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(Jefferson Rudy / Senate Agency)

As an economics columnist, I am immensely grateful to live in Brazil. There were many times that inspiration was not there and these things suddenly appeared out of nowhere, of great proportions just when I (certainly not the country) needed it most.

I speak, in this case, of the proposal – probably the proverbial “trial balloon” – to “finance” the new income transfer program through the non-payment of court orders e do deviation of part of the resources the Fund for the Maintenance and Development of Basic Education and the Valorization of Education Professionals (Fundeb), an attempt beyond that clumsy in the sense of violating the spending ceiling, worthy of the late (#sqn) Arno Augustin, the King of Pedaladas.

Beginning of the beginning. The president’s popularity soared with the payment of coronavoucher, which costs us a trifle of R $ 50 billion / month, already deducting the migration of those who received the Bolsa Família to emergency aid.

Such a volume is simply unsustainable: if maintained for 12 months, it would imply disbursement of R $ 600 billion, somewhat less than the largest expense of the federal government, social security benefits from the INSS (R $ 700 billion in the last 12 months).

For comparison, the federal government’s primary spending last year reached R $ 1.44 trillion. In other words, maintaining this program would imply a permanent increase of more than 40% in federal expenses, or just over 8% of GDP.

Thus, a clear conflict is created. With an eye on 2022, the president would like to keep the program. But, as the unsustainable is rarely sustained, it has to settle for something less, but that can still be seen as its brand in the social area. Hence the idea of Citizen Income, essentially a turbocharged Bolsa Família.

While spending associated with Bolsa Família is budgeted at R $ 35 billion next year, the Citizen Income, in the words of the budget rapporteur, Senator Marcio Bittar, would cost something like R $ 30 billion more, that is, R $ 65 billion (0.9% of GDP).

The problem is to make R $ 30 billion more in the budget, whose limit, given the spending ceiling, is R $ 1.52 trillion. This represents about 2% of the total expenditure. Ideally, it would be enough to reallocate other expenses. But, as is known, the Brazilian budget is extraordinarily rigid.

According to the budget law sent about a month ago, social security benefits would total R $ 704 billion, the federal payroll R $ 337 billion, while the other mandatory expenses (with and without control of the flow of disbursements by the Treasury) would reach R $ 366 billion.

In other words, the set of mandatory expenses represents R $ 1.41 trillion (93% of total expenditure). There are only R $ 109 billion left for the so-called “discretionary” expenses, including all federal investments, very close to the minimum limit for the functioning of the government and insufficient to replace even the depreciation of public capital.

In other words, there is no way to fit an increase of R $ 30 billion under the current rules, or better, there is no way to do it in a world without accounting magic. But, fortunately, this is a subject for which there is no shortage of conjurers.

Among the Federal Government’s expenses, there is a portion reserved for the payment of court orders, equivalent to R $ 55 billion. Precatories represent a public debt owed to citizens, derived from a conviction in a judicial process.

The rapporteur’s proposal is to limit the payment of court orders to 2% of the government’s current net revenue, which would divert around R $ 25 billion to the Citizen Income.

As my friend Carlos Kawall, a former Treasury secretary, recalled, this is not just a ride, but pure and simple default. If you allow me to compare, it is equivalent to not paying child support to spend with the new love.

Fundeb is not limited by the spending ceiling. Constitutional Amendment 95, which created this restriction, left these resources out, since they would serve to finance basic education.

In addition, about a month ago, Constitutional Amendment No. 108 raised the value of transfers from the Federal Government to Fundeb from 10% to 23% of the total between 2021 and 2026 (in 2021, for example, it will be 12%).

Thus, transfers from the Union, which reached R $ 15.6 billion in 2019, are expected to rise to close to R $ 20 billion next year.

According to the rapporteur, however, instead of transferring these resources to states and municipalities to finance education expenses, part of them would be diverted to the new program.

It is, in fact, curious: there was originally an increase in expenses that do not count towards the spending ceiling, originally linked to education. Now, it is proposed that these expenses be directed to another purpose.

This episode brings us an important lesson, always ignored by those who defend a more “flexible” ceiling, removing supposedly noble expenses (investments, social expenses, etc.): any exception to any tax rule, no matter how tiny its original size, will always be duly used to spend a herd where a calf was barely squeezed.

This is exactly what happened with Dilma-Mantega-Augustin’s “rides”, in particular the advances from official banks for Bolsa Família, social security and unemployment insurance, and there is no reason to imagine anything different every time exceptions are created. .

That said, if the proposal succeeds, the government’s lack of commitment to the balance of public accounts becomes clear every day.

Regardless of constitutional amendments that may provide legal support for the new rides, additional spending will continue to turn into additional indebtedness, further postponing the debt stabilization process, which, let’s face it, requires a dose of credulity beyond any measure at this point of the championship.

On the contrary, what we see is uninterrupted debt growth, a process that sooner or later – generally sooner than later – ends in blood, sweat and, mainly, tears.

Meanwhile, the interest rates required to roll over the debt are rising, despite Keynesian guarantees of interest that interest rates have nothing to do with fiscal imbalances.

And the Economy Minister swears he wants to implement a social-liberal program …

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