By PAULO CAPEL NARVAI*

In this “knife party” of cutting and cutting ever more, and deeper, something like R$100 billion or R$150 billion would not be enough. It would not be enough, because the market is never enough.

“It’s the economy, stupid!”, the phrase made famous in the 1992 election that led Bill Clinton to the presidency of the United States, is often taken out of context and manipulated by political analysts, according to the interests of those who debate the relationship between the economy and politics. The economy is always subordinate to politics, but deniers of all stripes pretend to ignore this in order to attribute to the economy a pseudo-pragmatic protagonism, based on the acacian logic that expenses should be less than revenues.

The phrase “It’s the economy, stupid” returned to the political debate in the last week of November 2024, when the Finance Minister Fernando Haddad announced a set of measures to address the public accounts deficit and comply with the rules of the fiscal regime established by Complementary Law No. 200/2023, known as tax framework.

The measures announced by the federal government will now be processed by the National Congress, where they should be approved by the end of the year, probably with many changes.

At a meeting at the Brazilian Federation of Banks (Febraban), in São Paulo, the minister Fernando Haddad responded to criticism from across the political spectrum about the measures, already indicating the degree of difficulty and also the tone that the debate will have in the National Congress. This is not the “grand finale” of the government’s effort to adjust public finances, said Haddad, assuring that he does not want to “sell fantasy” and that if the announced measures need to be revised “we will return to the discussion table”, because “the toolbox is infinite”.

The purpose of the set of measures, which implies a cut in the federal budget of around R$70 billion in two years, is to comply with the rules of the fiscal framework. According to Fernando Haddad, R$30 billion will be cut in 2025 and R$40 billion in 2026. The set implies changes in the financing of public policies and in federal government expenses, including transfers to states and municipalities, which refer to income tax, minimum wage, salary bonus, military pensions, super salaries, Bolsa Família, Vale Gás, Pé-de-Meia, Proagro, Continuous Benefit (BPC) programs, parliamentary amendments, tax exemptions, civil servant salaries, public examinations, constitutional funds such as Fundeb and the Constitutional Fund of the Federal District, Aldir Blanc Law, Unlinking of Federal Revenues (DRU), the creation of expenses and the duty of execution (for detailed information on each item, see the click here).

The words used in corporate media and social networks to refer to the set of measures give an idea of ​​the ideological use made of the words. For the Agency Brazil, InfoMoney e The Globe, the government announced a “fiscal package”. The Estadão emphasized that this is a “government fiscal package”. The Veja saw the whole thing as a “Haddad fiscal package”. To capital letter the set corresponds to a “fiscal adjustment plan”. The UOL and Forbes They referred to “adjustment”, but said it was a “fiscal package”.

Regardless of whether it is a “fiscal package” or an “adjustment plan,” the announcement by the federal government brought some relief to sectors linked to the public education and health systems, which were concerned about the possible end of the constitutional minimum wages in these areas, which could further aggravate the well-known pattern of underfunding that has persisted for decades. There were also fears that part of the R$70 billion would compromise the Social Security budget, affecting retirement and pensions. Although these areas have been preserved for now, concerns remain about the direction that the adjustment plan will take in the National Congress. “This game was won in the first half,” I heard from a health activist, who added: “The problem now is to see if we can prevent the score from turning around in the second half,” referring to the National Congress, under neoliberal hegemony.

In an article (“Health: directions for the transition”) on the website the earth is round I wrote, even before Lula took office as President of the Republic, that “this will not be an ultra-liberal government, but it will be a neoliberal government” and that, in my opinion, there was nothing new and it was not an “accusation of Lula or anything like that”, because the government that was being organized at the time and that was seeking its political viability, had begun “well before the October elections, way back when the political alliance that would result in the 'Juntos Pelo Brasil' front was established.

There, it was tacitly decided that the government would not be ultraliberal, but neoliberal, as this was a requirement derived from the political viability of that alliance, and a condition recognized by the party organizations that formed it, that the Front's program, necessary for the political-electoral defeat of the extreme right, nested in Bolsonaro's government, could not go beyond neoliberalism. I emphasized that "the socialist program, dreamed of by sectors of the PT and by allies such as the PSOL and others, would be left for another political situation, in another historical period." Now, that would not be possible.

I considered that “the alliance forged by Lula, Alckmin and political leaders close to both was widely celebrated” and that the “electoral result revealed the correctness of the decision made at the beginning of the year” and that, from then on, it would be “necessary to govern with everyone who is ‘on board’.” I concluded by reiterating: “not ultraliberal, neoliberal. The problem for Lula will be to keep this comma exactly in the position it is in, because he will not lack pressure to change the phrase to ‘ultraliberal, not neoliberal’, according to the messages that ‘the market’ never stops sending him. Let’s see what history will tell us about the position of the comma, although even stones know that life is not grammar, but often drama.”

Now, with the “fiscal package,” the market has dramatically taken the offensive. It is not enough for it to be neoliberal. The market wants an ultraliberal government.

Will Lula give in? What to do?

“It’s the economy, stupid!” some readers will say.

I dare say no, it is not the economy, but politics.

Let's see: the first conversations about the "adjustment" talked about ending the constitutional minimum wages for education and health. Nothing about touching the income tax table, military pensions, super salaries, parliamentary amendments, tax exemptions, among other items. The "savings" would be in the order of R$25 to R$30 billion.

To “calm the market”, the government itself started talking about something around “around R$40 billion”.

But the “market” remained “nervous” and “raised the bar” to R$50 billion.

The government reacted and expanded the list of items to be covered in the adjustment plan. To compensate, it included the income tax table (with exemption for incomes under R$5, a campaign promise by Lula) and, to meet pressure from social movements and from the Esplanade of Ministries itself, it protected the constitutional minimum wages for health, education and social security. Lula's voice was often heard echoing that "expenditure on health and public education is not an expense, but an investment." Finally, he proposed cuts that amounted to R$70 billion.

But the announcement had barely made the news when the corporate media began to echo the “market dissatisfaction”, giving voice and prominence to “experts”, generally spokespeople for investment funds, or “economics professors” from here and there. Almost unanimously, they all called for cuts in the funds that finance public education, the Unified Health System (SUS) and social security.

“The market is a voracious animal,” Delfim Netto, the unsuspected superminister of the civil-military dictatorship, would rightly say. But the market, which always wants more, is not on the political scene only for economic reasons. It is also on the political scene for political and ideological reasons.

It's not the economy, stupid, I'm tempted to say.

It is politics, because what is also at stake in this episode is the direction that the Brazilian State should take, and especially in those areas that refer to the social security system provided for in the 1988 Constitution and in the area of ​​education. It is, therefore, the type of State that the 1988 Federal Constitution outlined that continues to be attacked even now – as, in fact, has been happening since Ulysses Guimarães announced the “Citizen Constitution” in October 1988. Since then, “the market” has been insistently announcing, daily, that that set of rights in the areas of public pensions, social assistance, health and education “does not fit into the budget”.

But there does not seem to be any problem in the Union Budget for the government to pay for expenses, including stratospheric interest, on the public debt. Banks and investment funds – that is, those that live off capital income but do not produce a single liter of milk – never complain, because “their share” is always guaranteed.  

For the “market”, however, it is not just about “economics”, about guaranteeing “its share”. It is also, and above all, political and ideological.

The market wants “all of this”, in the areas of public welfare, social assistance, health and education, which “does not fit into the budget”, to be transformed into merchandise to be sold by the market.

The market does not want a State to ensure the exercise of rights to education, health, and social security, but a State that defines the “rules of the game” for the free marketing of health, education, and private pension “products.” The market pretends not to understand rights, but only “products.”

Therefore, the market cuts, strangles, defunds, leaves in abeyance all public policies in these areas.

That's what it's all about. For the market, this is a "front of struggle" of crucial importance. Even more important than if Lula's government had offered them, in this "knife party" of cutting, and cutting, and cutting ever deeper, something like R$100 billion or R$150 billion. It wouldn't be enough, because it's never enough.

It's not the economy, stupid, it's the type of state.

Let no one be fooled. This is the battle over the type of State and the fate of the sections that deal with citizenship rights that will be fought in the National Congress until the end of December.

*Paulo Capel Narvai is senior professor of Public Health at USP. Author, among other books, of SUS: a revolutionary reform (authentic). [https://amzn.to/46jNCjR]

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