Economy

Opinion: Social responsibility or tax irresponsibility? – Opinion

On the last 10th, president-elect Luis Inácio Lula da Silva gave a speech at the Banco do Brasil Cultural Center, in Brasília, at a meeting with allied parliamentarians, which generated controversy. For him, there is no problem in failing to comply with the budget if there is a need for the people, generating expenses that exceed revenues.

According to the politician: “Why do people all the time say that we need to cut expenses, that we need to make a surplus, that we need to cap spending? Why don’t the same people who seriously discuss spending ceilings discuss the social issue in this country?”.

The central idea of ​​social responsibility and fiscal irresponsibility was reiterated at the 27th United Nations climate conference, on the 17th: “It’s no use thinking only about fiscal responsibility, because we have to start thinking about social responsibility”, said the future president.

To answer the question raised about the need to seriously discuss the spending ceiling, economists Arminio Fraga, former president of the Central Bank, Edmar Bacha, former president of the National Bank for Economic and Social Development, and Pedro Malan, former Minister of Finance, published an open letter on the same date.

The authors explain that “fiscal responsibility is not an obstacle to the noble yearning for social responsibility”. For them, “the challenge is to take measures that do not create bigger problems than the ones we want to solve”.

When the government is not concerned with fiscal responsibility, it is perceived by creditors as a potential bad debtor. So, the risk of lending money is increased and, consequently, the basic interest rate, which is high, needs to be even higher.

A high basic interest rate implies a reduction in the population’s access to loans and financing, reducing consumption and investment capacity. It’s bad for those who need to buy and also for those who need to sell, slowing down the economy. With the drop in revenues, companies seek to reduce costs and expenses to maintain profitability and, therefore, increases the probability of an increase in the unemployment rate.

In contrast, economists and researchers José Luis da Costa Oreiro, leader of the Research Group on Structuralist Development Macroeconomics at the University of Brasilia, Luiz Fernando Rodrigues de Paula, deputy leader of the Research Group on Structuralist Development Macroeconomics at the Federal University of Rio de Janeiro, Luiz Carlos Bresser-Pereira, emeritus professor at the Getúlio Vargas Foundation in São Paulo, Kalinka Martins da Silva, professor at the Federal Institute of Goiás, and Luiz Carlos Garcia de Magalhães, technician at the Institute of Applied Economic Research, published a letter on the day next, the 18th, in defense of social responsibility, even with the spending cap being exceeded.

For them, the spending ceiling does not guarantee fiscal discipline and fiscal and monetary policies interfere little in the inflationary process. Economists and researchers understand that “the spending ceiling is an element that imposes a medium and long-term squeeze on the budget” and that “it must be replaced by a new fiscal rule”.

I tend to agree that it may be necessary to breach the spending ceiling to ensure health, education and security for the population, but only when the possibilities for reducing non-essential spending are exhausted.

Administrative reforms, restructuring expenditures and salaries of public and tax servants, attracting investments through legal stability, efficient regulation and reducing its complexity, seem urgent to guarantee fiscal balance, but little or nothing is said about it.

It seems to me that the central discussion is not on the spending ceiling, which tends to arise in times of social crisis, but on the concern with the increase in the public debt. From 2013 to 2021, the government did not have an annual primary surplus, which guarantees the resources needed to pay interest on public debt and government debt in the medium and long terms.

Jeremy Hope and Robin Fraser published an article in 2003 entitled “Who needs budgets?”. These authors are also founders of the Beyond Budgeting Institute (“Instituto Além do Budget”, in free translation) which criticizes the budgeting process adopted by organizations. For them, instead of budgeting, companies should establish longer-term objectives and adopt profit, cost, customer satisfaction and quality targets, as examples. However, better results would imply rewards.

Public administration and business administration have their differences. However, the question that remains is: does the Brazilian public budget model need to be revised or reformed, which considers the need for a line aimed at facing crises? Shouldn’t the management and quality of expenses be rethought and better discussed?

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