On my last installment in the Salmon Blog We outlined a decalogue to try to get out of the crisis caused by the coronavirus without fracturing the fragile foundations on which our economy rests.
One of the critical elements that we highlighted at the time was the impact of high public spending in a context of moderate reactivation and lower income after a sharp fall in the economy. Trying to increase the fiscal pressure in a generalized way on economic actors and citizens to finance that spending could stifle our incipient recovery. The question we must ask ourselves at this point is, can we avoid it?
The fact is that the red numbers of the Spanish economy in 2020 were the worst in the European Union, with an 11% deficit. We were followed by Malta (10.1%), Greece (9.7%), Italy (9.5%), Belgium (9.4%), France and Romania (9.2%). 113,172 million euros of excess spending over public revenue in all administrations is a brutality. To this we must add that in its latest update of the macroeconomic picture, the Government has worsened the deficit forecast for 2021 from 7.7% of GDP to 8.4%, reducing the estimated growth this year to 6.5%, estimates which on the other hand are subject to enormous uncertainties, as we pointed out in a previous article.
For its part, on May 11, Airef estimatedBased on the “limited” information provided by the Government in the Stability and Growth Program, the National Reform Plan and the Recovery Plan, that the structural deficit it could remain at 4.6% in 2024, that is, above pre-pandemic levels (3.5% in 2019). This implies that, even with an economy at pre-crisis growth levels, our structural gap would have worsened.
Our starting fiscal position, in the words of Airef, “represents an added difficulty when facing the challenges of the crisis.” And let’s thank the ECB that the burden of our very large debt remains contained due to historically low rates.
Faced with this situation, the Government proposes a generalized increase in the tax burden that, regardless of more or less confusing messages, half-truths, probe balloons, rectifications and various detours, will affect all economic sectors and all citizens in the coming years. . A tax increase that, let’s not forget, accompanies the structural easements that come with the Recovery Funds, and to which we are led by (i) have a weaker fiscal position at the time of the outbreak of the crisis, (ii) have committed expenditures for the next decade being fully aware of said deficit position and (iii) not contemplate in turn reforms of depth on the need, timeliness and efficiency of the many clearly reviewable expense items of our administrations.
This strategy of launching ourselves at the time on the path of fiscal expansion, without undertaking other parallel adjustments, suddenly ran into the enormous supervening needs derived from the pandemic, in such a way that we now find ourselves in a trap that is very difficult to escape if we really want to return with guarantees to sustainable public finances.
Thus, while other large euro economies such as Germany, France, Italy and Portugal have opted for tax rebates to stimulate economic recovery, we seem doomed to continue the opposite way, as we have been counting in this house (for example, here, or here). Something that will be very difficult to sell to an audience that is too saturated with slogans and promises.
The bet of our economic managers is quite clear: trust everything to a rapid economic reactivation that absorbs the impact of the tax increase and translates it into immediate, constant and sound income. Hence the insistence on the countdown to the vaccination goal, the appeal to a bright future, and the official clean slate that aims to make us forget the long months of the pandemic and its management. A possible bet, but still uncertain and above all very risky, since what is being put at stake is nothing other than our future.
Good management of our resources, that pending issue
Our public administrations have not generally been characterized by their disposition to good sense and austerity, understood as sobriety and rigor in spending. A disposition that fits very badly with the artificial nature of political discourse, prone to excess, to blaming the ideological opposite and to solve problems by using the citizen’s checkbook without rigorous prior analysis or subsequent evaluation of results. Y It is precisely this lack of consistency that makes any tax increase so unpopular, especially when it appeals to the responsibility and even the patriotism of the taxpayers..
Years ago i wrote an entry in my blog personl, in which he formulated five recommendations on the management of public resources that are still fully valid, and much more in the times:
1) When any of the administrations decide to provide a public service (and I mean a true public service), those responsible should take into account:
- That it is not already being provided by another administration.
- That the service corresponds exactly to the need that it intends to cover and not to your own or other people’s interests.
- That the quality / price ratio of the service to be provided is adequate, and that its financing is guaranteed over time.
- That the entity that is going to provide the service is correctly dimensioned in infrastructure, material resources and personnel. An excess of size consumes unnecessary financial resources that could be used in other tasks.
two) Public goods, obtained through taxes, constitute a true treasure for our society. Political positions and officials should take this into account when handling them, and act as a careful cashier with those flows that are not theirs. But citizens must also use public goods and services in a civic and responsible manner. It is a question of rights, but also of duties.
3) Useless services, accessories or duplicates should be removed immediately. They cost a lot of money, time and effort, and they do not render any use to the citizen, only to the structures that provide them and the politicians who run them.
4) When an administration hires, it must always choose the most economical means. And as such it is not necessarily understood the cheapest, but the one that is most appropriate to the circumstances of the case.
5) Besides utility, the productivity of public media and public workers is also a key factor. If we have idle material and human resources, we will be wasting salaries, interests of the public capital invested and fixed amortizations. The higher the productivity of these resources, the lower the cost of the services provided. This is valid for all types of services: education, health, defense, security, etc. Here, the modernization and professionalization of the public career, digitization and the complete review of administrative processes have a lot to say.
As we pointed then, for decades we have been content with a routine and bureaucratic management of our public resources, which has limited our possibilities for improvement. If all the public administrations worked intensely in the five aspects mentioned, another economic rooster would have crowed us now.
And by the way we don’t have to start from scratch: Some seem to have forgotten that Airef has been working very seriously and exhaustively for years in the review of our public spending through their spending review. Remembering our Independent Authority for Fiscal Responsibility just to justify future tax increases is a bit presentable “cherry picking.” Let’s not cheat the lonely, because in the end, they always end up paying the same. How would he say Professor Rodríguez Braun: “you, ma’am”.