PEC to take away Bolsa Família from the ceiling beneficial properties energy as an answer for the Price range

Exit is seen as the most viable from a technical and political point of view

The option to remove all spending on Bolsa Família from the spending ceiling gained strength in discussions conducted by the team of President-elect Luiz Inácio Lula da Silva (PT) to address the lack of space for different expenditures in the 2023 Budget.

According to interlocutors heard by the Sheet, the exit is seen as the most viable from a technical and political point of view and has a “high probability” of being chosen by the new government. The PT party still does not have a solid base of support in the National Congress, but a PEC (proposed amendment to the Constitution) with this content would hardly face resistance.

Even PP lawmakers and Republicans, parties aligned with President Jair Bolsonaro (PL), say Congress will not vote against a proposal that provides more money for poor families. The political cost of rejecting a sealed measure to expand cash transfers is considered very high.

Transition calculations indicate that the amount needed to guarantee the minimum benefit of BRL 600 as of January and the additional BRL 150 per child up to six years of age should reach BRL 175 billion (considering the BRL 105 billion already reserved in the budget proposal). This would be the amount to be left out of the spending ceiling (fiscal rule that limits the growth of expenses to the variation of inflation) in 2023.

The value may or may not be made explicit in the text of the PEC, but this will depend on a political decision.

The financial market has demanded that the transition team define a maximum value, as this would provide greater predictability in relation to the trajectory of public accounts. The fear of economists is that the absence of an explicit limit will serve as a gap to continue expanding spending after the program, with readjustments in the benefit or inclusion of more families.

Lula’s team, in turn, has arguments against setting a value in the PEC, precisely because the amount in nominal terms (without considering inflation) may lag over time, bringing new problems to the management of public expenditures. .

This future perspective is considered relevant because the initial intention of the new government is to permanently exclude Bolsa Família from the spending ceiling.

The measure is not a PT endorsement of the spending ceiling, but it would give Lula’s team more time to discuss a structural review of fiscal rules, a task that will not be trivial and will require a series of technical analysis and political support in Congress. Without this, a new risk of tightening could arise as early as April 2023, when it is necessary to submit the 2024 LDO (Budget Directive Law) project.

The permanent exclusion of Bolsa Família from the expenditure ceiling, however, was not well received by members of the CMO (Mixed Budget Committee). Members of the collegiate warned the vice president-elect, Geraldo Alckmin (PSB), about the risks and recommended stipulating a deadline for the exception, which could be one year or even four years (term of office).

The assessment among the members of the commission is that the permanent removal of some expenditure from the spending ceiling could have a bad impact on the financial market, at a time when the elected government still seeks to inspire confidence and credibility among investors. The topic was discussed at a meeting on Tuesday night (8).

By excluding Bolsa Família from the scope of the spending ceiling, R$ 105.7 billion is released today reserved for the program in the Budget proposal. The money can be redistributed to actions that need funds for 2023, such as Popular Pharmacy, real increase in the minimum wage, health actions, education and public works.

PT auxiliaries say that this alternative would be simpler to explain to parliamentarians.

From a technical point of view, the measure is also considered the most feasible, since it requires the exclusion of a single expense. The alternative would be to make an exception for additional resources directed to a series of policies, which would need to be detailed in the text of the PEC — a much more complex option that could stifle budget management in the future.

Another argument is that the PT wants to increase expenses that could hardly be left out of the spending ceiling, such as the real increase (above inflation) for the minimum wage. It would be difficult to leave a portion of the expense within the ceiling and another portion outside the scope of the rule.

Despite the relief in 2023, there is concern about the future of the Budget in 2024. Even with Bolsa Família off-limits, the space for other expenses may be tight again due to the form of correction provided for by the rule.

For next year, the budget’s general rapporteur, senator Marcelo Castro (MDB-PI), has already told the Sheet which will keep the 7.2% expansion at the limit, reflecting the projection for the IPCA (Extended National Consumer Price Index) in August, despite a lower current expectation for inflation.

This decision provides a gain of around R$ 30 billion in 2023, but, under current rules, it needs to be compensated in the following year – that is, it becomes a squeeze of the same size. Technicians are studying how to absorb this impact on the PEC.

In his first meeting with the summit of Powers after his election, Lula discussed the PEC for the Transition. According to PT allies, he has already made it clear that he intends to seek “a way out of politics” for the 2023 Budget, indicating that he does not intend to resort to the “plan B” suggested by the TCU (Union Court of Auditors), using extraordinary credits by MP. (provisional measure), without the need for prior approval from Congress.

In one of the meetings, the president of the Senate, Rodrigo Pacheco (PSD-MG), demonstrated that he considers the PEC to be the safest route from a legal point of view. The proposal should even begin processing in the Senate, where Pacheco has indicated that he will provide accelerated processing and support for the proposal.

The budget’s general rapporteur is betting on a unanimous vote in favor of the PEC precisely because it is a proposal to guarantee the continuity of the Bolsa Família of R$ 600. Castro is also quoted as rapporteur for the constitutional amendment.

Tax reform is one of the priorities, says Persio Arida

While trying to solve the 2023 Budget, the transition team is already signaling the next steps of the Lula government. Economist Persio Arida, one of the four coordinators in the economic area, said this Wednesday (9) that tax reform should be among the priorities.

He specifically cited the proposal to create a single tax, called VAT (Value Added Tax), to be formed from the merger of other taxes, saying that the debate on the subject is mature.

“It should be a priority in the next government, which is great news,” he said at a seminar promoted by the France-Brazil Chamber of Commerce.

For him, the initiative would facilitate productivity gains if combined with greater opening of the economy to international trade. More efficient taxes would also help re-industrialize the country, he said.

Arida also drew attention to the need for fiscal responsibility and warned Brazil not to make economic policy mistakes early on, citing as an example the short-lived government of Liz Truss in the United Kingdom – which ended last month after the adoption of a economic package (with a large tax cut) considered inappropriate for the moment experienced by the British economy.

“You can’t burn the start, that is, start with something perceived as disastrous”, he said. “England gives us a warning: don’t burn the start”, he said.

Arida said that Brazil comes from a fiscal policy that is far from contractionary and has a spending ceiling that has been breached. “The biggest concern is the risk that the new government will face up to what happened in Britain.”

Source: Leaf