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By PLINIO DE ARRUDA SAMPAIO JUNIOR*

Fernando Haddad's Fiscal Framework is smart and tricky, but it does not go beyond a Spending Ceiling 2.0

The Lula/Alckmin government presented the Fiscal Framework project to the National Congress to replace the infamous Expenditure Ceiling. In addition to the technical details of its operational mechanisms and institutional parameters, whose final version will still undergo changes, the spirit of the proposed fiscal policy is unequivocal. It is not a matter of modifying the content of Constitutional Amendment nº 95, whose essence consisted in promoting a draconian reduction of the State's presence in the economy, but only of introducing changes in the way of achieving this goal.

In comparison with Henrique Meirelles' rough Spending Ceiling, whose practical feasibility proved to be unsustainable, Fernando Haddad's Fiscal Framework is much more intelligent and tricky. This is a Spending Ceiling 2.0. The idea is to subordinate the pace and intensity of restrictions on public sector expenditure to the circumstances of the national economic situation – a more flexible and realistic way of pursuing the goal of a minimal State.

The expectation that the defeat of Jair Bolsonaro could represent the end of the vile garrotte on public spending barely lasted three months. Same policies, same effects. The new fiscal framework perpetuates the state of permanent penury that blocks the federal government's spending capacity. Instead of responding to the needs of the population and national interests, the evolution of social policies and public investments will remain depressed, not being able to exceed a fraction of the increase in tax revenues and being institutionally linked to the fulfillment of primary surplus targets – reserved fiscal resources to pay part of the public debt interest expenses.

During the election campaign, Lula promised to resume the social policies of his first two terms. It is ironic to note that, had the proposed tax legislation now been in effect, its past achievements would have been much more modest. A simulation shows that the application of the new rules for the period from 2011 to 2022 would have implied a cut of BRL 775,3 billion in Union spending – a reduction of BRL 64 billion per year, a 40% decrease in the growth rate actual actually observed.[I] If the same calculation were made for the years 2003-2010, the period of the growth cycle driven by the commodities that conditioned Lula's “neo-developmentalism”, the contraction of the Union's primary expenditure would be even more severe and the policy of recovering the purchasing power of the minimum wage, one of the main flags of his government, simply could not have happened.

The economic policy of the Lula-Alckmin government, of which the Fiscal Framework constitutes the main beam, does not address any of the causes responsible for the chronic fiscal weakness of the Brazilian State. The continuity of the liberal-peripheral accumulation pattern, which has inflation targets as its strategic architecture, perpetuates the stagnation of growth and the deindustrialization of the economy. The complacency of the tax reform with big capital and the plutocracy blocks any possibility of significantly raising the tax burden and correcting secular tax injustices.

Finally, the absence of any measures to limit financial expenses resulting from interest payments on the public debt and the costs of the monetary and exchange rate policy that support the rentismo spree, the main item of expenditure of the federal government, irrevocably prohibits any possibility of put the poor in the public budget. The bloodletting that such expenses signify is evident when one realizes that for decades their amount has been equivalent to more than three times the accumulated spending of the central government on health and education.[ii]

Prepared without consulting the unions, disregarding the social movements and olympicly ignoring the importance of opening a public debate on the more general meaning of economic policy, the Fiscal Framework of the Technocrats by Fernando Haddad is a museum of old news. It is a workaround to mend the ill-fated Constitutional Amendment no. 95. The good manners of the Minister of Economy and the greater technical sophistication of the proposed legislation barely camouflage the strategic objective of subordinating fiscal policy to the intention of making room for the commodification of social services and guaranteeing the intertemporal sustainability of the public debt/GDP ratio – sacrosanct criteria that govern the fiscal austerity regime inaugurated with Joaquim Levy in the Dilma Rousseff government and brought to paroxysm after the spurious arrival of Michel Temer to the Planalto.

Due to an absolute lack of courage to face the economic and social interests that are fed up with the misery of the workers and the breakdown of the national State, the Lula-Alckmin government is taking big steps to repeat the electoral fraud of Dilma Rousseff, who opened the Caixa de Pandora that drives the reactionary hordes that struggle to transform neocolonial reversal into a reason for the State.

In seeking to reconcile the irreconcilable, Lula became a victim of his own tricks. Far short of what would be needed to overcome the serious civilizing crisis that threatens Brazilian society, his government was condemned to fulfill the sad role of consolidating the offensive of capital over work, legitimizing and institutionalizing the blows against the democratic and republican contents printed by the popular struggle to the 1988 Constitution.

* Plinio de Arruda Sampaio Jr. He is a retired professor at Unicamp's Institute of Economics and editor of the website Contrapoder. Author, among other books, of Between nation and barbarism – dilemmas of dependent capitalism (Vozes).

Notes


[I] See article “New tax rule would have saved BRL 64 billion a year, analysts estimate”, in https://www1.folha.uol.com.br/mercado/2023/04/nova-regra-fiscal-teria-economizado-r-64-bi-ao-ano-estimam-analistas.shtml

[ii] On the importance of financial expenses in the federal government budget, see the interesting work by Luís Carlos G. de Magalhães and Carla Rodrigues Costa, “Institutional arrangements, cost of public debt and fiscal balance: 'absent' spending and the limits of structural adjustment ”, in: IPEA, Text for Discussion, No. 2403, Rio de Janeiro, August 2018. https://repositorio.ipea.gov.br/bitstream/11058/8594/2/TD_2403_sumex.pdf


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