OP-ED EDITORIAL

Editorial: A new federalism in the making

The onus for fiscal responsibility in this pact falls almost entirely on the provinces and it is true that they account for around two-thirds of Argentina’s state employees, with the lion’s share of expansion in the last couple of years.

National officials meet governors over a rough debate.
National officials meet governors over a rough debate. Foto:Presidencia

Judging the effects of the previous day is the task of the journalist, not the historian – for that reason the word “historic” being so widely bestowed on Thursday’s fiscal pact between President Mauricio Macri and the provincial governors is premature. Whether Argentina’s history is in fact changing is something which can only be confirmed years from now, yet we can at least already speak of a new federalism in the making. A federalism which does not so much diminish the power of the national government as change its field of action – instead of a “carrot and stick” domination of the provinces in pursuit of a total centralisation as imposed by Kirchnerism, the Macri presidency aspires to shift the focus to the provinces themselves with an exhaustive control of their “fiscal responsibility.” 

It would be unfair to dismiss this fiscal pact as a vapid statement of good intentions – any closer examination of the contents will reveal that the consensus politics by no means sidelines the number-crunching – but many questions remain to be answered. There is the obvious contradiction between cutting the deficit and taxation at the same time – especially when everybody agrees on the need for the progressive reduction of a far too high deficit. Nor is the consensus broad enough to offer any final resolution of federal revenue-sharing, whose updating of the statutory percentages was stipulated by the 1994 constitutional reform almost a quarter-century ago – vital for defining exactly where the cuts will fall. What has been achieved after the passage of a quarter-century is the burial of the increasingly absurd Greater Buenos Aires Reparation Fund but no institutional mechanism emerges in its place to address the multiple problems of that urban sprawl – only the extreme goodwill between Macri and Buenos Aires Province Governor María Eugenia Vidal.

The onus for fiscal responsibility in this pact falls almost entirely on the provinces and it is true that they account for around two-thirds of Argentina’s state employees, with the lion’s share of expansion in the last couple of years. Nevertheless, there are at least two major areas of dubious sustainability where the national government is also involved – they are not immune from the need to streamline the public sector after the runaway expansion of the Kirchnerite years and they are primarily responsible for the pension system. If this fiscal pact answered all the questions, the labour, pension and other reforms being so intensely pursued would not be necessary.

Thursday’s pact enjoyed its clearest success at the political level – securing the adherence of all provinces save San Luis when the ruling coalition still only controls five of the 23 provinces was certainly an achievement – but if it had somehow managed to tie up all the other issues in a neat package, it would then have contradicted the spirit of “permanent reformism” which has become a pet government slogan in recent weeks (a post-modern version of Leon Trotsky’s “permanent revolution” which was launched 100 years ago this month). As Cabinet Chief Marcos Peña repeatedly points out, reform in today’s changing world is not a question of making a shopping-list of 10-12 items and then sitting back once they have been ticked off. Well begun is half done, as they say, but is this even the end of the beginning?




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