Letter IEDI n. 1011–Emergency Aid and Permanent Basic Income: proposals under debate
In early April, through Law 13,982/2020, the National Congress approved a policy granting BRL 600 in emergency aid for three months as a measure to combat the adverse economic effects caused by the COVID-19 pandemic in Brazil. At the end of June, the program was renewed for another two months, amid the intensification of the debate on the creation of a permanent basic income program.
This preliminary note identifies the main proposals for this type of program currently under discussion in the country, detailing the characteristics, cost and sources of funding identified by their proponents.
The beneficiaries of the current Emergency Aid program are microentrepreneurs and unemployed informal workers, with total monthly family income of up to three minimum wages or per capita income of up to half a minimum wage, who do not receive social security benefits or unemployment insurance and who have not earned taxable income above BRL 28,500 in 2018. The holders of the Bolsa Família program were allowed to receive the emergency aid instead of their regular benefit if this proves to be more advantageous.
According to the Ministry of Citizenship,1 a total of 64.1 million people had received the Emergency Aid by June, totaling BRL 87.8 billion, which does not include the payment of the third and final installment, whose payment began in the week of June 23rd. In this way, approximately 60% of the budgeted expenses for the scheme were released by the federal government (BRL 152 billion).
Although the program is already entering its third and final phase, problems of design and, above all, of implementation are still present, giving rise to frequent criticisms of its operators. In early June, the Federal Court of Accounts (TCU) pointed out budgetary risks in the design of the policy and risks of exclusion or inclusion of undue people.
The TCU estimated an error of inclusion of 6 million beneficiaries or 10% of the total covered in the first phase of the program.2 Among other factors, this is due to the insufficient use of Tax Returns data in the analyzes carried out by Dataprev to verify the income limit of BRL 28.5 thousand in 2018.3 Work carried out by the Brazilian Basic Income Network (RBRB),4 which brings together 162 organizations and movements and is highly active in Congress, also identifies the undue receipt of aid by 189,695 military personnel, totaling BRL 113.816 million.
In contrast, according to the TCU, out of the total budget (BRL 41.3 billion) allocated for the first installment only 86.6% were executed in April, signaling the undue exclusion of possible eligible beneficiaries. The number of inconclusive registrations was about 13.7 million, which represented around 15% of the applications received and was equivalent to 27% of the number of registrations approved in the first installment.
The RBRB identifies 10 million people whose files, in June, had been under analysis for more than 50 days, with no response from the program's managing bodies. In addition to the long lines outside Caixa Econômica Federal branches, as shown by the press, more than 110 million calls were made to the phone channel created by the Ministry of Citizenship. These data, according to the RBRB, are symptoms of problems in the execution of the scheme.
Despite the need for adjustment, supervision and greater control, given the severity of the COVID-19 economic crisis and the fact that it has now gone into the second half of 2020, the approaching end of the last phase of the Emergency Aid program gave rise to, throughout June, a discussion on its renewal for a few more months. Many proposals were submitted to Congress defending its extension until December 2020, that is, while the "state of public calamity" lasts.
However, although suggesting a lower monthly amount for the extension due to the high fiscal cost of the program, on June 30 the federal government ended up confirming another two months of BRL 600 aid.5 It is possible, according to a statement by the economic team, that such monthly amount is not paid in a single installment as it has been occurring, but divided into more than one deposit in the same month.
In the wake of this discussion on the extension of the Emergency Aid scheme, a different but related debate is also gaining prominence: the idea of transforming the aid into a permanent Basic Income program, as has been happening in other countries, such as, for example, in Spain with the Minimum Vital Income. Two major reasons justify the proposition: first, the prominence that the COVID-19 crisis gave to the vulnerability of a large part of Brazilian society to the economic cycle; second, the technological changes towards automation and digitalization, which can have profound impacts on job creation.
Although perhaps similar in purpose and form, the Emergency Aid scheme and a Basic Income program have different implications in terms of their design and their sources of financing. If there are doubts about the fiscal capacity to extend the emergency aid until the end of 2020, even with a reduction in the value of the benefit, they are even greater in the case of a permanent program, stirring up discussions about other designs that can make it fiscally sustainable.
For the expansion of the emergency aid, provisional sources of financing can be obtained, like the creation or rising of taxes for a certain period or through the increase of public debt, with each of these solutions having implicit costs and benefits. In the case of a permanent basic income, the funding must be definitive and compatible with the cost of the program over time.
In the next sections (in Portuguese), this document will present proposals both to extend the emergency aid and to implement a permanent basic income program—ideas that are under debate in the Brazilian press and in Congress—seeking to emphasize their design, cost and sources of financing.