problems would lie in some new public policy.
Maybe it’s pedagogical to set the sky as the limit for spending, and see what happens.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
