Opinion – Nelson Barbosa: The unrealism of the Temer ceiling generated the secret budget of the center

This week, the government presented its 2023 PLDO (Budget Guidelines Bill). The measure kick-starts fiscal debates over 2023 and beyond.

As has happened since the adoption of the Temer spending ceiling, the government’s projections remain quite unrealistic. I give two examples, one backwards, one forwards.

First, going back in time, in August 2021, when the government presented the 2022 PLOA (Annual Budget Bill), the economic team said that this year’s primary spending would be 17.5% of GDP, 1.1 points. of GDP below the one verified in 2021. The fiscal contraction foreseen in the PLOA 2022 was very strong and led, thankfully, to the expansion of the spending ceiling.

At that time, at the end of 2021, there was a great squeak in the market, and some people even left Guedes’ team, dissatisfied with the abandonment of the “die-who-die austerity” planned by Temer. Well, today the primary expenditure forecast for 2022 is 18.2% of GDP, 0.7 points of GDP above the initially forecasted by the Temer ceiling, and the world has not ended. The easing adopted at the end of 2021 reduced this year’s fiscal restriction and the market accepted the change, just look at the interest and exchange rates.

The biggest problem with this year’s fiscal easing was not its size (macro), but its composition (micro), concentrated on parliamentary amendments from the secret budget.

Second, looking ahead, we return to the initial phase of the budget games, in which the economic team promises a new fiscal tightening, to the applause of several financial analysts.

What is the size of the promised diet in PLDO 2023? Federal primary spending will fall to 17.8% of GDP in 2023, 0.4 points of GDP lower than expected for this year. Subsequently, in 2024 and 2025, the PLDO 2023 foresees further tightening, with primary spending falling to 17.3% and 16.7% of GDP, respectively.

For the PLDO 2023 scenario to materialize, it will be necessary to cut even more investments and social programs, in addition to the civil servants’ payroll. In other words, the PLDO 2023 scenario is unlikely to materialize, and we already know how it ends.

The last few years have shown that ambitious fiscal targets take two kinds of work: putting them in and taking them out, with the second step usually including the government cornered, accepting any and all budget demands from Congress.

Translating from economês, the unrealism and fiscal irresponsibility of the Temer ceiling generated the secret budget of the center. By making the conflict explicit without saying how to resolve the conflict, the Temer team’s masterpiece stimulated the misallocation of public resources, delayed important institutional reforms and hampered the recovery of the economy.

Is there an alternative? Yes, several, and maybe this is even debated in this year’s election campaign, especially after Bolsonaro, knowing it or not, signaled another three years of fiscal shortage.

On the progressive side of the pre-electoral campaign, Lula, the fiscal debate seems to be heading towards a easing in 2023, focused on paying the arrears left by Bolsonaro, strengthening income transfers to the poorest and increasing public investment in infrastructure, environment, health and education.

How much tax easing? The Lula campaign does not have a chief economist, much less a government program, but I think it will take at least 1% of GDP more in primary spending, in addition to what is foreseen in the 2023 PLDO, to clean up the mess left by Bolsonaro and recover income. and employment faster. Happy budget games!