Policy brief 1 – Structural, extraordinary… strange?

Policy Brief 1 is now available: Structural, extraordinary… strange? (in Portuguese), by Henrique Lopes Valença and Luís Teles Morais.

In the debate on the State Budget for 2016, as in others, there are political aspects and technical aspects. The distinction is not always easy, but a more enlightened debate on budgetary policy requires differentiating the field of policy choices (the so-called normative analysis) from technical aspects (positive analysis).
In this respect, the political debate has not gone in the right direction. It has been confused what are natural differences between budget policy options with conceptual or even terminology, which may be (in some cases, very) debatable, should not be mixed.

In this Brief, we start off by explaining how the budget balance can be broken down into three separate parts: the structural budget balance, the cyclical component, and one-off measures. Then, we question whether the most prominent fiscal measures listed in the Draft Budgetary Plan for 2016 can be in any way regarded as “one-off”. Finally, we briefly analyse the implications of correcting the budget balances of recent years, according to the argument that if the budget cuts of recent years were supposed to be temporary, then these should have been registered as “one-off” measures rather than “structural” consolidation efforts.