By Ricardo Amorim
Why reform Social Security? For two reasons: first of all for the sake of fairness. We are all equal under the Constitution, but not under the current Social Security. The rules in the private sector are not the same as the rules applied to professional public servants, also not the same as the rules applied to polititians, nor the rules applied to Court judges or to the military, and so on.
In order to work out the deficit in each system we have to add the total benefits and deduct the total contributions by employees and employers. In the case of the Public Service, since the government is the employer, we must discount its contribution. Even then, the deficit per retiree – that is, the portion of benefits not covered by the contributions – is in average 11 times greater than in the INSS (National Social Security Institute). Are Public Servants 11 times more important to the country than workers in the private sector?
The second point is the balance of public accounts. The Brazilian government got to a very high level of indebtedness. The debt and the interest fees it entails must not continue to grow, but it will, unless we properly reform Social Security. Only this year the INSS and the Federal Security System will be about R$ 450 billion short.
With the aging of the population and less children per couple, the number of retirees increases and the number of contributors will drop. Without the reform the deficit will only grow. The government will be R$ 500 billion short next year.
Besides increasing public debt and taxes, where else can funds come from to finance the Social Security deficit and its growth? From less investment in public services, such as health, education, public security and infrastructure. The Social Security deficit partly explains the appalling state such services are in.
The reform proposed is not ideal, but it greatly reduces injustice and prevents the exhaustion of funds meant for infrastructure, security, health and education – or the exhaustion will happen in less than 15 years from now if current rules are maintained.
If approved as is, the project will result in savings of over R$ 1 trillion in 10 years and more than R$ 4 trillion in 20 years, allowing Brazil to spend on public services and boosting confidence in the country. We shall then have more jobs, economic growth, income and wealth for all.
Ricardo Amorim is the author of the best-seller After the Storm, a host of Manhattan Connection at Globonews, the most influential economist in Brazil according to Forbes Magazine, the most influential Brazilian on LinkedIn, the only Brazilian among the best world lecturers at Speakers Corner and the winner of the “Most Admired in the Economy, Business and Finance Press”.
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Translation: Simone Montgomery Troula