Giving it all away, while infuriating everybody
President Gustavo Petro’s talk about “an economic storm” tries to obscure the true problem Colombia will face for the rest of his administration: an upcoming fiscal storm, caused by factors other than those he cites. Blaming the Fiscal Rule, the Constitutional Court ruling, or the IMF loan repayment is smoke and mirrors. Central government revenues are overestimated, and the time of reckoning is drawing ever closer: this is the true gathering storm. To avoid drastically cutting public investment, the government seems increasingly likely to propose changes to the Fiscal Rule bill. It will be up to Congress to remain on the responsible side of the aisle, and to reject these dangerous advances. The Fiscal Rule could also be suspended. If Congress refuses government entreaties to amend the law, the next and obvious question is: should Colombia include a new tax reform in the Petro government to-do list?
Petro has just announced his idea of the week: to remove the Fiscal Rule. He says it prevents the government from spending more and saving the economy. What's stopping him from spending more isn't that rule. It is well documented that what is blocking the implementation of the housing, infrastructure and royalties’ budget is the incompetence of its teams, doubts over the “Mi Casa Ya” housing program, 4G and 5G roads, and oil royalties. As of October, only a small fraction of the investment in housing and infrastructure had been executed. In royalties there are more than 15 billion unexecuted. But even stranger is that Petro hasn’t stopped announcing expenses, from freezing tolls, insurance payments, heath fees and fuel prices. He announced that the public university will be free. Petro goes on spending billions each week. Free to spend even more, he’d give away the tomatoes in the market squares, the salt and sausage in the stores and the water and electricity in the homes. That is why fiscal rules were invented: to defend the public budget from excessively generous and irresponsible leaders, who give away other people's money left and right.
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