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There are a lot of numbers that prove this flaw. But nothing is more eloquent than this position: the government will run a large deficit this year, about R$80 billion. It will be able to declare openly that it has achieved the legal goal of zero deficit.

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The trick starts by making the target more flexible. It’s zero, but, you know, budgeting is so complicated that it’s hard to get it right, so the frame accepts a tolerance. The result could be a deficit equivalent to 0.25% of GDP (about R$ 31 billion) or a surplus of the same size. In government, no one ever thought of pursuing the surplus target. They say that would be like leaving money to save when there are so many important expenses to be made.

Let’s give a tentative nod here. In fact, there are many needs that must be met through public spending. However, a government that is already burdened with debt, such as this one, should, as a matter of wisdom, seek a zero-sum outcome, leaving room for tolerance for unforeseen events. In the current circumstances, if the government spent only what it collects, it would be a very good thing. Even because revenues have increased dramatically.

But this is not enough. The Treasury says it needs to target the maximum allowable deficit. Otherwise, he will have to cut a lot of expenses, which the president does not tolerate. A thesis has been formed in the Federal Court of Accounts that the government should aim for zero deficit, not a margin of tolerance. But this, if achieved, will not happen until next year. The executive gears are not fully revved. It looks like this: The government will aim for a deficit of R$31 billion (0.25% of GDP) when implementing this year’s budget, which will be equal to zero according to the law and the logic of the fiscal framework.

However, Treasury calculations show that the real deficit will be closer to R$80 billion. The trick is twofold. In addition to the tolerance margin, the law and framework stipulate that some expenses are not included in the account. There are various expenses, from paying court orders to emergency and non-emergency expenses, such as purchasing military equipment. That’s right: money is spent, but it is not taken into account in formal and legal accounting.

And so, ladies and gentlemen, there are no hidden cards in this hand, nothing in the other, and a deficit of R$80 billion looks like R$31 billion, which is zero – a great achievement.

Unfortunately, the reality is somewhat different: unaccounted money leaves government coffers and is actually spent. Therefore expenses are higher than revenues. Therefore, the government needs to borrow money to cover ongoing expenses and pay interest on debts already owed. In other words, it increases public debt.

When Lula III’s government began, total debt was equivalent to 71.7% of GDP. Last August, it was already 77.5%. And it rises. When launching the framework, the Ministry of Finance expected total debt to reach 77% of GDP by the end of 2026 alone, and this is in the worst-case scenario. Since this number has already been exceeded this year, the new forecast expects debt to reach 83% of GDP at the end of the government’s term, in December 2026.

According to calculations by economist Alexander Schwartzman, federal spending under the current administration has increased by R$280 billion. Even with the subsequent increase in taxes, there is no way to cover all of this. There is no doubt that the large expenditures are necessary and just. But is there really any more to be cut?