Lula 3’s most important decision is close – 03/14/2023 – Vinicius Torres Freire

Luiz Inácio Lula da Silva is going to make the most important decision of his government these days. He will decide what his “spending ceiling” will be like, any type of expenditure and public debt limiter. Fernando Haddad says the plan is ready.

It will not be a roof like Michel Temer, who had a very short life and was cursed for several reasons, including his defects. It only lasted in 2018 and 2019, somewhat in 2021, when it was imploded by the government of darkness.

Lula’s so-called “new fiscal framework” will also have some spending limits, enough to control the increase in the public debt, with another attached or appendix plan, that of increasing revenue.

This debt limiter and therefore, to some extent, spending growth will not be a silver bullet. It won’t kill the low-growth vampire. But it must determine whether the outlook will be positive. That is, if it is possible for the economy to grow more than the 1.5% of the year seen after the Great Recession.

It is difficult for the country to withstand this pace. Maybe democracy can’t take it. It is not possible to alleviate social suffering, to lift people out of poverty and misery, just by “putting people on the Budget”.

A good fiscal plan will thwart the spending expectations imagined by the left; it has to bother the richest with more taxes.

It is difficult to see how to accommodate accelerated increases in the minimum wage in such a program (since they have an impact on Social Security spending) or the cut in the Individual Income Tax, for example. But somewhat greater growth can offset the frustration.

It will take more than a fiscal plan to accelerate growth in the short term (in the Lula years 3). Good tax reform is more effective in the longer term, but it can be encouraging. A well-thought-out industrial policy plan for the “green transition” as well. That is, an agile, light plan that explores the opportunities that open up for the country, given the risk of a climate disaster and the new configuration of world politics.

Having a more functional market economy helps to discover needs and opportunities for intelligent intervention. Tax reform, regulatory changes, or guarantees for productive investment can make the economy more functional, boost growth, and point the way for government action.

But every week an idea of ​​counterproductive intervention is heard. Many people in the government and surrounding areas imagine that the problem boils down to a political decision, a game of zero-sum wins and loses, as if decrees on prices, wages and rents would resolve the issue. It seems ridiculous, but it is not uncommon for this to leak out of the government or to be heard behind the scenes.

Petrobras really has to change. But what change? For now, price interventions and attempts to asphyxiate the money that the company earns for the government, which needs resources to invest. Infrastructure, science and technology are in ruins.

Right now, the government has decided to lower the payroll interest rate. Who knows what the intention is. But the measure will reduce the supply of credit of this type, unless the basic interest rates plummet through the tables and the level of employment rushes up the stairs. Will not happen.

As the government has barely started, we can expect the group to come up with new, unforeseen ideas, instead of badly revised (or not even that) reissues of the Dilma 1 disaster.

The first step, however, the cornerstone, will be the “new fiscal framework”. The subject seems esoteric or motivated by a conspiracy of austericides. Frankly, it’s an obscure tedium for almost any human being. But it will be a decisive, critical moment for Lula 3.

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