Wednesday, June 1, 2016

Brazil moves to shrink the state


From Financial Times
How do you shrink a government? That is a thorny political question anywhere in the world but especially in Brazil, which has traditionally favoured a bloated state.
Now, however, the new government of interim president Michel Temer is trying to tackle this issue as it grapples with a fiscal crisis that is threatening to unwind the country’s economic achievements of recent decades.
Mr Temer’s answer is as bold as it is unorthodox — a constitutional amendment to freeze for the foreseeable future public expenses in real terms at 2016 levels. If implemented, the move could help cure one of Brazil’s biggest ills — a spendthrift budget with constitutionally mandated expenditures that have led to constant increases in government spending. This has been exacerbated by a blowout in spending by the previous governments of the leftist Workers’ Party, or PT.
“I’m very encouraged by this,” said Raul Velloso, an economist and specialist on Brazil’s budget. “If we manage to do this, we will free ourselves of the possibility of future populist experiments.”
Brought to power after congress voted in May to begin impeachment proceedings against President Dilma Rousseff, Mr Temer and his supporters in congress have staked their rule on solving a deep economic crisis afflicting Brazil.
The economic dip was fanned by a fall in commodities prices but its ferocity is due to a crisis of confidence among investors in the ability of Ms Rousseff to restore Brazil’s sinking public finances after more than five years in power.

If the USA is any indication, future rulers of Brazil will probably ignore the constitution, but at least they are trying. It is too bad that every politician in the USA is spendthrift on something, whether it is social things or the military industrial complex or subsidizing the climate scare industry.

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