Senators propose more economical alternatives to Lula da Silva’s ceiling-breaking PEC; see the options

The ceiling-breaking PEC that the transition team of president-elect Luiz Inácio Lula da Silva (PT) intends to approve until the beginning of the parliamentary recess, which removes expenses estimated at R$198 billion from the spending ceiling in 2023, has gained more economical alternatives in Congress.

Two PSDB senators presented alternative PECs that authorize lower spending outside the ceiling, and a third proposed an option that involves opening extraordinary credit for six months and also allows lower amounts than the elected government’s proposal.

Alessandro Vieira (SE) and Tasso Jereissati (CE) have already started collecting signatures to discuss two alternatives that foresee an overflow of the ceiling of R$70 billion and R$80 billion, respectively, well below the license to spend intended by the team coordinated by vice-president elect Geraldo Alckmin (PSB).

The resources that the elected government wants to withdraw from the spending ceiling will serve, for the most part, to pay for promises made during the electoral campaign, such as maintaining the Auxílio Brasil – or Bolsa Família, as it should be renamed – at R$600, the creation of an additional R$150 per child up to 6 years old, and a real increase in the minimum wage.

There is also a third alternative, prepared by the parliamentary team of Senator José Serra (PSDB-SP), which provides for the opening of an extraordinary credit of R$100 billion, for six months, while Congress discusses a new fiscal anchor to replace the ceiling of expenses.

The proposals can be a counterpoint to the PEC that Alckmin is still negotiating to officially present to Congress, with the signature of Senator Marcelo Castro (MDB-PI), who will have the task of articulating the text with other parliamentarians.

The president of the Chamber of Deputies, Arthur Lira (PP-AL), observes that the deadline is short to move forward with the project.

The ceiling-breaking PEC provoked reactions from the market when it was presented last week, mainly because it leaves social spending outside the ceiling for an indefinite period, and also because of the high value – all of this without the indication of the future Minister of Finance, which in theory, would signal responsibility in the management of resources.

“A proposal that removes the spending ceiling of up to R$150 billion, for one year, is acceptable. A proposal that releases R$70 billion a year, for four years, is also acceptable. [But] a PEC with an indefinite term and a R$200 billion license is a lot,” says Gabriel Fongaro, senior economist at the Julius Baer Family Office (JBFO).

Fongaro’s criticism is reflected within the transition team itself, with Lula da Silva’s allies asking for a specific deadline for social spending outside the ceiling, since the original proposal could generate a ripple effect on an economy that is already showing signs of slowing down.

However, the president of the PT, Gleisi Hoffmann, and Lula da Silva himself defend a permanent exclusion from the rule.

While the president-elect is recovering from the surgery performed on Monday (21), in which he removed a lesion in his larynx, the transition team is working to make the PEC more palatable to the market, including a mechanism to ensure adoption of a new fiscal anchor for the country to be voted on by the end of the first half of 2023.

Former minister Aloísio Mercadante (PT), coordinator of the thematic groups of the transition team, explained on Tuesday (22) that the resumption of a device originally approved in the spending cap law of 2016, which provided for a review of the rule in 2026, which was brought forward by the current government when voting on the PEC on precatories at the end of last year.

“What is under discussion is this possibility, of introducing a device, in the PEC that authorizes the extract, of a review of the spending ceiling by complementary law in the future. The date, form, deadline, etc are under discussion,” he said.

Allies and advisers estimate that while the president-elect does not officially appoint the future responsible for economic policy, a substitute mechanism for the spending cap could make the license to spend a little less difficult to be approved. PT leaders in the Chamber of Deputies anticipate the analysis and vote on the PEC next Tuesday (29), in the Senate.

Check below the details of the PECs proposed by Vieira, Jereissati and Serra, and statements by Senator Oriovisto Guimarães (Podemos-PR), who says he is preparing his own alternative.

ALESSANDRO VIEIRA’S PROPOSAL: AN OVERFLOW OF R$70 BILLION JUST FOR URGENT EXPENSES

In the alternative to the ceiling-piercing PEC filed by Alessandro Vieira, only the R$70 billion sufficient for expanding the Auxílio Brasil/Bolsa Família beyond what is already reserved in the proposed Budget for 2023, which for now covers a benefit of R$405 per family.

The original proposal of the transition team is much more “expensive” because it foresees that all aid of R$600, plus the additional R$150, will be funded outside the ceiling, in order to release the money that is already available for other purposes. planned for the program in the Budget.

Vieira’s PEC also leaves out of the ceiling expenses with socio-environmental projects, related to climate change, which are funded by donations, as well as expenses of federal educational institutions funded by their own revenues, donations or agreements – two points that are already included in the PEC drawn up by the elected government.

The senator stated that the proposal for the transition team is “generic and comprehensive” and could jeopardize the fiscal stability of the future government, mainly because it does not even have an effectively formed economic team.

What is right, according to Vieira, is to have only the most urgent social expenditures in the PEC, leaving for next year the more complex discussion about a new fiscal framework that gives security and confidence to the market.

“We are talking about complex things that cannot be discussed in a very short space of time, when the lights go out of a government and the year of the legislature. So, we guarantee what is urgent and set a deadline for a relatively quick discussion, six months, and the enactment of a new fiscal anchor. Especially because the so-called spending ceiling has become demoralized over the last four years,” he told Agência Senado, in reference to the successive constitutional amendments in recent years that allowed a total expenditure of R$795 billion beyond the ceiling.

In Vieira’s alternative proposal, permission for spending above the ceiling will only be valid for 2023. In addition, the text requires the approval of a complementary law with a new tax regime by July 17, 2023, the same deadline for approval of the Law of 2024 Budget Guidelines. Thus, the 2024 Budget will already be prepared according to the limits of this new regime.

Another point in which Vieira’s PEC differs from the transitional government’s proposal is that it does not exclude from the spending ceiling:

• recomposition of funds cut from the Popular Pharmacy program;
• federal universities that do not generate their own income with donations or agreements;
• transportation and school meals;
• the National Scientific and Technological Development Fund (FNDCT); and
• aid to culture, through the laws Aldir Blanc 2 and Paulo Gustavo.

JEREISSATI’S PROPOSAL: R$80 BILLION MORE IN THE SPENDING CEILING

Senator Tasso Jereissati’s proposal, which he calls “PEC da Sustentabilidade Social” (Social Sustainability PEC), provides for the expansion of the spending limit by R$80 billion in 2023, capable of accommodating the Auxílio Brasil/Bolsa Família de R$600. From 2024 onwards, the spending ceiling would consider the previous year’s limit (which will be R$80 billion higher if the PEC is approved) plus inflation variation (IPCA).

In the justification, Jereissati says that the expansion of the spending limit “also allows other actions to expand spending in important areas such as health, education, science, technology and culture, in addition to flexibility for allocation in discretionary expenses, including a real increase in the minimum salary in 2023.”

He cites as an example the recomposition of programs such as Popular Pharmacy, School Meals, or the National Fund for Scientific and Technological Development (FNDCT), in addition to other actions, such as reducing the queue of the Unified Health System (SUS) and implementing the Aldir Blanc Law.

For Jereissati, this expansion of the ceiling gives tranquility to the national and foreign market that intends to invest in Brazil. “And it gives the government the guarantee that it has R$80 billion that will be enough to fulfill all its campaigns in the social field,” he said in an interview with CNN on Monday (21).

Jereissati claims that these R$80 billion more at the ceiling limit are enough to cover the difference between the R$405 proposed by Paulo Guedes’ current budget for Aid Brazil in 2023 and the R$600 promised by Lula da Silva, and not all the benefit. The other promises of the ceiling-breaking PEC would have to be accommodated in the budget piece under discussion in Congress, and not in the license to spend more.

The senator’s proposal also gives the government the possibility, if it prefers, to discuss a new fiscal framework in 2023 that will replace the spending cap from 2024 onwards. However, Jereissati recommends that the spending cap rule be maintained.

“We have a golden opportunity. Today, with the new government, with the energy problems that Europe is facing because of the war in Ukraine – which is only getting worse – and the eagerness, need for clean and alternative energies, Brazil is almost the ideal point for the investment”, he added in the interview, reaffirming the gain that the country can have with more investments that will help expand the budget.

The Jereissati team’s proposal also removes donations for environmental projects and spending on federal universities’ own resources from the ceiling – these exceptions are already provided for in Lula da Silva’s ceiling-breaking PEC.

JOSÉ SERRA’S PROPOSAL: R$100 BILLION CREDIT AND NEW FISCAL ANCHOR

The proposal drawn up by Senator José Serra’s team, called “PEC da Reconstrução” (Reconstruction PEC), revokes the spending ceiling regime and gives the government a period of six months to submit a proposal for “global limits for the amount of the Union’s consolidated debt.” Thus, the new fiscal anchor would be related to the size of the public debt.

Within this six-month period, the government will be able to count on an extraordinary credit of up to R$100 billion “to meet the expenses of the income transfer program.”

The alternative was one of the first suggested since the beginning of the transition. In the justification, Serra says that the spending ceiling “is dysfunctional and needs to be replaced by a new fiscal anchor.”

In exchange, a rule would be instituted to control the federal government’s indebtedness through a “Periodic Review of Spending Plan,” which would be made based on the evaluation of public policies. “The president would have the obligation to show what needs to be done revised to maintain fiscal sustainability,” said Serra when presenting the text.

In addition to debt control and the periodic review of expenses, the senator also proposes the deconstitutionalization of the Golden Rule, a mechanism that prevents the carrying out of credit operations above expenses without approval by an absolute majority of the two houses of Congress. For him, the measure lost its ability to limit public debt.

“With the necessary legal certainty, the government could implement actions to recompose income and combat hunger during the period it would have to submit a debt limit proposal to the Federal Senate. If approved, the indebtedness limit would begin to serve as an anchor for fiscal policy, replacing the spending ceiling currently in force,” added Serra in his justification for the PEC.

ANOTHER OPTION ON THE WAY

In addition to the alternatives already presented, Senator Oriovisto Guimarães (Podemos-PR) is also preparing a suggestion for a PEC to avoid exceeding the R$198 billion spending ceiling. However, he stated that he will wait for the final version of the text from the transition team to prepare his own proposal.

“Me and my party, Podemos, are against excessive spending and are waiting for the elected government to release the details of the Transition PEC to decide which measures we will adopt”, he said in an interview with TV Senado this Tuesday (22).

Soon after, in an article published on his website, Oriovisto condemned what would be an excessive spending of R$200 billion a year during Lula da Silva’s entire presidency.

“This authorization, if granted, would reach an astronomical value close to R$1 trillion, approximately R$800 billion. The Senate, as well as the entire Legislative Power, would be giving up being one of the three Powers that govern Brazil, which would reduce, from an economic point of view, its importance to zero. Lula da Silva would have a blank check throughout his term,” he said.

For the senator, it is possible to give Lula da Silva a “license limited to the year 2023 with a well-defined amount,” in addition to discussing the proposition of a new fiscal anchor or maintaining the current spending ceiling.

The expectation is that the final text of the ceiling-breaking PEC will be presented by the transition team later this week, possibly after a meeting between Lula da Silva and Alckmin with leaders of the main parties in Congress.

ECONOMIST OF THE TRANSITION TEAM SAYS THAT EXTRA SPENDING OF R$136 BILLION WOULD NOT BE “FISCAL EXPANSION”

Economist Nelson Barbosa, former Minister of Finance and Planning in the Dilma Rousseff (PT) government and member of the economic area of ​​the transition team, said on Monday (21) that an additional expenditure of R$136 billion beyond the ceiling would not generate a fiscal expansion of the government.

He made the statement based on the relationship between federal public spending and the Gross Domestic Product (GDP).

Barbosa stated that in the 2023 budget piece sent to Congress by the current government, spending, as a proportion of GDP, is much lower than in 2022. According to him, the last bimonthly report points to spending of 18.9% of GDP in 2022, compared to whereas the 2023 Budget corresponds to 17.6% of GDP.

“It means that if you add up to R$136 billion in the budget, in terms of the size of the economy, it will not be a fiscal expansion,” said Barbosa, indicating that such an addition would only be a “recomposition.”

With information from Gazeta do Povo/Guillermo Grandi