Dirceu: Levy repeats the market's and Aécio's 'mantra'
Former minister José Dirceu has once again criticized the economic policy led by Finance Minister Joaquim Levy; "His recipe is old and according to him [Levy] it works: spending cuts, increased BNDES interest rates and the Selic rate with a consequent brutal increase in consumer interest rates, in installment plans and for bank customers, credit card and overdraft facilities," he reports; "The question that begs to be asked is: does all this fiscal and political effort, at a social and political cost to the government and its party, the PT, aim to resume growth? In what direction and on what basis?", he questions; read the full article.
247 - In a text published this Friday, the 6th, former minister José Dirceu once again criticized the government's economic policy, under the leadership of Finance Minister Joaquim Levy. According to Dirceu, Levy is repeating a "mantra" of the market, chanted by Senator Aécio Neves (PSDB) during his presidential campaign last year.
"His recipe is old and according to him [Levy] it works: cutting expenses, increasing BNDES interest rates and the Selic rate with a consequent brutal increase in interest rates for consumers, in installment plans and for bank customers, credit card and overdraft facilities," reports Dirceu.
"The burning question is: is all this fiscal and political effort, at a social and political cost to the government and its party, the PT, aimed at resuming growth? In what direction and on what basis?" asks the former Chief of Staff of the Lula government.
Read below the full text by José Dirceu.
The minister and his logic.
Finance Minister Joaquim Levy, experienced and determined, is charting the course of changes that, according to him, will lead Brazil to regain the confidence of the markets. He is thus repeating a mantra of the market and of the PSDB presidential candidate from last year's campaign, Senator Aécio Neves (PSDB-MG).
He explains this approach and discusses it in an interview published today in Folha de S.Paulo. His recipe is old and, according to him, it works: cutting expenses, increasing BNDES interest rates and the Selic rate, with a consequent brutal increase in interest rates for consumers, on installment plans, and for bank customers, credit card holders, and overdrafts.
Your revenue includes more: a drastic reduction in tax breaks, adjustments to fuel and energy prices, increases in CIDE and PIS-COFINS taxes, reductions in unemployment insurance, salary bonuses, and survivor's pensions. Furthermore, there are increases in social security contribution rates based on revenue (or the option of 20% of payroll); increases in IOF – Tax on Financial Operations, import tax, and a reduction in the REINTEGRA rate (a program also related to exports).
What a package we see! No more progressive income tax for individuals, no financial tax like the CPMF, no taxation on fortunes, inheritances and donations, no tax on rentiers… On the contrary, interest rates of 12,75% on the Selic rate, as per the increase decided this week by the Central Bank (BC). An increase determined even with inflation falling and in an economy in recession or with growth of less than 1%.
Quite a package! But it doesn't answer the nation's questions.
His plan, or package, proposes tax increases, yes, but not on assets and wealth, not on financial income or extraordinary profits from financial capital. And no reforms or changes that affect the upper class.
The burden ultimately falls on those at the bottom, whether through budget cuts affecting education programs (such as FIES and PRONATEC), the Minha Casa Minha Vida program, and healthcare, or through changes – some of which are necessary – to unemployment insurance, the salary bonus, and survivor's pensions.
With the fall in demand, credit, and investment, we will have lower economic growth and tax revenue, requiring a greater fiscal effort to achieve a 1,2% surplus. This will result in unemployment and a drop in income.
The burning question is: is all this fiscal and political effort, at a social and political cost to the government and its party, the PT, aimed at resuming growth? In what direction and on what basis?
Will the tax and political reforms demanded by the country be implemented?
Will we continue distributing income, increasing the minimum wage, and investing in the country's social and economic infrastructure? Will the domestic market and regional integration remain our priority? Will we implement tax and political reforms to enable state funding not only for our social safety net, but also for an educational and scientific revolution?
Are we going to implement the political and tax reforms necessary to finance our social and economic infrastructure, and our capacity to produce energy, gas, and oil? And are we going to move forward with a genuine foreign trade policy, including an export and import bank (our Eximbank)?
Will we maintain growth with income distribution, consolidating our nascent welfare state, or will we regress to the times of a minimal state (like the one implemented by the PSDB party), accelerating the privatization of health and education? Will we avoid or maintain the current concentration of income, accelerated by profits from high interest rates, which deepens our social inequality and has been rapidly regressing over the last 12 years?
These are the questions that have not yet found answers in the government's actions towards fiscal adjustment, which seems like an end in itself, a tautology, a fallacy, even if it works in its immediate objective and guarantees solvency to the State's creditors, providing an absolute guarantee of return to rent-seeking and financial capital.