Breaking with austerity-driven fiscal policy

With each passing day, the coronavirus crisis worsens exponentially. Bolsonaro and Paulo Guedes have been refusing to confront the gravity of the situation for several weeks. The former maintains his flat-earth discourse of denying the threat posed by the pandemic, for which he uses qualifiers such as "little flu" or "little cold." The latter cannot distance himself from his commitment to the ideas of orthodox monetarism, even though most thinkers of this conservative model are already softening their interpretations around the world.

The urgency of the moment has moved political leaders on the right across five continents to abandon their dogmatism and proactively confront the harsh reality of COVID-19. A similar movement has been undertaken by a significant number of economists within the establishment itself. Thus, the entire discourse of fiscal austerity at any cost has been relativized in the face of the risks presented by the unprecedented nature of the situation. The European Union itself is proposing the relaxation of its strict and austere fiscal rules imposed on member countries. The governments of developed countries, in general, have perceived the need to retreat from the policy of containing public spending at any cost. In fact, we are in the midst of an important shift in the behavior of opinion leaders and those responsible for implementing economic and public policies in general. The situation is completely new, and comparisons with the 2008/9 crisis or the Spanish flu of the early 5th century are not sufficient. The perverse combination of widespread economic crisis and the emerging health crisis demands a radical change in the prescriptions advocated by fiscal austerity until recently. The time has come to definitively break with the murderous shackles of blind and stupid austerity.

The solution is to increase public spending.

On one hand, it is imperative to implement measures to save lives on a local, regional, national, and global scale. The enemy is a strong and powerful unknown microorganism. Thus, states must pave the way for the necessary expenditures in the fight against COVID-19. On the other hand, this period demands the implementation of measures aimed at mitigating the perverse effects of the very reduction in the pace of economic activity caused by the crisis. This means that the state must promote alternatives to compensate for the income losses of workers and the majority of the population. Furthermore, another set of resolutions is also needed to reduce the negative impact on businesses, especially small and medium-sized enterprises. With this, the discourse that "the government no longer has resources," as has been hammered home since 2015 in our country, falls apart. As heterodox economists have been warning for a long time, the problem is not the state's inability to carry out its expenditures. The issue is that the true priorities have always been elsewhere. In particular, the guarantee of fulfilling financial expenditures, such as the payment of public debt interest. This type of public spending is considered untouchable, unlike items such as health, education, social security, public servant salaries, and others. The gravity of the moment demands a definitive and radical break with the assumptions of austerity fiscalism. Contrary to the lie repeated day in and day out by Paulo Guedes, the resources exist. What is lacking is the political will to use them in the fight against the pandemic. The National Treasury, for example, has at its disposal the equivalent of R$ 1,3 trillion in its Single Account with the Central Bank. The way forward is to transform part of this amount into immediate resources for the public policy programs that the current situation demands. The vast majority of economists and specialists are already convinced that the moment calls for increased public spending. In circumstances like those we are experiencing now, there is no solution outside this scope. To call upon the "market" as a magic wand can only signify ignorance or a great deal—a great deal indeed!—of malice. Promoting agility in public spending is the only way to ensure that the resources needed for healthcare reach the point of care within the system. Fortunately, we still have our SUS (Unified Health System), present in all of our municipalities and staffed by competent, specialized, and motivated professionals.

Who pays? The poor or big capital?

However, it is also necessary to have immediate access to funds to purchase equipment, products, medicines, vaccines, hospitals, ambulances, etc. Furthermore, it is essential to have funds to pay for new professionals hired to work in this fight against the virus. The neglect this system has suffered over the last 5 years clearly demonstrates the crime committed against our public health in the name of this murderous fiscalism. The moment calls for alleviating the lives of the vast majority of Brazilians who are unable to afford basic expenses such as water, electricity, telephone, transportation, food, rent, and others. This means implementing mechanisms to postpone utility bills and providing extraordinary income support mechanisms for families not in the formal job market. Obviously, all these programs have their costs. However, fortunately, our country has the capacity to face this emergency. The methods of paying this bill in the future should be part of the national debate, as it is increasingly evident that the elites, the top of our pyramid of inequality, have never effectively contributed to the formation of our tax revenue. Here is the opportunity for them, for the first time, to offer a portion of their "sacrifice." In any case, the time demands commitment and political will to change. This is the moment to break with austerity-driven fiscalism and to emerge from the crisis with a spirit of greater fraternity and solidarity among all. The moment calls for an immediate and significant increase in our public spending. The longer we linger in the current inertia proposed by Guedes and Bolsonaro, the worse the consequences and difficulties will be in the exit phase from the crisis.