Finally, at least to the majority, it is becoming clear that Argentina needs to move quickly to fiscal balance.
Ending the public sector deficit in the coming years is a necessary condition for having a stable macroeconomybased on a monetary and currency policy that stops receiving the negative influence of emissions and debt to finance the public sector. The key is rather to close the Central Bank close the door of the Central Bank to the Treasury.
Now, ending the fiscal deficit is only part of the regime change the country needs. Argentina must replace public spending with private investment and, in this sense, in addition to the regulatory changes, many of which are outlined in the DNU and in the Basi law, which has so far been frustrated, Quality fiscal adjustment is needed at all levels.
Let’s start by analyzing the scheme for eliminating the national fiscal deficit.
So far, not being able to count on the tax chapter of the Bases Law, nor having yet to reintroduce the employee income tax, which has almost been repealed, Tax adjustment is based on increasing or updating already sanctioned taxes -National tax, fuel tax-; in a exaggerated liquefaction of spending, essentially in pensions, social spending in “intermediate” plans and salaries; In the cost reduction structural, operational and capital, –“chainsaw”-; THE suspension of payment commitments -sit at the till and do not pay, for example in the energy sector, or other outstanding debts- and in bring transfers to the provinces to practically zero other than the automatic ones corresponding to sharing.
It’s likely that the liquefaction component of the adjustment gave the maximum possible. The same procedure as “standing at the checkout” and not paying. Hence the reduction of subsidies for transport and energy, and based on negotiations with governors and Congress, the new tax package and authorization to use the chainsaw in public companies and trust funds.
It is true that the objective of substantially reducing the inflation tax is higher than the search for reductions in other taxes, but it is equally true that if we want to create the conditions for private investments to be present in a generalized and without targeted advantages, Argentina must replace the current tax regime with a simple, paid system as quickly as possible, including the reformulation of the employment taxes, and an AFIP with the technology and human capital trained to stop zoo hunting.
It is appropriate, at this point, to introduce the qualitative question Nation-Province Relationship.
Federalism requires the existence of “multiple” states. But the people who benefit or suffer from the state are not national or provincial. Citizens are not national or provincial. Taxpayers have only one pocket.
The state has the responsibility to provide public goods.
Since the reform of the 1990s, this provision of public goods is distributed asymmetrically. The national state has the obligation to provide the national defensesome aspects of security and justice, a coin that satisfies the minimum conditions to be so, and the framework of integration with the world, to name the main ones.
The provincial states, in turn, assume responsibility for the public goods closest to the population, health services. healthcare, primary and secondary education, and security and justice, within their jurisdictional areas. This “distribution” is based on the logic of the division of labor between what is best centralized in a national state and what is best decentralized, bringing the requester of basic services closer to the provider. In other words, bringing people who need such services closer to the “neighbor” who has the task of providing them efficiently.
Unfortunately, the results, in general, of this division of labor have been very negative. We have a failed state at the national level, and we have provincial and municipal states that have systematically deteriorated and not precisely for lack of resources, but for bad management -always with exceptions- the quality of education, healthcare, security and justice.
We are, therefore, faced with aa failure in the provision of public goods of both the Nation and the Provinces.
The national reasons for this failure are already on the table and there is no need to reiterate them here, neither on the diagnosis nor on the remedy.
But diagnosis and problem solving are less discussed. provincial failures.
Indeed, the key to the decentralization of basic services centers on the idea that “consumers” who receive terrible service punish “providers” with their vote. However, we have seen in many provinces the same party, and even the same individual, remaining in power far from being punished for the poor quality of his governments, he is rewarded with re-election.
It is true that in the last elections some fiefdoms that seemed impregnable have fallen, but the system remains that can bring them back, as has already happened on other occasions.
Because the voter does not punish provincial inefficiencies
It is likely that one of the reasons, entirely multi-causal, the former president would say, is that The current governor has become a provider of a private good which is employment. In many provinces, in fact, the State is the main employer. It is very difficult, in that environment, to punish those who give you work and pay your salary.given that there is no demand for alternative private work.
Without punishment, and as long as you can continue to offer salaries and benefits, The governor has no incentive to improve the quality of the public goods it has to offer, nor in encouraging private investments that would make the voter independent.
Without quality public goods, private investments do not find employable human capital, so those who do not have access to public employment emigrate to other regions of the country, with better demand prospects for their scarce capital, even if it is jobs informal. , which in recent years were “integrated” with social plans and related “businesses” (always with honorable exceptions).
President Milei, given that “the money isn’t there”, has put on the table the need to adapt the public sector in a broad sense. But the Nation-Province relationship, in a regime change, requires not only a quantitative, but also a quantitative discussion a qualitative discussionAS generate incentives political and economic, so that both the national state and provincial governments are efficient providers of public goods that people need.
I understand that today the priority is the macro and the end of the tax on inflation, but given that the Nation and the Provinces are once again sitting at the same table, it would be good to implement transfers conditional on a measurable improvement in the quality of public goods that the inhabitants of each region receive.
Incidentally, an illustrative example is that of the Province of Buenos Aires which, given the reduction in national transfers it receives, has decided to “adapt” by cutting extended hours in some schools. That is, deteriorating educational quality.
It would be nice to face it an agreement that goes beyond a “tax offer”.
In this sense, I always remember that phrase from the brilliant Jeffrey Archer: “The only difference between a lord and a pirate is who he shares the spoils with”.
Source: Clarin
