The law of fiscal management responsibility: Combating government failures in the Brazilian way

The purpose of this article is analyzing the principal aspects of the new regulation, the so-called “ Lei de Responsabilidade na Gestão Fiscal” using the framework of the budget imbalance as a government failure. We pointed out that the principle of the new regulation is that if the government planning is highly detailed and the deficit is under control, we will observe neither inflation nor debt pressures. There are two great issues of control: limits to expenditures with personnel’s salaries and the amount of debt. The new regulation restrains the public action during the last year of mandate and deals with the importance of spreading information on fiscal issues and the public participation on the budgetary practices. Despite the good aspects of the regulation – especially on the last year of a given government’s expenditures, there are still some problems: the lack of discussion on the adequate size and functions of the government and the anti-cyclical component of the government action which is despised by the law. JEL Classification: H60; H61; H62; H63.