O teto do gasto público: mudar para preservar

Abstract

This text analyses the Brazilian expenditure cap (“teto de gastos”) and the difficulties to meet its targets in the coming years. The paper proposes a new fiscal rule, similar to the current one, to be analyzed by the Congress in 2020 and to rule from 2021 to 2036. The new rule allows a moderate real growth for the expenditures and creates a specific space for the public investment. It also proposes the suspension of the “golden rule” during the period of validity for the expenditure cap, based on the idea that the rule is redundant if the cap is respected. With the new fiscal rule, we estimate the total federal primary expenditures to reduce between 0.2 p.p. and 2.9 p.p. of the gross domestic product (GDP) from 2019 to 2036, under the assumption of a GDP growth path between 1.5% and 2.5% per year.