Brazil experiences civil war by other means – 11/04/2023 – Vinicius Torres Freire

Brazil is going through one of those fierce phases of competition for public money. It is also worse because the Budget is almost exhausted and there is an economic and/or political limit to the increase in the tax burden.

Without a solution, this conflict has already ended in hideous inflation. But it could drag on until we lose sight, as in so many other issues, of what we have seen in the last four decades of near stagnation. A “marriage with mediocrity”, as economist Samuel Pessoa wrote in his Saturday column this Sheet. Not that the country was better before. He was preparing the socially barbaric impasse he is in.

The conflict appears as delirium, misinformation, propaganda, sectarianism and class shamelessness, which usually passes for public debate. The degree of shamelessness now seems exorbitant.

Tax Reform and “zero deficit” are the hot topics.

Businesspeople usually come together at these seminars of trade associations or similar, when it is not uncommon to call authorities to highlight the propaganda event. They talk about “reforms”, the “tax asylum”, “alternatives for Brazil”, all that nonsense.

In Tax Reform, many of these people and wealthy professionals lobby to get favors and money. It’s a bigger case of the usual behavior of putting tortoises in laws, of getting favors from the courts, from the governor, from the mayor. Such favors break the tax situation and worsen the “tax madhouse”. It also happens in other reforms and privatizations. The shame is great.

Some are actually calling for a more rational or effective Budget. As a whole, they dynamite the foundations of a building that, they say, needs renovations on some floors.

If they could, they would push the entire bill to those who receive Social Security and social assistance benefits, to healthcare, to civil servants (yes, part of the civil servant elite plunders the Budget). Etc. A large part of this business community doesn’t care about the public good: thinking they would make money, they even supported Jair Bolsonaro’s coup plan.

The Budget can and should be changed, but the efficiency gains would have to go back to expenditure. The country is poor, unequal and lacks investment.

The left thinks or pretends that the problem does not exist. According to the official propaganda, it says that the government will put the “poor in the Budget and the rich in the tax”. The rich evade the tax, often with help from the government, and the Budget exploded.

When it is suggested to contain the deficit, they say that they want to give this money from reduced expenses to the rich and to finance, a delusion. Obviously MORE DEFICIT gives more money to those who lend to the government, the richest. The alternative would be default and confiscation, either explicitly or via inflation. So suggest that.

There is sad ignorance, like saying that half of the federal budget is spent on interest or debt. Government revenue pays part of primary expenses (as there is a deficit, money must be borrowed to pay the entire bill). But the maturing debt and its interest are “paid” with new debts.

Increased debt, in turn, increases interest payments (due to higher liabilities and higher interest rates). Most of the government, the PT, the left and the rare aggregate economists think this is not a problem.

The poor will not even fit into a fair Budget. Even among the poorest 20%, more than 60% of family income comes from work (about 18% from social security and other income). It is easy to see that, to cope with poverty, more growth is needed: more work and wages.

Bolsa Família is already 46% of the minimum wage. The minimum is equivalent to 48% of the average salary. But half of employed people earn less than R$1,800. Therefore, the minimum is equivalent to around 73% of the median salary. Even a huge tax or deficit increase wouldn’t fix the problem.

The country does need more taxes, but there are limits to that too. The new money will not cover a relevant part of the total deficit (primary plus interest). So debt and its negative effects on growth will continue to increase.

It’s a serious impasse that appears in the conversation as this pile of ideology, ignorance and propaganda.

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