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After Bolsonaro said that “until 2022, in my government, it is forbidden to speak the word Renda Brasil”, defining “to continue with Bolsa Família, period,” now it is Renda Cidadã’s turn, just a new appearance of the same program. , but with new sources of financing to cover these expenses.
For now, everything is just a proposal that needs the approval of Congress, made up of the House and the Senate.
But, if everything is just a proposal, which can even be approved, why did the market react so badly, with a sharp fall in the stock market on the day of the announcement?
I am César Esperandio, economist at Econoweek, the translation of economics. In this article, I’m going to take a behind-the-scenes look at this political confusion and translate the economic impacts of it all. In the video above, this same discussion took place with live Q&A.
Why did Renda Brasil die before she was born?
Renda Brasil was a proposal to expand Bolsa Família, so that there would be a continuity of payments, this time permanent, for those who began to receive emergency aid in the pandemic, as well as an increase in the income of the current beneficiaries of Bolsa Família.
In practice, more people would start receiving Bolsa Família and the amount of the benefit would be higher than the current one.
Critics say this is a populist movement by Bolsonaro, who has seen his popularity grow with emergency aid payments. Although it is necessary to help this part of the unassisted population, Bolsonaro would be really looking at the next elections.
On the other hand, Paulo Guedes’ economic team, the Ipiranga Post of Bolsonaro’s economy, suggested sources of financing to finance the program requested by the President, which he did not like, since they would be unpopular measures: the freezing of retiree readjustments and reduction. assistance to people with disabilities, among others.
There is a limitation to the creation of new expenses, such as Renda Brasil or even Renda Cidadã (and any other expense creation), which is the spending ceiling.
The spending ceiling was created to limit uncontrolled public spending and growing indebtedness, and establishes that spending for a year can be at most the same as the previous year, adjusted for inflation. For example, if public spending in one year was R $ 1 trillion, with inflation of 2% in the period, in the following year total spending could reach R $ 1.02 trillion.
And there is no secret: we are at the limit! To create a new expense, you must cut another of equal value.
Why did citizens’ income “get worse”?
Although it was not detailed how the Renta Ciudadana works, the new look of the Renta Brasil, without details of the values of the benefits and who exactly the beneficiaries would be, one of the main changes is that the economic team is no longer the economic team. Paulo Guedes, but representatives of the government in the Senate and the Chamber of Deputies.
Another fundamental difference is the source of funding. In Renda Cidadã, the proposal would be to use part of Fundeb’s budget for education professionals, as well as to use the money to pay for precautions.
Precautions are government debts with people and companies already recognized in the courts. In practice, the government would postpone the payment of these debts to pay for the Citizen Income, practically a combination of Bolsa Família with the continuation of emergency aid. And that flirts with the default, which sets a bad precedent, in addition to being considered a fiscal walk, since it would be a strange maneuver to try to respect the spending ceiling.
All of this went very wrong, especially with the financial market, which, in the end, “sealed” Bolsonaro’s candidacy with the expectation that the promise to reduce the size of the public machine and its expenses, as well as a series of . other reforms.
What we have seen so far has been very few reforms taking place and a dubious commitment from the government to cut spending.
There were no relevant reforms that cut jobs, high salaries and public affairs, or other huge expenses. On the contrary, realignments were granted and there are accusations that there are electoral interests behind the intention to increase some social benefits, while there is little or no will to change the history of great privileges on the side of the big shots of the public sector.
It is the economic team that continues to lose credibility, while we are the ones who pay the bill.
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