Dialectic of the budget game

Clara Figueiredo, the false choice, digital photomontage, 2020


Considerations on recessed planning in Brazil

There reigns in Brazil, to the despair of thousands of people and families in a state of need and social vulnerability, a perverse economic logic, which is difficult to apprehend by common sense and explicitly accepted by segments of the mainstream media and conservative thinking in general. This is the unfortunate combination of fiscalism and finance (or rentism) in dealing with Brazilian public finances.

Based on a comprehensive analysis of the chapters contained in the book Financial dominance and privatization of public finance in Brazil (Fonacate, 2022), it is possible to verify the gradual assembly of a normative and institutional arrangement of a fiscal and financial nature in the Brazilian State, an arrangement responsible for the phenomenon of privatization of national public finances that we seek to define and characterize in the book.

By fiscal nature is understood the set of measures that, since the Finance Law of 1964 (Law 4.320/1964), through Complementary Law n. 101/2000 (known as Fiscal Responsibility Law – LRF), by Constitutional Amendment n. 95/2016 (which instituted the expenditure ceiling, to be in force for twenty financial years, establishing individualized limits for primary expenses), until reaching the package of Proposed Constitutional Amendment (PEC) n. 186/2019 (converted into EC 109/2021), PEC n. 187/2019 (which proposes, fundamentally, the extinction of public funds with a view to redirecting resources towards an alleged reduction of the public debt), PEC n. 188/2019 (which aims to extinguish the PPA, cut personnel costs and reorganize the inter-federative fiscal arrangement) and PEC 32/2020 (mistakenly called administrative reform), a normative and institutional arrangement is being consolidated that fundamentally engenders a process of tightening real public spending and criminalizing its budgetary management/execution.

For its part, by financier/rentier nature it is understood the set of measures that, along with those mentioned above and many others present in Annex 1 of Chapter 9 of the referred book, such as Law nº 9.249/95, Law nº 11.803 /2008 and Law 13.506/2017, judicially and politically protect the Brazilian financial system, both from public social control and criminal punishment against financial offenses committed, such as currency evasion, fraud and remittances to tax havens. All these regulations point to broad freedom, such as the recently approved autonomy of the Central Bank (PLP 19/2019, sanctioned in Feb/2021), and a large radius of maneuver for financial public spending, that is, for its unlimited flexibility superiority and legal shielding, precisely the opposite of the treatment that has been given to the real primary expenditure of the Brazilian public sector.

All in all, both processes mean that the Brazilian State, through the so-called normative and institutional arrangement of public finances, has been historically driven and constrained to act more in line with immediate business interests and the process of financial accumulation, which the direct and pressing interests of its population, the vast majority, incidentally, still far from effective citizenship and the integral development of the nation. Thus, through the normative acts listed in the timeline of the phenomenon of privatization of public finances in Brazil (Chapter 9, Annex 1), it is possible to demonstrate that a continuous and cumulative process of institutionalization has been developing in the country, with a view to fiscal and financier at the same time, and a legal-normative tightening of the functions of budgeting and internal control of public expenditures, all of this based on a contradiction associated with the rhetoric of transparency of accounts and accountability of public agents.

Below these more general determinations, a dynamic and complex process of “disputes, cooperation, hierarchical commands and fragmented spaces of autonomy” is (dis)organized around what is now called budgetary governance, which “comprises these relationships, through of formal and informal rules, which occur throughout the budgeting process, of elaboration, approval, execution, evaluation and control of public resources and expenses”.[I] Although neither the exegesis of the normative acts nor the full identification of the main actors involved in the conflicts around budgetary governance are likely to be carried out within the limits of this text, it is necessary to be clear that this dynamic is in the concrete basis of the formatting of such institutional arrangement fiscalist and financier nature of public finances here on screen.

The recent period demonstrates that the pace of regulatory changes has accelerated and new changes are still on the agenda, with relevant gaps. The relationship between planning and the budget, focusing on the results of public policies for society, weakens in line with the eminently fiscal/financial emphasis on public spending. The controllers of public spending, endowed with instruments and legal support, inhibit, alongside the guardians of the budget, the action of public policy executors, while preserving their position as definers of priority expenditures. However, the Executive's own ability to promote its priorities is limited, revealing the fragility of the current balance (Couto and Cardoso Jr., 2018).

The current situation of imbalances and dysfunctionalities is also derived from previous cumulative events that, since the 1980s and 1990s, helped condition the primacy of the fiscal and financial dimensions of public finances over the dimensions of planning and implementation of public policies. All this in order to convey to the financial market and other private agents (domestic and foreign) a sense of confidence in the government's ability to honor its commitments to the sustainability and solvency of the federal public debt, since then managed by the dominant logic of financialization. .

This takes place, in practice, through an always positive differential between the interest rates paid by the government on its bonds, with a certain guarantee of repurchase from its creditors, and interest rates or the marginal efficiency of private capital potentially obtained from non-governmental valuation alternatives. Since the maintenance of monetary stabilization has been the primary objective function of macroeconomic management since the Real Plan, and also considering the political-ideological environment of the 1990s, the liberalization of markets and the reduction of the role and size of the Brazilian State in its relations with society and the market, it is not surprising that, from a strategic point of view, even the planning function has been interpreted and applied to reinforce the fiscal/financial character of the budget, relegating itself to a second or third plan to structuring of the technical and political conditions necessary for the institutionalization of the PPA as a central instrument of the governmental planning process in the country.

With that, big steps were taken in the process of institutionalizing the policy of generating permanent primary fiscal surpluses. This is undoubtedly one of the most significant aspects of the phenomenon of privatization of public finances in Brazil, as it reflects a set of guidelines adopted by multilateral organizations in their negotiation procedures with the governments of member countries. All in all, in the midst of the processes of institutionalization and empowerment of the functions of budgeting and control of federal public expenditures, and still constrained by the canonical vision of the balanced budget within the scope of the dominant theory (but mistaken!) of public finances, according to which the capacity expenditure and investment of any state entity must be a function of its own previous saving capacity and any annual accounting deficit in this relation is necessarily inflationary, the inconvenient belief that the planning instruments , budgeting and control of public spending should encompass the complete set of government policies, programs and actions with budget manifestation.

As a consequence, since then, the movement towards full and detailed accounting of public expenditure has gained discursive weight and institutional materiality, which, in turn, should be governed from the liberal logic of the balanced budget, that is, the strong idea of ​​savings as a precondition for any and all items of current expenditure or government investment. The final result, to close the fence, is that the control function grew and developed, normatively and operationally, to control (that is to say: monitor and punish) misconduct by the public power (in this case, by the bureaucrats who order expenditures public) in disagreement with the precepts defined by the liberal logic of the balanced budget.

Thus, before born under the sign of the republican quest for transparency and collective accountability of public resources, the control function quickly became an agent of inhibition and criminalization of public spending and its operators or executors. In this regard, it is necessary to explain that sustainable public finances are different from sterile public finances. Sustainable finances are those based on primary expenditures responsible for public policies, whose aggregate effects (and respective multipliers) tend to be positive insofar as they generate employment, income, profits and taxes throughout the economic cycle. Its determinants are social, economic and political.

Sterile finances, on the other hand, are those of a financial nature and/or destination, whose multipliers are negative and their aggregate effects contribute to the expansion of unemployment, poverty and income concentration. Its determinants are autonomous, endogenous, not based on real economic factors. Hence, the problem is not the deficit or the public debt per se, but only its composition and form of financing over time. Evidently, the composition and form of financing of the Brazilian federal debt are bad, as they are based on the logic of financial valuation of its flows and stocks.

All available official data show that there is a large annual commitment of public resources destined to the management (read: guarantee of liquidity and solvency) of the Brazilian federal public debt. It means that the capture of public debt management by the logic of speculative finance continues to be one of the main obstacles to economic growth and an unacceptable constraint to the fulfillment of social rights in the country.

For no other reason, we call austericide the set of ideological assumptions and macroeconomic policy guidelines that make up an institutional arrangement for managing the government's economic area that, in addition to having a precarious theoretical and historical foundation, produces results opposite to those desired, with enormous and negative repercussions on the capacity for growth, job creation and distribution of income and wealth in a society, such as the Brazilian one, already structurally marked by immense heterogeneities, inequalities and needs of various orders.

It means to say that the instruments of economic policy defended by economic liberalism have become the ultimate purpose of these systems. The means (that is: private property as a foundation, competition as a principle, the accumulation of monetary capital as a major objective) have become ends in themselves of the model, removing from the scene both the assumptions under which such an economy really works, as the concrete deleterious consequences for the planet and the human species that such a mechanism engenders.

The environmental collapse, the deterioration of work and existence conditions, the financialization (and exclusion) of income and wealth, the cultural and civilizing impoverishment in general, all of this as a direct – and abject – consequence of economic liberalism, have become in normal and natural facts of the alienated or resigned reality of contemporary societies.

In short, the processes narrated here institutionalize the phenomenon of the financialization of the Federal Public Debt and the privatization/privilege of its management by the country's monetary (BCB) and fiscal (STN) authorities. As stated above, such phenomena promote, due to the normative arrangement being consolidated, blockages and upper limits to primary fiscal expenditure of a real nature, precisely the expenditure that is responsible for funding all current expenses, both intermediary/administrative and purposes aimed at the effective implementation of federal public policies in all areas of government action.

Simultaneously, regulations are consolidated that represent both flexibility without an upper limit and political shielding (including for criminal purposes) of public financial spending, whose main beneficiaries are financial institutions (banks, brokerages, insurance companies), investment funds and other agents. large businesses, including foreigners operating in the country.

In view of this, as a result of the proactive indignation with which societies and their countries are reconstructed, it becomes imperative to displace the alienation and resignation imposed by bad theory and harmful practices of economic policy, replacing them with a general orientation capable of taking Brazil to consistent and decisive processes of definancialization and deprivatization of public finances. After all, Brazil can do more!

*José Celso Cardoso Jr., doctor in economics from Unicamp, is a federal public servant at Ipea and current president of Afipea-Sindical.



[I] Cf. COUTO, L. and CARDOSO JR., JC Budget Governance: transformations and gaps in planning and budgeting practices in Brazil. Brasilia: Political-Institutional Analysis Bulletin (BAPI), no. 19, Diest/Ipea, 2018.

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