The contradictions of a spending government

The Minister of Finance, Fernando Haddad, said that the National Congress also needs to have fiscal responsibility. The charge was a response to the terrible – and predictable – reaction of parliamentarians to the government’s disastrous action in the Federal Supreme Court (STF) to suspend the payroll tax exemption for 17 sectors of the economy and municipalities.

For the minister, the most recent chapter of this soap opera exposes an unbalanced relationship between the Powers, in which the Executive would have to assume the burden of austerity alone, while Congress would be free to create expenses or forego revenue without having the obligation to compensate. them. “It has become a parliamentarism that, if it goes wrong, does not dissolve the Parliament, but the Presidency of the Republic, and calls in the vice”, said Haddad, in an interview with the newspaper Folha de S.Paulo.

Haddad even has some point in his diagnosis. In fact, when the fiscal target is not met, the blame falls largely on the President of the Republic, even though the Legislature also has its share of contribution to the result, mainly due to parliamentary amendments and the electoral fund.

However, a dose of self-criticism on the part of the government would be necessary so that the Legislature does not turn a deaf ear to Haddad’s appeal. With what authority does the government feel free to demand some austerity from Congress weeks after asking the same Congress for authorization to spend R$15 billion more this year and announcing the change, for the worse, in the fiscal targets for 2025 and 2026?

In the specific case of the payroll tax exemption, it would be wise for the government to have the humility to recognize the cost of arrogance in being absent from the debate with the Legislature while it was taking place. It is no secret that Lula da Silva does not have a majority in the Chamber and the Senate, but where were his representatives when the sectors were working together to extend the benefit and the policy was approved in public sessions in the Chamber and the Senate?

The presidential veto of the exemption and the publication of a provisional measure annulling the proposal approved by the Legislature at the end of 2023 had already been poorly received, but the action presented by the Attorney General’s Office (AGU) to the STF was a true declaration of war on politics. The speed with which Minister Cristiano Zanin granted the injunction as well as the four favorable votes that his decision has already received show that the government will have no shame in using the alliance with the STF to block Congress.

It is true that the Legislature gained increasing and even disproportionate power to define how part of the Budget should be spent in the form of amendments, but it is also a fact that Congress approved the entire economic agenda defended by a government that does not hold a majority in the Legislature. Even though these measures were partially dehydrated, they were fundamental in ensuring a boost to revenue in the first quarter, and this is what the government is relying on to achieve this year’s fiscal target.

In this sense, the reaction of the president of the Senate, Rodrigo Pacheco (PSD-MG), is absolutely understandable. “It’s one thing to have fiscal responsibility, it’s quite another to demand that Parliament fully adhere to what the Executive thinks about Brazil’s development,” he stated, in response to Minister Haddad.

More than demanding the Legislature, it is the government’s role to set an example and take the initiative to cut its spending. At the same time, it is prudent not to inflame tempers any further and return to the path of good politics. Even if the government wins the tax relief battle with the support of the Judiciary, this episode will have harmful consequences on relations between the Powers.

The Legislature will certainly react with initiatives to reduce the power of the Judiciary and will be unreceptive to any other initiative sent by the Executive to Congress, which is especially serious at a time when parliamentarians are preparing to regulate tax reform. This will not be how the balance between the Powers will be reestablished.