Opinion – Vinicius Torres Freire: The war for public and private money in 2023

Federal government spending on military personnel was stable compared to 2019 or 2017, if expenditure is calculated as a proportion of GDP (the economy’s annual income).

Expenditure on active duty military personnel and their retirees and pensioners has indeed grown. But it grew almost as much as GDP, as the economy.

Spending on civil servants has declined by 0.46% of GDP since 2019. Their salaries have mostly been frozen; the military had career rearrangements and a special pension, courtesy of Jair Bolsonaro.

But the issue here is not this difference in treatment. The difference between civilians and military is just one example of the great dispute for public money (and private, via taxes), which will intensify from 2023.

Other serious consequences aside, for now, to finance the extra expense there will be more taxes or more debt. Even with the reformulation or abandonment of the spending cap, there will be serious disputes.

Strictly speaking, the cap was an expenditure cap only in 2018 and 2019. In 2017, the first year of effect, the cap was high. Michel Temer increased expenses for himself before limiting them to subsequent governments.

In 2020 and 2021, there were extraordinary expenses with the epidemic, with a relevant remainder in 2022, which has expenses still inflated by the hacks approved at the end of last year.

By late 2019, it was clear that the ceiling would soon be blown or there would be crippling cuts in government spending. In 2023, the problem will return, made worse by the euphoric illusions of the election.

The government now spends less than at the end of 2019 (in expenditure calculated as a proportion of GDP). The bulk of the “adjustment” occurred through the reduction of expenses with civilian personnel, Social Security from the INSS, salary bonus and unemployment insurance and administrative costs.

Still, the federal government has a deficit, even without counting interest expenses. From 2023 onwards, the debt will grow, as revenue will not increase as fast as it does now (courtesy of inflation and commodities), there will be more interest to pay and GDP growth will be very low (or a better tico, if the elected official promotes a “confidence shock” at the end of the year).

Civil servants will want readjustment. There will be pressure for the readjustment of the minimum wage in addition to inflation, which will increase social security expenses.

The federal government will want to increase spending on works. Investment expenditure is practically half of what it was (in terms of GDP) that of Lula 2 and Dilma 1.

Part of the investment expenditure is directed towards parish works and of low economic impact, determined by parliamentary amendments. The value of amendments almost tripled from 2019 to 2021. Now it is equivalent to more than half of the federal investment. There will be a dispute here or a large increase in expenses, as the parliamentarians will not give up this profitable power.

Where would money come from for a minimum social program (SUS, houses, day care centers, basic income)?

Without reallocation and control of the largest current expenses (social security and salaries growing less than GDP), more taxes (or reduction of tax favors, which amounts to the same thing) and/or more debt would result. Even if one believes in the foolhardy idea that more spending results in more GDP growth, in the short term there will just be more debt. The prospect that the public debt will grow without limit will be nonsense.

It is possible to change without everything blowing up, without the next government starting to sink in 2023. But the socioeconomic, political, public accounts and world economy situation is much worse than in 2003. How to try to do this magic will be Theme of other columns.