Government tries to sweeten the bitter pill of the fiscal framework – 03/30/2023 – Bruno Boghossian
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Michel Temer said that the government’s low approval ratings gave him the courage to take what he called “unpopular measures”, such as a spending cap. Jair Bolsonaro, preoccupied with his own numbers and with a reelection at risk, abandoned the ultraliberal fantasy and opened so many holes in that expenditure control mechanism that, in practice, it was demolished.
It is not trivial that the mission to remake the rule falls to a left-wing president who campaigned promising to fatten the Budget. The elaboration of the fiscal framework took into account a complex balance between investors’ distrust, Lula’s pact with his faithful base and the maintenance of a stock of popularity.
Fernando Haddad pursued a rule that had the mark of tightening the accounts after convincing Lula that, otherwise, economic policy would be a constant target. The counterpart demanded by the Planalto Palace was a modulation, so that the government would have the strength to meet its campaign commitments, and a package that would allow it to cushion possible accusations of electoral fraud.
The creation of an expenditure limiter means that, sooner or later, Lula will have to tell his supporters that he will not be able to fulfill some 2022 promise. The government makes an effort to postpone this uncomfortable moment by establishing a more comfortable margin than the old ceiling, saving space for spending on health and education.
In the announcement of the new rule, Haddad sought to sweeten the bitter pill of the adjustment. He said that the framework allows for the inclusion of the poor in the Budget, expressed concern for families and signaled that the cost of tightening would be paid by the richest who, according to his team, receive undue benefits.
It was a message for Lula voters and for PT groups grinding their teeth at the idea of a squeeze. Serving these groups and calming restless economic agents will be a permanent challenge.
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