The tortoise in PEC for court orders ends with locking the golden rule and releases indebtedness – 08/10/2021 – Marketplace

Government included in the Presidential Election Commission (proposed amendment to the constitution) What is the initial installment? Excerpt authorizing the executive not to comply with golden base Public accounts without specific approval of Congress. The text was delivered on Monday (9) to the legislature.

Despite being a target of discussions among public account analysts, the Golden Rule is one of the country’s main fiscal rules and prevents the government from getting into debt to pay for current expenses – such as salaries and pensions.

The rule aims to prevent the state from financing current expenditures and leave the bill to future generations. Instead, the rule seeks to direct the use of debt resources to public investments, such as works or the construction of schools and hospitals – which remain over time and can therefore be used by future taxpayers.

Existing debt expenditures can only be funded if Congress authorizes specific targeting and after an absolute majority vote.

The Government intends to cancel the specified phase of the request to Congress and obtain approval from the Constitution for the payment of current expenditures, as long as the amounts are provided and authorized by income (which would still need to go through parliamentarians).

Public accounts analysts have debated potential modifications to the golden rule for years. Among the problems of the standard, it is often mentioned that it did not control the escalation of public debt, and was not able to maintain a significant level of investment in the country.

Felipe SaltoThe executive director of the IFI (Independent Financial Institution), says the base has run into problems, but the government’s action is tantamount to ending a specific target. “Indeed, it is the rule of the day, very poor, poorly calibrated and designed. But its spirit was right,” he said.

Warnings about the risks of non-compliance with the Golden Rule have been issued by the National Treasury since, at least, 2017. As of 2018, several measures have been taken to mitigate the numbers.

Exceptional resources were obtained by returning loans previously made to the treasury to public banks, such as the BNDES (National Bank for Economic and Social Development). But from the start, the economic team knew that the source of this revenue was limited and would run out at some point in the coming years.

The limit was crossed in 2019, when the government could no longer comply with the rule and began asking Congress to approve non-compliance. If you do not submit the application, the executive authorities are subject to it crime of responsibility.

For 2021, for example, the government has included in its budget proposal a forecast of R$453.7 billion as debt to pay current expenditures. After using up the fiscal surplus from previous years, there are still about R$60 billion, depending on congressional approval.

It was the golden rule too Mitigation goal during a pandemic. In 2020, Congress authorized a suspension of these tax and other rules to unleash resources to combat Covid-19 and its effects.

In 2021, there was a new flexibility. A total of R$44 billion to pay emergency aid was withdrawn from the financial bases by the so-called emergency PEC.

For all that, behind the scenes, members of the economic team are arguing that the golden rule has already been treated as a fictitious rule, violated annually, always with congressional approval.

However, loosening the golden rule represents a loss of power for parliamentarians. Annually, it is up to members of Congress to authorize or not authorize the government to make this excess spending, above the limit of the fiscal base.

As a form of pressure, to ensure approval of the application, the executive branch usually links the base with expenditures with strong political appeal, such as pensions, salaries, and social benefits. If Congress does not approve, these expenditures are frozen.

In defense of the PEC, portfolio members claim that the true anchor of fiscal policy is spending capWhich prevents the government from expanding spending above inflation.

However, due to the exhaustion of space on the roof, the government proposed measures that would, in practice, go around the base. The proposal to Congress establishes payment in installments for court orders (the Union’s debts recognized by the courts) and establishes a fund that will cover the expenses without counting the ceiling.

The precatório balance sheet law contains flexibility in the financial rules to open the way for the implementation of expenditures in the election year.

Paying in installments for court orders circumvents the next year’s spending cap rule and makes way for other expenses. The margin in the budget must be consumed by the expansion of the Bolsa Família, now renamed Auxílio Brasil.

Understand the main tax rules of the country

golden base

The government is prohibited from carrying out credit operations (issues of public debt securities) that exceed the volume of its capital expenditures (investments).

The goal is to prevent the state from paying current expenditures (such as civil servants’ salaries and pensions) and leave the bill for future generations, directing these resources to investments (such as works and building schools and hospitals).

spending cap

Limits annual growth of federal government expenditures to 20-year inflation change.

financial meta

Corresponds to the difference between revenue and expenditure that the government expects for the year (excluding interest expense). It is the effort that the government has promised to make to prevent an increase in the public debt.