Bolsonaro accumulates dribbles to the spending ceiling, and rule may undergo further changes

Just five months after two constitutional amendments increased the spending ceiling limit by almost BRL 115 billion for 2022, the election year, President Jair Bolsonaro (PL) has shown public that the appetite for increased spending has not yet run out.

The chief executive defended changes in the rule to increase public investments, something that is currently unfeasible within the limits established by the ceiling. The additional space created recently was soon filled by the reinforcement of social programs and by the rapporteur’s amendments, stamped by Planalto allies to benefit their electoral strongholds.

Although it signaled that the discussion would take place in the future, the government’s current stance has already contributed in practice to sentencing the spending ceiling to a new modification.

as showed the Sheet, the National Congress stepped on the accelerator of goodness and approved, with the support of the government base, a billion-dollar tax bomb by creating salary floors for health professionals, many of whom are paid by the public sector. Contrary to the position of the Ministry of Economy, Palácio do Planalto did not offer resistance to the proposals.

The fight now is to decide who will pay the extra bill. In Congress, there are already advocates of a new change in the ceiling to allow the transfer of resources to states and municipalities to finance the floor of health professionals.

“It has to be seen if it is necessary or not. [flexibilizar o teto]. If it is, it has to be done”, says the leader of União Brasil, Elmar Nascimento (BA). The party has the fourth largest bench in the Chamber of Deputies. , he says about changing the spending limit.

The ease with which the National Congress has changed the spending ceiling is a fact. Created in 2016, the rule underwent its first structural change in September 2019, when Minister Paulo Guedes’ team (Economy) saw the need for an express permission to transfer to states and municipalities part of the money raised from the auction of pre-construction areas. salt.

Since then, there have been five constitutional amendments, in an interval of three years, changing the ceiling or allowing additional expenses outside it. The most recent ones changed the calculation of the limit and postponed the payment of part of the precatories (amounts owed by the Union after a final court decision).

Some additional dribbles were undertaken using existing escape valves – such as when the Economy endorsed an extraordinary credit of R$7.6 billion to capitalize Emgepron, a state-owned military company that manufactures vessels for the Navy, at the end of 2019. The TCU itself (Union Court of Auditors) pointed out the maneuver, since the investment in the construction of this equipment would need to be within the limit.

Other attempts did not succeed, such as the recurring idea of ​​removing public investments from reaching the ceiling. The proposal reached its peak in 2020 with the Pró-Brasil Plan, which had the military and political wings of the government as enthusiasts.

Survey made by Sheet shows that the fiscal rule has already undergone at least 12 attacks by changes or dribbles in the Bolsonaro government – and is on the verge of a 13th, if Congress decides to make it more flexible to put the salary floors on health in the Union account.

Upon assuming command of the Economy, Minister Paulo Guedes defended on different occasions “breaking the floor” so as not to “climb the ceiling”, that is, reduce mandatory expenses.

In the first year of Bolsonaro’s administration, the economic team was successful in obtaining the approval of the Social Security reform, which helped to control the pace of growth of this which is the biggest expense in the federal budget.

At the height of the Covid-19 pandemic, Guedes also obtained in Congress the forecast of freezing civil servants’ salaries in 2020 and 2021, which put a brake on the advance of personnel expenses, the second largest in the Union.

The other promises of “breaking the floor”, however, remained on paper. When Guedes’ team tried to propose changes in the salary allowance (a kind of 14th salary paid to formal workers with remuneration of up to two minimum wages), Bolsonaro publicly rejected it, saying that he could not “take from the poor to give to the very poor”.

The proposal for administrative reform, a bet by the Economy to ensure more lasting control of expenses, was shelved in the Civil House for months and, when it was finally sent to Congress, it did not have enough support from the Planalto to advance.

The absence of additional cuts in expenses considered inefficient makes the future scenario increasingly challenging. Discretionary expenses, which include funding and public investments, are expected to fall to R$108.2 billion in 2023 and fall to R$76.7 billion by 2025, a value very close to the minimum necessary to keep the machine running.

In reserved assessments, technicians in the economic area have the diagnosis that, regardless of the president elected in October, the Bolsonaro administration ended up making the sustainability of the spending ceiling unfeasible.

Former Minister of Finance and Planning in the Dilma Rousseff (PT) government, economist Nelson Barbosa, columnist for Sheetforesees a liability close to R$ 100 billion to be resolved by the next president of the Republic, which would include the reversal of the precatories limit and other expenses that are being created by the current government.

For Barbosa, the spending ceiling had the merit of holding back expenses with the civil service payroll by not leaving room for wage pressures of categories. However, he reckons the rule proved too inflexible.

“Every very rigid rule generates an incentive to be broken”, says Barbosa, making the analogy that “even a pressure cooker needs a valve so it doesn’t explode”. For the ex-minister, the excessive restriction generated by the limit, mainly on investments, encouraged Congress to stamp for itself a larger share of the Budget through the rapporteur’s amendments.

Barbosa advocates a change in the ceiling to allow for some real growth and apply it only to current expenses, with a sub-ceiling for the personnel sheet. For investments, the idea would be programming on a pluriannual basis.

The combination of this spending target with the collection would result in a public debt trajectory. In case of frustration of the predicted trajectory, the adjustment would be pursued the following year – avoiding the current practice of blockages and contingencies that end up holding expenses in the first months and, often, releasing at the end of the year.

Ahead of the team that created the spending cap, in 2016, former finance minister Henrique Meirelles makes a different diagnosis. For him, the limit was made in a rigid way precisely to reduce the size of the public machine, but with a fixed term of 20 years.

In his assessment, the rule was successful in reducing expenditure as a proportion of GDP (Gross Domestic Product) and restoring investor confidence in the country.

“My view is that the credibility of the ceiling is intact. What is damaged is the credibility of fiscal policy,” he says. “With a government coming in and strictly following the ceiling, it has its value automatically restored.”

For Meirelles, the list of attacks against the ceiling shows the loss of credibility of the current government’s fiscal policy. He warns that if the assumption for the future is to continue to expand spending, then there will indeed be a problem. “But it’s not about the ceiling, it’s about fiscal policy.”

“What can be done? You have to cut permanent expenses, because there is no more room to cut investments”, says former government minister Michel Temer (MDB). He argues that there is room to expand the participation of the private sector in investments, especially in infrastructure.