Vagner Freitas: Temer’s “Austericide”

In a recent article in NACLA, Sujatha Fernandes argues that there is a problem in the Northern left’s writing and analysis on Latin America, based on little or no dialogue with the working class, with some writers seeming more concerned with criticism than solidarity. At Brasil Wire we believe that the same thing has been happening with regards to the Brazilian organized left, the labor unions and social movements who formed the base support of the four consecutive center-left governing coalitions that ended the hunger crisis and moved 35 million people above the poverty line.  The Central Unica dos Trabalhadores (Unified Workers Central/CUT) is the largest union federation in South America, with around 8 million members.  In this recent article, CUT president Vagner Freitas talks about the Michel Temer government, which promised fiscal responsibility during the time of the coup, and how it has raised the public sector deficit by 43% compared to Dilma Rousseff’s last year in office. Originally written on Thursday, August 10, Freitas correctly predicted that the government would announce a R$159 billion deficit, on Monday, August 14. The article can be read in its original Portuguese here.

by Vagner Freitas.

The Temer government should announce the increase in the projected deficit for this year from R$139 to R$159 soon. The prediction for the 2018 deficit is even greater. Furthermore, this is happening during a time when his economic team is studying limiting the salary for employees of the executive branch to R$5000/month and freezing raises during the same year that he is cutting federal assistance to prisoners’ families.

The deficit increase is an unequivocal demonstration of bad faith and disastrous political incompetence by illegitimate Coup-President Michel Temer. When he took office he said he would balance the country’s books. At the time, in the middle of 2015, there were minor imbalances in the economy. Now there is a deep recession. And now Temer is saying that Brazil will only be able to balance the books in 2020.

In order to balance the books we need economic growth with public investments that lift private investments, generate jobs and, consequently, increase the federal tax base. Without these elements we will never get out of the crisis.

The measures Temer sent to Congress that he alleged would control spending and help reduce the deficit only increased socioeconomic chaos.

He lied to the population when he froze spending in health and education for 20 years, under the allegation that that it was essential for reducing public spending. While he reduced the size of the State and its public policy budget he spent millions of reais to free himself from corruption allegations and stay in office.

Temer’s political economy is a disaster and the general population, especially the low income sector- the working class- is disproportionately paying the bill.

The government should create effective mechanisms for the return to growth and increase tax collection from the sectors that pay the least taxes in Brazil such as large fortunes and stock dividends. These resources should be used to guarantee the implementation of public services and for the return to investments and jobs and not for pork barrel politics or interest payments on the national debt.

The most important strategy for reducing the budgetary gap is to reduce the interest rates. This will reduce the public debt and stimulate industrial policy and agricultural exports. This revenue crisis is due to a policy of high interest rates and public investment cuts, which economists call “austericide”. Temer does not appear to understand any of this.

The best way to solve the public budget problems is to establish a just, progressive tax system where the rich pay proportionately more than the poor, make a large reduction of the stratospheric interest rates and increase public investment to stimulate the private sector, and solve the shortfall in Brazil’s public accounts.