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May 17, 2016


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Some of the comments in the link had my eyes rolling, like "social inclusion, sounds great, but bad in practice"... Ooooooh boy. Thing is, I've been reading too much material on the degree to which economy dysfunction is a result of a lack of social inclusion, most recently Pesek's Japanization. So it's no surprise that he advocates a little austerity for the little guy.

My main issue, though is the fiscal situation. While guys like Alston can go with the waste-fraud-abuse angle, in Brazil, most of that is entirely accepted among people with considerable power to frustrate reform. Things like Bolsa Familia, or the expansion of education are a relative drop in the bucket such that I understand.

Culture war, such as seen in Kansas or Louisiana, will only get you a thimbleful of revenue nominally, and probably net out as larger losses due to the probable high fiscal multiplier (compared to white elephant infrastructure)

As in Argentina (and Spain), Brazil's provinces and municipalities are in excruciating fiscal crisis and need restructuring. However, restructuring such that it would do any good needs a large cash investment. Brazil certainly has the reserves, and hey, the national fiscal situation isn't that unbalanced. The mentality is the problem, though, when fixing things means allowing a more sizable national fiscal deficit (assuming Brazil can issue the debt) and spending down reserves. On top of ending some of the fun and games by the rent-seekers.

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