Lula stresses the economy – 09/28/2024 – Samuel Pessôa
On the 13th, President Lula inaugurated the Boaventura Energy Complex, in the metropolitan region of Rio. The complex is the recycled version of the Comperj refinery, one of the biggest white elephants in our history.
At the inauguration event, the president criticized the Central Bank’s statement in its documents that the policy of raising the minimum wage is inflationary.
He stated that the high salaries paid to executives and other professionals are not considered inflationary, that the dividends that Petrobras distributes are not considered inflationary, but the policy of increasing the minimum wage is inflationary for the market and for the Central Bank.
The difference is that executive salaries and Petrobras dividends are income produced by the functioning of the market. The minimum value is the result of legislation approved by the National Congress and is not proportional to the evolution of low-skilled worker productivity.
The same difference occurs with interest on public debt and primary spending. Interest on public debt is the result of a contract made under market conditions between savers who finance the Brazilian State. The primary spending lines are decided by the National Congress.
On Lula’s part, there is questioning and discomfort with the operation of a market economy. It is natural that this is the case. The operation of the market economy produces one of the greatest income inequalities known here.
One way to change inequality, in the long term, is through quality schooling for the population.
Despite a certain skepticism towards education, very careful recent work, and not yet published, by Amory Gethin documents that the population’s schooling explains 50% of all growth in the world economy between 1980 and 2022, and 70% of the growth in income in the world. poorest fifth of the world’s population.
In medium terms, it is possible to improve income distribution by changing institutions, such as union, labor and tax legislation, among others. In Brazil, it seems that the reform of income taxes with a view to increasing progressivity will be Minister Haddad’s next step.
An important step will be to change tax expenditure that favors the richest, such as full deduction of health expenses from IRPF and exemption from contributing to IRPJ for rich people with illnesses covered by law.
In the short term, Lula’s main instrument for reducing inequality is the rule to increase the minimum wage. This mechanically increases the income of disqualified workers. Additionally, as the benefits of social programs are linked to the minimum, their increase increases the reservation salary of the disqualified worker.
However, resource limitations are a fact. Raising the minimum wage puts pressure on demand and, when the economy approaches full employment, it is inflationary. This fact of life Lula will not be able to change. We will have more interest ahead.
LINK PRESENT: Did you like this text? Subscribers can access seven free accesses from any link per day. Just click the blue F below.
