The parliamentary debate about the 2023 Budget served to concentrate the discussion that had been accelerating as inflation was climbing steps (parked in the range that goes from 6% to 7.5% per month during the last semester). Precisely this acceleration of the price level highlighted the difficulties of the national State in being able to attend to public spending that has been constantly rising in the last two decades.
The commonly used sources of financing expenditure: increase taxes (creating new ones or increasing rates of existing ones), borrowing or resorting to more monetary issuance; They have already been squeezed to the max. The tax pressure is close to the maximum of 32% of 2015 (added the national and provincial)measured by the IARAF. But added to the municipal rates and the tax effect of three-digit inflation, it gives reason to those who believe that there is no room to continue increasing it without first carrying out a deep restructuring.
Something similar occurs with the monetary issue: the extraordinary situation during the first months of the pandemic, in which all the countries financed their deficit due to the imposed inactivity, camouflaged that the formula for happiness had been found for any Minister of the Economy: print banknotes and distribute money without serious inflationary consequences. End of the story: since the end of 2020, in Argentina the correlation returned to the historical number: almost 1 and throughout the world, the rise in the CPI is the most urgent problem. There is no possible alchemy, either, on this side.
Debt was, occasionally, the other way to finance unbridled spending. In fact, during the first quarter of this year, according to official data, the gross debt of the Central Administration alone reached US$378.5 billion (almost 80% of GDP)..
the pruning The resource that remains, perhaps the most genuine, but the one that takes the longest to get going, is to operate directly on the same expense: lower it. But one thing is to say it or even turn it into a political slogan, and another is to do it realistically and effectively.
The Economist orlando ferreresdirector of OJ Ferreres & Associates, estimates that since the exit from convertibility spending, measured in terms of GDP, has risen at least 10 or 12 points. “Public spending has been growing since twin surpluses (fiscal and commercial) were achieved thanks to a large devaluation and the liquidation of public spending. Then another path was taken and spending began to grow more than collection and we arrived, 15 years later, at more than 42% of GDP for the consolidated total.”, analyzes. To lower it in the short term, he warns that the only alternative is to go towards a realistic exchange rate because a 100% gap that does not encourage exports is not sustainable, which is what is needed to break the dollar shortage and return to growing up.
For the economist and professor at the UCEMA Diana Mondino “There are hard data that show that it almost doubled in the consolidated and taxes were increasing at the same time. The deficit is due to spending more than taxes grow, generating debt for which interest must be paid, which gets worse every year, ”he says. But he gives a clue in this discussion: it is not whether spending can be lowered, but how to lower it. “After the debt restructuring there is no low-cost financing and issuance is used. If spending is not reduced, it will be very difficult to avoid an inflationary spiral and where there is much to be done in energy and public companies, ”he says. He observes that with high tax pressure it is difficult to revive economic activity and, furthermore, it is difficult to reduce taxes because it does not increase production immediately and it will increase the deficit in the short term.
For its part, Ariel Barrauddirector of Economic Research Institute of the Córdoba Stock Exchangeindicates that beyond COVID, the problems continue have to do with the fiscal deficit and its financing, which, he emphasizes, later generates other problems “such as inflation, the lack of growth and openness to trade in the country (due to the high and productive taxes) and the punishment via country risk for high indebtedness, all a consequence of spending more than fiscally possible for many years”.
Federal. George Hilleconomist at IDESA and co-author of the book “A vaccine against decadence” in which a series of concrete proposals are made to attack the problem and relaunch the Argentine economy towards a path of sustainable growth, to close the fiscal gap of about 6 points of GDP, the way it is not with the red pencil crossing out items but to make a severe reorganization of the State. “Basically, the provinces and municipalities have to take charge of collecting their own taxes (for example, those that tax consumption: eliminate Gross Income in exchange for obtaining the entire VAT) and take charge of all the basic functions: assistance social, education, public health and security”, he argues. The Nation should focus on interprovincial functions: national transportation infrastructure, foreign relations, defense, federal justice, social security, and universities.
The how. If instead of thinking about immediate major surgery, you focus on selective cuts and a longer term, Sebastian Menescaldi, consulting associate director Echo Go adheres to this idea and affirms that where there is really “cloth to cut” is in social and economic subsidies. In the first case it affects the most vulnerable sectors and in others the middle class, raising the cost of their basket of goods. However, inflation is already doing part of this dirty work. “Social benefits are already being liquefied by inflation because it accelerated,” he clarifies. Where can it be cut? Give an example, privilege pensions: 6.4 million beneficiaries consume 6% of GDP, another 836 thousand receive 1.8% of GDP and 330 thousand receive 0.8% GDP. “Even if it is to raise it from now on, but it is important to start down this path.” Just a sample of the endless inequities and the sum of geological layers of “acquired rights” that the end of the cycle forces us to rationally reconsider, before another great crisis does so abruptly and uncontrollably.
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