PEC 186 establishes yet another fiscal tightening package in exchange for insufficient emergency aid
Enacted on March 15th, the Constitutional Amendment (EC) 109/2021 institutes yet another package of budgetary restrictions on public services. Despite arising from the Proposed Amendment to the Constitution (PEC) 186, of 2019, the PEC was put on the agenda in 2021, when the government linked the emergency aid proposal to its text, in an amount seven times smaller than the resources invested in the benefit in 2020. As it conditions the approval of aid to budget restrictions for public services, the measure is seen by experts as the “PEC of blackmail”, in the case of José Moroni (Institute of Socioeconomic Studies), or as the “PEC of tightness ”, as economist Guilherme Mello (Unicamp) calls it. Both warn that, with the increase in unemployment, poverty and hunger in the country, the measure should further fuel inequalities, which deepened during the pandemic. Without a minimum income and with deteriorated public services, what will be left for the population?
Formulated as “a ceiling within a ceiling”, as economist and professor at Unicamp Guilherme Mello defines it (check out the edition of Direto na Fonte on PEC 186 below), the measure establishes triggers that allow for a further freeze on salaries for public servants, which could extend, in some cases, until 2036. Furthermore, the ban on new hiring in public institutions and the use of fund balances, such as science and technology, to pay public debt, are on the horizon.
Placed as a condition for the approval of emergency aid, Constitutional Amendment 109 also established a ceiling for emergency aid, the contribution of which, according to the text, cannot exceed R$44 billion this year. At least 20 million people will no longer be covered. And those that are, will receive a smaller benefit, which is between R$150 and R$375. For one of the campaign organizers Basic Income We Want, José Moroni, given the need for social isolation and limited assistance, the value of the benefit provided for by the PEC represents an “affront to human dignity”.
How will the measure work?
PEC 186, created by the federal government and approved by the National Congress, changes several articles of the Brazilian Federal Constitution to establish new fiscal rules and place a cap on emergency aid. One of the devices created is the possibility of triggering triggers, both for the federal government and for state and municipal governments, in the event that current expenses exceed 95% of current revenues. Among the triggers are the ban on public tenders and the freezing of civil servants' salaries.
For states and municipalities, the adoption of triggers will be optional. However, if they do not comply with the restrictions, they are prohibited from taking out new loans. For the professor at Unicamp's Institute of Economics (IE), Guilherme Mello, initially the federative units and municipalities tend to be the first to be affected by the measure, as in many cases they already fall within the rules. It is estimated that 14 states could already adhere to the triggers. Check out the edition of Direto na Fonte with the professor:
“The PEC does not promote an immediate fiscal adjustment. It will be for some states and municipalities that will automatically be covered by this new tax rule. As a result, they will not be able to hire more employees, such as teachers, doctors, nurses. They will not be able to give a salary increase, they will not be able to create new mandatory expenses. For example, they will not be able to have new health expenditures and open new hospitals.” In the case of the Union, the estimate is that the ceiling of 95% of the relationship between mandatory and current expenses will be reached in 2025.
With the deterioration of public services, the professor points out what is on the government's horizon. “If the public career has no prospects, if salaries fall every year, if there are no new hires and new investments, the quality of public service tends to deteriorate and the deterioration will lead to pressure for privatization. This is the main objective of the PEC. When the State is prevented from fulfilling its role, it opens up space for private companies to gain by providing that service to those who can pay. The problem is that in Brazil fewer and fewer people can pay for education, health, access to culture and security services.”
In the economist's assessment, in addition to accelerating the destruction of the State, the PEC is poorly written and allows a series of distortions, by inserting into its text the concept of mandatory expenditure, a definition that does not exist in the legal system. The amendment, indicates Guilherme, sought to correct problems with the 2016 Spending Ceiling, which made it difficult to adopt fiscal adjustment triggers due to a problem in the formulation. However, it creates new problems.
“PEC 186 was created, which is an idea that triggers the trigger when mandatory spending reaches 95% of total spending. What's the problem with that? There is no legal definition of what is considered mandatory expenditure. Some agencies are above 95% because they consider mandatory expenses to be a series of expenses that other agencies do not consider. This creates a space for manipulation and gigantic fiscal pedaling. Once again, it is a poorly drafted law”, he says.
In addition to the elaboration problems, the economist assesses that there is a content problem, as it encompasses yet another package aimed at the destruction of the State. “And in a country with the level of inequality in Brazil, we know that it means removing the State from social mediation: it means throwing millions into poverty and misery and it means perpetuating the situation of inequality”, he observes.
The professor says that there is a consensus among economists around the world, including the most liberal ones, that this is not the time for austerity measures. “Everyone argues that this is not the time to make fiscal adjustments, that this will only generate a new recession. Everyone argues that it is time to guarantee income for people and credit for companies, because if we don't [do this] it will generate a crash with long-term consequences. Everyone argues that it is time to discuss public investment”, he points out.
He cites the United States as an example, which recently launched a US$1,9 trillion package for public investments and lines of credit for small businesses. Furthermore, he highlights that there is a false opposition evoked by the Bolsonaro government, which repeatedly contrasts the issue of social benefits with the recovery of the economy. “When spending is done well, it multiplies in the economy, generates income, generates consumption, generates employment and, therefore, generates tax revenue.”
Em study performed by Center for Research on Macroeconomics of Inequalities in University of São Paulo (USP), for example, the Gross Domestic Product (GDP), which fell 4,1% in 2020, could have fallen by up to 15% without the aid. “Without the emergency aid, the drop in GDP would have been much greater than it was and the public debt ratio would have been higher. The public debt ratio is a ratio of debt to GDP. If the denominator falls a lot, the debt grows, so the aid contributed to the public debt not being as bad as it could have been. In other words, public spending helped manage public debt”, says the economist.
“The strategy failed”
In the case of Brazil, fiscal adjustment measures deepened especially after 2016, with the approval of the Spending Ceiling (Constitutional Amendment 95/2016), which froze public investments, such as those destined for health and education, for 20 years. Approval of the Labor Reform and Pension Reform are added to the austerity measures. The situation of mass unemployment and increasing poverty, which had already been exploding before the pandemic, according to Guilherme, already warned of the dangers of this economic policy.
Today, around 40 million Brazilians live in extreme poverty and 10 million in a situation of hunger, according to the Brazilian Institute of Geography and Statistics (IBGE), which also points out. Unemployment rates broke records in the country, reaching 13,4 million people. Informality still affects around 40% of workers.
“Since 2016, Brazil has been betting on fiscal austerity, the destruction of the State in the medium and long term, the sale of public companies, the reduction of the role of public banks, the reduction of social rights, the reduction of labor and social security rights. All of this has brought us to the current situation: highest unemployment rate in history, return to poverty and misery, drop in income. Of course, the pandemic plays a role in this, but even before that Brazil was doing very badly, in an economic depression. In the first quarter of 2020, there was already a drop in GDP. In other words: the strategy failed.”
With the federal government under Jair Bolsonaro's command and Paulo Guedes guiding the economy, the professor's assessment is that there is a combination of corporatist patrimonialism and archaic neoliberalism. “Guedes’ vision is the vision of neoliberalism from the 1970s, from Margaret Thatcher and Ronald Reagan, that no one defends anymore.” Patrimonialism, he explains, is the mixture of public and private interests, which marked Jair Bolsonaro's parliamentary career and which is expressed, for example, in the crack scheme that has been investigated in the Bolsonaro family. In the context of corporatism, the practice is illustrated in the defense of some sectors, such as neo-Pentecostal churches and the military, whose salary increase is being processed in Congress despite the freeze imposed on other categories of public service.
The amnesty for taxes owed by churches, according to Guilherme, also conflicts with the discourse that the State is broken and that, therefore, it is necessary to cut social benefits and restrict the budget for public services. “If it’s broken, why are we going to give up collecting taxes? ”, he questions. Failing to pay the most vulnerable population with the argument of breaking the State, says the professor, is a “terrorist speech”.
Public funds in the crosshairs
The transfer of balances of public funds to pay public debt is also one of the mechanisms provided for by PEC 186. The funds serve areas such as health, education, social assistance, science and technology. With the approval of the PEC, its balances can be used for another purpose: the payment of public debt. It is worth noting that the budgetary restriction of funds has already been a target of the Bolsonaro government. The National Fund for the Development of Science and Technology (FNDCT), which finances Science, Technology & Innovation (CT&I), for example, had resources blocked by vetoes by the Bolsonaro government on laws that prevented its budgetary restrictions.
Due to pressure from scientific societies in Brazil, the vetoes were overturned on March 17th. However, underfunding for the area of research, science and technology is highlighted as worrying by Guilherme Mello, who is also coordinator of postgraduate studies in Economics at Unicamp and has witnessed the cut in scholarships in recent years with concern. “Without research there is no development, without science there is no development. Other countries are advancing, creating and mastering new technologies, and we cannot compete with them if we do not develop our technologies, our knowledge and our innovations”, he assesses.
Cuts to the National Council for Scientific and Technological Development (CnPQ) and the Coordination for the Improvement of Higher Education Personnel (Capes), in addition to the more than R$4 billion removed from Education in 2021, are just some of the points that challenge scientists to maintain their researches. Added to this is the federal government's interference in the management of higher education institutions and the constant denial of science, which also threatens the health of the population in the most serious health crisis of the century.
The use of the balance of funds to pay the debt adds to the set of restrictions. And, as Guilherme points out, it was placed in the text of the PEC by a legislative trick. The professor indicates that it is necessary, more than barring the use of fund balances, to review the fiscal rules that prevent fund resources from being effectively spent in the areas for which they were created. The balances, he says, are only created because they were unable to use their resources for the areas for which they were destined. “They could not be spent due to Brazilian fiscal rules, which are crazy and do not allow these expenses to happen. Then you accumulate unspent resources in these funds. It is essential that we change fiscal rules to allow the use of resources in these areas that are crucial for Brazilian development.”
“Affront to human dignity”
Emergency aid, with a ceiling of R$44 billion set by PEC 186, will benefit approximately 45 million people, around 20 million fewer people than in 2020. The amount, for each beneficiary, will have an average of R$250 real. Last year, he included installments of R$600 and installments of R$300. In the opinion of José Moroni, member of the Institute of Socioeconomic Studies (Inesc), one of the organizations leading the campaign for minimum income, this value is an “affront to human dignity”.
Today, he emphasizes that the amount is enough to buy two cartons of milk; two kilos of rice, two sandwich breads; two kilos of coffee; two liters of oil; three kilos of beans; three kilograms of flour; three kilos of sugar; a pot of margarine and two kilos of second-rate ground beef. “That’s what you can buy with R$250 reais. A family of, on average, four to five people, how do you live on 250 reais a month? When we talk about emergency aid, we are basically talking about people being able to buy food and staying at home during the pandemic. This is what the aid is for, so it has to be of a value so that people can have at least it. We are not talking about other expenses, such as electricity, water, internet, which are fundamental”, he observes.
During 2020, emergency aid, according to research by Date Favela, was used by 95% of beneficiaries for food items. Among them, 70% helped family and friends buy food, highlighting the return of the hunger problem in the country. Furthermore, according to Datafolha, 44% of those who received the aid had no other source of income.
For 2021, the aid, which must only be paid from April onwards, in addition to the lower amount, can only be received by one member per family. Due to budget limitations and the worsening of the pandemic, whose necessary control measures point to the right to protect oneself by staying at home, José Moroni indicates that Inesc and other entities are taking legal action with resources to block the R$44 billion ceiling. This Thursday (25), governors also signed a document requesting that the government increase the benefit to R$600.
“A dubious agenda”
The tying of emergency aid to a new budget restriction package for public services, in the assessment of Unicamp Political Science professor Wagner Romão, constituted a “dubious agenda” that made it difficult to understand the proposal. The new presidencies of the Chamber of Deputies and the Federal Senate, more aligned with the Bolsonaro government, he assesses, also contributed to PEC 186 being approved quickly. Added to this is the urgency, which meant that the proposal was assessed and approved within a few days.
Furthermore, the ceiling of R$44 billion for aid was inserted at the end of the deadlines for modifications to the PEC. “It was a dubious agenda, on the one hand positive for containing aid and on the other came the blow of the unprecedented fiscal adjustment. From this, it was difficult to establish a concrete agenda in the opposition and the difficulty of mobilization. This PEC really brought a lot of difficulties for people to understand the size of the problem”, he observes.
The high voting quorum (in the Senate, 62 senators voted in favor and 11 against and in the Chamber, 341 deputies in favor and 121 against) is explained by the professor also as a result of the composition of Congress, which is considered the most conservative in the country's history. “We had the election of a very conservative Congress guided by a privatist vision - towards the sale of the Brazilian State and Public Power and towards granting benefits to certain groups in the country”.
The evaluation of public servants as enemies, Wagner indicates, is harmful not only for civil servants, but for the population in general, as it calls into question the very continuity of public service. “The government is waging a war against the public service, with a vision of a minimal State like we have never seen in the country. We are reaching a situation where the current government is insensitive to the suffering of the population. This PEC has everything to do with that metaphor that Guedes used of putting the grenade in the server's pocket. But it’s not just for employees, but for the general population.”
Trying to put other fiscal measures on the discussion agenda that do not sacrifice rights and that effectively help in managing the pandemic, says Wagner, is one of the perspectives that can be taken. The government's current political and economic line, according to the professor, appears to be insufficient, as it did not take into account either economic stability or containment of the pandemic. "The government did not deal with the economic crisis in a way that was capable of resolving it and reorienting the country towards a better path. The Brazilian population needs to be alert and I believe that it is possible to build an alternative to this vision, because andWe are talking about very concrete things, about 3 thousand people dying a day, about unemployed people, about companies closing, about the absolute ineffectiveness of this government in dealing with the crisis situation in the pandemic, but not only in the pandemic, as this was already happening. dragging”, signals.