Government considers spending limit first step in overcoming economic crisis

The PEC which deals with the ceiling of Public Expenditure must be voted on this week.
09/10/2016 16h04 - Updated 9/10/2016 16h04
Photo: reproduction

The proposed amendment to the Constitution (PEC 241), known as PEC Public Expenditure Ceiling, It will be voted on this week. Considered by the government Michel Temer as the first step to overcoming the economic and financial crisis the country, or text limits by 20 years federal spending to the previous year's budget adjusted by the Consumer Price Index (HICP).

Only, for 2017, the budget ceiling of primary expenditures - those that exclude the payment of debt interest - is the total spent on 2016 corrected by 7,2%. The rule applies to both the Executive expenses as expenses for Senate, Chamber, court Union accounts, Union Public Ministry (MPU), MPU Board, public defense, Supreme Court, Superior Tribunal de Justic a, National Council of the Justic and Labour Justices, Federal, Military, Election and the Federal District and Territo rivers.

Director of Budget and Financial Overseeing Consulting Chamber, Ricardo Volpe says the only point on which all the impasse is over the role of the state vision. "Today we are the largest expense historic public, with 20% stir START. We want to continue growing or want to decrease or stabilize?”, questioned.

second Volpe, maintaining the current path come to distrust the country point of view the market, which may stop buying government bonds, used for debt rollover, or will want to purchase with very low. "Which means you will have to increase the interest rate. Unable to finance its expenditure, the Union will pay the same and will have to issue coins to pay their commitments, inflation will rise and wages will be frozen ", designed.

Ricardo Volpe, who helped draft the proposal, ensure that fiscal adjustment is inevitable, but it is a choice of society. "Or is via inflation, or abrupt adjustment cutting various costs immediately or with the gradual adjustment, which is that the SGP. You will only grow and inflation over time, how the economy will grow, that stabilized expense can reduce the size of the state and back to save money. It is a discussion of the state size ", said.

The exit, second or technical legislative, It will be the search for greater efficiency in spending. "The Brazilian government spends too much and spends badly. The state will have to seek efficiency. Want to hire more servers? You'll have to take another place. Want to buy a car? Reduce other expenses ", he added. to Volpe, PEC provides a gradual exit to the current situation of the country as they have strong economies such as the Netherlands, Norway and Canada. "We created the illusion, post-Constitution 1988, that the State is able to give everything to society. Now we will have to prioritize. If education and health are priorities, we take from elsewhere. All
areas have a ceiling and health and education have a floor, minimal. Want to spend more on this? Just spend less on others. "


economics professor at the University of Brasilia (UnB), Roberto Piscitelli warns that it is not possible to assume that Brazil will continue with GDP falls or that the economy does not go react.

"We will have real growth and continue to limit inflation? Within a philosophy of reducing the size of government, PEC has to a certain consistency, but the question is whether we are willing to take more and more the state of economic activity and especially the social ", he said.

Roberto Piscitelli, the proposal reduces the participation of the state and can stifle the economy. "Economic conditions are much more dynamic in emerging countries like Brazil in such a troubled phase of the world economy in so many uncertainties and changes".

social spending

Unlike other areas, health and education had the limit outlined by the minimum to be spent, not the maximum expenditure. by text, the floor for the two sectors shall obey the limit of expenses linked to inflation from 2018. In 2017, the opinion provides, in the case of health, percentage 15% of net revenue, what, according to Constitutional Amendment 86, It would only be in 2020. In the case of education, the constitutional floor was kept in 18% tax collection.

Opponents of Temer government claim that the measure will freeze social investments. Piscitelli sharing this position states that the losses will be inevitable for these sectors, since the new rules will create a "dispute" between areas. "If you have a global ceiling based on inflation, if you need to increase expenditure more than inflation you will have to sacrifice other areas at a time that restriction is already, recession contention that expenditure in some way are already falling and revenues are plummeting in some sectors will necessarily be very sacrificed ", he explained.

However, Ricardo Volpe, resumes the discourse of efficiency spending. "The state spent on education a money mountain more. Spent 4% more than the GDP in recent years and the IDEB [Education Development Index Basic] goes nowhere. Not always give money to solve the problem more. You have to seek quality, professionalism."

According to him, a survey of recent years shows that the minimum expenditure on health was a ceiling of expenditure in education. The only year with more flexible spending is 2016, when Congress put R $ 10 billion. "When Congress puts more money and the government understands that it is a priority will spend more. It is spending more than US $ 10 bi that or minimum. The spending is the most in one area or another depends on political decision. No use putting more in budget. If you have no political will, not going to spend. Link resources is a false illusion that has more appeal because contingencia,, freezes the area and take free actions of other areas. "


Ricardo Volpe also said, the PEC, Judiciary and Legislature have "fat to burn" and are in a comfortable situation, including to promote new hires by public tender. The exception would be the "most spenders", as the Labour Court. But the Executive would be depending on other fiscal adjustment measures to stay with the current structure.

"The Executive, without the pension reform, will have to close a four ministries. The state will have to choose to pay only pensioners, servers and the rest close the doors.”

Conforms Roberto Piscitelli, the next two years the industry will be stopped. "The government wants to reduce the number of servers. There is also a media appeal that propagates we have too many servers, When, actually, we have much less than in Europe, for example. Piscitelli warns that since 2012 wage increases in the public service were below inflation.

Source: Agency Brazil

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