The spending cap is over, now what?



The Bolsa Família PEC (EC 126) represents the repeal of EC 95 and the definitive end of the so-called Spending Ceiling

Last December 21, Constitutional Amendment 126 was approved and promulgated. This PEC received several nicknames depending on who spoke about it: PEC of the Transition, PEC of the Explosion, PEC of the Bolsa Família or PEC of Spending. During the proceedings there were some controversies since the proposal initially made by the government transition team that will start right on the next day.

One of the controversies that gained the most attention was the period in which a certain amount of 145 billion reais would be authorized annually to be invested in social policies beyond the budgetary limits imposed by EC 95. This amendment was named by its creator, the government Michel Temer and his Economy Minister Henrique Meirelles as the New Fiscal Adjustment, but it was popularized by the bourgeois media of Teto de Gastos and by the social and popular movement of PEC da Morte when it was presented by the coup. I affirm: EC 126 represents the revocation of EC 95 and the definitive end of the so-called Spending Ceiling. But no one else thinks so, Elenira?

Well, read this entire article and you will probably agree with me. But first, let's go through the history of what this measure was, is, its effects and then why it is possible to say that it ended.

On June 08, 2016 I recorded the video[I] which ended up being, until today, the video with the most views on the SINASEFE channel, explaining the tragedy that that proposal meant. Despite the fact that the project that I present was not exactly what was approved and enacted, unfortunately the core of the tragedy that it represented was executed and with flying colors, generating a reduction in investment, unemployment, an increase in inflation, an increase in the transfer of money from the people to bankers, reduction of the Brazilian industrial park, increase in the number of Brazilian billionaires and the other side of this coin, hunger and food insecurity for half of the Brazilian people.

The death bill, enacted in December 2016, included articles 107 to 114 in the transitional provisions chapter, creating a draconian rule that prevented the country, regardless of economic conditions, both indebtedness and investment, economic growth measured by the Gross Domestic Product - GDP, increase or decrease in unemployment or income of Brazilian workers or even the growth or not of government revenue, the government was limited to a ceiling of social spending, of importance for national sovereignty or national self-determination strategy according to expenditures made in July of the previous year corrected by inflation measured by the IPCA of the IBGE accumulated in the previous twelve months until June of each year.

This PEC had a complex procedure, received changes even before being sent to Congress by the coup government, then a replacement in the Chamber, amendments and its enactment, which, despite being troubled, was quick and did not allow for adequate debate by society on a topic that amended the founding landmarks of the Citizen's Constitution of 1988.

The popular movement denounced and faced the PEC da Morte and it was right to do so because there was only a ceiling for primary expenses, that is, everything that directly affected the realization of social and collective rights, such as education, health, housing, housing, culture, memory and no limit to the transfer of public money to the very rich through financial speculation via the public debt system, interest rates and protectionism of the financial system.

The PEC also facilitated the privatization and commodification of rights by authorizing expenditures outside the ceiling for public companies with non-dependent capital, even encouraging entities of this type to be created by this loophole, taking away the public character of the entities that would receive public funding from the National Treasury, that is, the savings of the Brazilian people whose spending is organized by a democratically elected government in accordance with a budget law approved by a congress also democratically elected, even though we know that in proportional elections due to the lack of maturity of our democracy and system fragile party, economic power has a much greater weight than for the federal executive. This is the first aspect in which this amendment breaks the democratic principles of the CF, which is nationally planned budget management, with respect to the federative pact by an elected government for that purpose.

PEC 241 was part of a package to break a process of some democratization of public resources that had been conquered with a lot of struggle since the redemocratization positive in the Magna Carta, for example, by the constitutional minimum of investment in social policies and that were still broken which were not revoked by EC 95. Within the package to withdraw rights and guarantees there was also the Pension Reform, which was only approved in the Bolsonaro government, due to fierce resistance, especially from the union movement.

There is also the Partnerships and Investments Program, PPI, presented as Provisional Measure 727 on the same day that the coup government takes office and which carried out the privatization of public companies and activities and social and political responsibilities of the government through various mechanisms such as concessions, partnerships , creation of non-dependent capital companies, among other means of weakening the social and strategic role of the State in the defense of the people and sovereignty.

The corporate media is already celebrating that the future Minister of Planning Simone Tebet, a political figure who claims to be liberal in the economy and will have influence with the PPI. Other components were the Labor Reforms and the approval of the Total Deregulation of Outsourcing Law, which affected the labor rights of the vast majority of the population, even imposing a reduction in average income, as both the private initiative with entities, autarchies and public companies began to have functions that are more fragile and privatized or commodified.

Another project of a Brazil for bankers that was approved was the infamous autonomy of the Central Bank, which in practice makes this strategic entity independent of the president elected by the people and totally at the service of financial capital, the great proposer and beneficiary of this entire project.

And of all the change envisaged in the infamous coup project called Ponte para o Futuro, the Bolsonaro government failed to implement the infamous destruction of the stability of public servants proposed in PEC 32/2020, which was called Administrative Reform by coup leaders and neo-fascists, but that would be the destruction of the State to the Brazilian people as conquered in the Citizen Constitution. This PEC was defeated by mobilization, especially by civil servants organized in unions and union centrals who pressured Congress to shelve the project and defeated it now with the election of Lula, who committed himself several times throughout the campaign that he would make the that it was within its reach so that this proposal would never leave the drawer where we placed it (although we will remain vigilant until it is withdrawn completely from processing).

Other Constitutional Amendments were also approved, which in an opportunistic way and using the discourse of lack of control over spending (which effectively only exists in relation to the transfer of money to the financial speculation system), of the ratio between gross debt and GDP in an anti-scientific way that increased despite that a greater volume of resources has been paid in the name of debt amortization and rollover and the pandemic, removed rights from public servants as a time count for progressions and promotions, trying the height of removing even this period from the count of the acquisition period to retirement, which was withdrawn at the last minute in the Senate.

Paulo Guedes warned that he would put grenades in the pockets of servants of the people, he did and they exploded. Also part of the dismantling package was the reduction of civil service with the paralysis of civil service examinations and the freezing of salaries of all federal civil servants since the coup, except for some readjustments already approved by law previously or some changes in specific careers also planned before of the coup and that during Temer's illegitimate government were forwarded. Already in the Bolsonaro mismanagement, the freeze was total.

But does EC 126 revoke EC 95 or not?

Some people already said that the New Fiscal Regime had not been in force for a long time, since since Bolsonaro took office, it has been broken or disrespected on several occasions. Even in July, the national congress approved the electoral PEC that was all executed outside that ceiling in Bolsonaro's desperate attempt to buy his re-election, which was ineffective. Estimates show that the ceiling was “exploded” by around 800 billion reais during the outgoing government.

But EC 126 certainly repeals and note that drawing attention to the debate over the validity period (1, 2 or 4 years) of the exception to the 145 billion ceiling was a nice distraction tactic to ensure the repeal of EC 95. The exception of the 145 billion is not valid for 2023, which already makes the CE partially revoked for that year. But then what?

Let's go to the text promulgated in its articles 6 and 9: “Art. 6 The President of the Republic shall submit to the National Congress, by August 31, 2023, a supplementary bill with the objective of establishing a sustainable fiscal regime to guarantee the country's macroeconomic stability and create the appropriate conditions for socioeconomic growth, including the rule established in item III of the caput of art. 167 of the Federal Constitution."

And “Art. 9º Are revoked the arts. 106, 107, 109, 110, 111, 111-A, 112 e114 of the Transitional Constitutional Provisions Act after the enactment of the supplementary law provided for in art. 6 of this Constitutional Amendment."

Two central points of the so-called “New Fiscal Adjustment” were that it was in the Constitution and that it lasted for 20 years. It was always known that he would not last the 20 years because the rule was so harsh and so disconnected with reality that it was obvious that even a government that wanted to physiologize would have to overturn, even partially, this rule.

The other was for this rule to be in the Constitution, because that makes it hard to change for any government that doesn't have a broad base in Congress. Bolsonaro, when he wanted to break the ceiling, exchanged it for the Secret Budget and needed to super empower Parliament in budgetary rules. The New Party (sic) tried to maintain this foundation and presented an amendment that was defeated in the Chamber maintaining the revocation of EC 95 from the approval of the PLC, which requires a simple majority and a much simpler type of procedure.

Not to mention that removing the reference to Article 167, which only mentions limitation when current expenses reach 95% of current revenues, a series of possibilities to determine new expenses are blocked, but this rule already existed before EC 95. there is no definition of what would be a tax regime to be approved in the PLC. Soon any tax anchor that comes will no longer be constitutional and automatically, when declaring that it complies with the provisions of article 6, it already revokes the entire EC 95, with the exception of articles 108 and 113.

But article 108 is what provided that in 10 years the tax rule should be updated, which ceases to be valid due to emptiness. The other states: “Art 113. The legislative proposal that creates or changes mandatory expenditure or revenue waiver must be accompanied by an estimate of its budgetary and financial impact.”

The maintenance of this article does not create an objective limitation, it only requires an estimate of the impact when it is a legislative proposal, without changing the condition of an executive proposal.

In Mathematics when we reach the conclusion sought in the proof of a theorem we write CQD, “As we wanted to demonstrate” or QED “Quod Erat Demonstrandum” in Latin and I consider it effectively demonstrated that EC 95 was revoked by EC 126. And so we can say that the Lula Government, even before taking office, has already fulfilled two campaign promises by working and winning the approval of EC 126: the maintenance of the income transfer program worth BRL 600 per family plus BRL 150 per child up to 5 years old and also the promise to revoke EC 95.

Now the question that gives title to this article remains: what now?

Of course, the slave-owning Brazilian bourgeoisie, especially the richest that profit from this whole system of financial speculation with money from the Brazilian people, is not going to give up so easily on a mechanism that enriches it so much, especially if it is highlighted that the big communication and , therefore, great ability to manipulate public opinion, as Globe e CHOOSE YOUR WRISTBAND, is owned by billionaire businessmen who have acquired most of their wealth and are growing in the financial system and, therefore, have already resumed the ratings of risk agencies (did they cease to exist in the Bolsonaro government? Had they disappeared), they are talking about “Gastança ” in fiscal irresponsibility and returned to the litany that you cannot spend more than you receive in the government as in a house, which is an obvious fallacy, since no housewife can issue money nor determine the interest rate that will pay on a loan. This week, André Lara Resende explains[ii] in a simple and direct way as the option for the highest interest rate in the world in times of recession and in the post-pandemic is the option that is making this debt never decrease (I strongly recommend reading it).

Another fundamental issue is to understand that Brazil is not financially broke. What used to be called “Fiscal Anchor” was sinking instead of holding the ship, but only in carrying out projects such as school feeding and the program to eradicate hunger and extreme poverty, because Bolsa Banqueiro never lacked for anything, on the contrary, it was for the Bolsa Banqueiro that the money was reserved by EC 95. It has 3 trillion in cash and the Union broke record after record in collection exceeding R$ 200 billion in monthly collection. So the problem is budgetary, from a government that wanted to break social policies and did it with mastery.

Therefore, in the first half of 2023, Brazil has to hold a long debate on a way for the budget to prioritize its people, social policies, what President Lula calls “putting the poor in the budget” and future Minister of Finance Fernando Haddad complete with “putting the rich on tax” and warns that the debate on the tax regime will be articulated with a Tax Reform that does this. A lot of social mobilization will be necessary because the elected congress is very conservative and in its vast majority submissive to the powerful directly or just to the dominant discourse about the essential need for a new fiscal anchor (recalling that Brazil lived well until 2016 without anything similar to this regime Supervisor).

Social and popular movements have to build a proposal that considers social parameters, including education, health, eradication of extreme poverty, in addition to GDP growth, tax collection and workers' income as economic parameters and dispute it by pressing the government and, primarily, Congress for its approval. This is because I believe that we cannot simply approve a fiscal rule that says that we do not have a new fiscal rule and that we can only continue to implement the budget approved in Congress with the priorities defined in Articles 3o and 5o of the Constitution and the government program presented by whoever is elected to the Presidency of the Republic, which would be ideal. This is an arid debate, but one that we need to be aware of and a cause for which we must be very mobilized.

Only struggle changes life!

*Elenira Vilela is a professor of mathematics at the Federal Institute of Santa Catarina and SINASEFE General Coordinator.


[I] Available at the link

[ii] Available at the link

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