Point for Haddad: The fiscal framework could be worse

If simplicity is the highest stage of sophistication, then the gadget that makes up the new>financial framework It can be considered a primitive piece. The suggested rules suggest a maze so complex that it suggests something meaningful.

Minister’s budgetPT, which President Lula da Silva seems to have adhered to, and for whom the thought of controlling public spending is an attack on human dignity. They believe that public spending generates growth and increases tax collection, and closes the self-financing cycle soon afterward.

This insanity is opposed by the primitive fundamentalism of a large part of the market analysts, who have embarked on the spending cap fallacy and for whom debt growth is only matched by very drastic retrenchment. They ignore that the political terms of administrative reform are not in place and that the roof law, which was otherwise inapplicable, only abolished public services. So, if the intention is to shuffle and confuse, the new teacher is already in the act.

Keeping expenses growing below the pace of revenue growth can have a stronger impact than you think. Let’s look back: 12-month changes in total central government expenditures between January 2000 and March 2023 (279 observations) average 12.2% annually, higher than the average annual change in revenue administered by the Internal Revenue Service, From the order of 11.5%.

If expenditures had grown at 70% of the increase in taxes, as is now being proposed, we would have a more favorable picture of public debt today. It is also positive that real spending growth is limited to a maximum of 2.5% annually, which is much lower than the 5.4% real growth recorded in this period.

The debt/GDP ratio, in turn, may have a more digestible trajectory if the government is able to generate primary surpluses and, after generous approval from the central bank, lower interest rates. In this period from January 2000 to March 2023, the average annual nominal GDP growth (using the central bank’s monthly estimate as a reference) was 10.2%, much higher than the 70% growth in revenue, about 8% annually. The numbers are many and the simulation is infinite, which does not allow for fatal predictions.

The new rule isn’t good, but it could be worse. Its sophistication has numbed Labor’s ferocity and even the market has not convulsed. That’s what we have. point to the minister.