“The minimum vital income is a mistake, an invitation not to work”

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The crisis provoke an instinctive reaction in humans. It is to stop looking at the long term to focus on the immediate future. Maybe as a precaution or maybe because survival. The one that has generated the coronavirus is multilateral, since it will not only affect health, but also human relations and, of course, the economy.

The new infections do not have a vaccine or treatment and, if they have the capacity to expand the coronavirus, they create enormous uncertainty. So the economist Jose Antonio Herce remarks that it is unknown when it will be possible to return to normality and when citizens will be able to return to classrooms, bars, theaters and stadiums. “We won’t see that in months. And in all those months we will go with face masks, with gloves, with protective clothing … you could even make a Cibeles Catwalk with the protective clothing that we are going to be forced to wear for a long time, “he says.

Without normality -and nobody knows when and how it will return-, economic activity will not return to full capacity and that generates significant uncertainty among the businessmen. Herce is critical of the Executive in this regard, considering that he has made some movements that have increased this concern. “Business organizations are scared and worried because they have to face the cost of discontinuity in their businesses and the cost of taking over their staff despite the fact that, in a few cases, they have not been open for a month. So the economic measures they cannot be imposed, but must be negotiated. And it seems that, in some cases, this has not been done. I would say that companies have the feeling of having seen caught by some traps that the Government has put, like that of the recoverable paid leave. That is not good, “he says, in a telephone conversation.

Companies have the feeling of having been caught by some traps that the government has set.

Herce is also critical of the – close – possibility of establishing a vital minimum income, because he considers it as an invitation not to work. “Giving everyone money just for being a citizen is a mistake. If they want to improve the situation of those with the fewest resources, they should first opt ​​to supplement pensions or lower incomes. ”

A good alternative to the basic income that the Government plans would be a negative income tax in the style of the ‘American Earned Income Credit’.

“With a negative income tax, whoever had little income would receive compensation from the public purse.” If the minimum income were 10,000 euros and earned 4,000, the State would put the amount necessary to reach 10,000. That is not an incentive not to work, quite the contrary. In addition, that tax would be given by the Treasury, not the Ministry of Social Affairs

What advantages would it bring, in that sense? “In order for the Treasury to grant it to you, you would have to provide all your data, that is, the Tax agency would have information on what goes into the current accounts of each individual. Without it, that amount would not be received. It would be a good way to compensate for low incomes and to reduce submerged economy. He earn income tax credit it is a much more rational system ”, he adds.

A long crisis

One of the questions that has been asked the most in recent days is the speed at which Spain will overcome the crisis; and if the recession that is intuited on the horizon could become a depression. “In vee we are not going out for the simple reason that we have months of relative confinement in sight. On the 9th the paid leave -another incomprehensible decision that will cost us in what is not written- and from now on, the relative normality that was two weeks ago returns, in which some companies can stay active, but others cannot, “he explains.

And it continues: “But it is that for many months the most popular activities will not be able to generate income and that will impact the economy. In the second quarter, the year-on-year drop in GDP it can be 20%. That already gives you a 4-5% recession for the rest of the year. That implies that a deficit of two figures will not be taken away from us by 2020. One 120% debt probably not either. That’s not a vee, is a or with a little stick long down. We will get out of this one, but not if not with a very large recession, much worse than the one in 2009. ”

To this, we must add the recession that the tourist outbound markets will also suffer, which will affect one of the engines of the Spanish economy. On the other hand, the global paralysis due to the pandemic has caused the productive supply chains “to fall apart”, with the damages that it implies for the industry, and this has been reflected in the chain of payments and counterparts. “It is a complicated situation for companies, which now have liquidity difficulties, but that, if this lengthens, they could soon have solvency ”, he warns.

“It is a complicated situation for companies, which now have liquidity difficulties, but which, if this lengthens, could soon have solvency problems”

One of the measures that a good number of companies have chosen in recent weeks to alleviate their situation is the presentation of temporary employment regulation files (ERTEs), either by force majeure or by causes, organizational, productive, economic and technical.

Herce regrets that in Spain there has been no “administrative agility”That this situation demanded. “There is such a queue in the agencies that there are entrepreneurs who have not yet had their turn and, meanwhile, have not had any income. Nor have they been able to anticipate their workers’ wages in some cases. Administrative slowness is unacceptable and should have been resolved on the first battlefront. It has not been done. There is no administrative agility, despite the fact that there is technology to speed up and automate all of that. It gives the impression that nothing is working as it should ”.

Debt, inevitable path

In the absence of Europe deciding the definitive plan that it will put in place to combat the effects of the coronavirus, it is evident that the fall in activity and the subsequent employment will reduce the income of the Social Security and of the Tax agency. That, Herce recalls, will force the state to borrow, which will not be good news, but will be necessary in a situation that has arisen almost without warning.

In any case, it should be borne in mind that everything that arises today could stop serving the next day. At least, until more effective medical tools are discovered to fight the coronavirus. Now we are already talking about the de-escalation, the curve, the peak, the plateau, the valley … But here the reality is that there will be ups and downs and nobody knows what will happen. We must closely follow China because their data says that they were able to contain the pandemic. But of course, imagine that a regrowth occurs. The panic that would be generated in the rest of the world would be enormous. ”

In these circumstances, people are going to be very conservative. “They are not going to spend everything they are saving. That saving is precautionaryIt is not provisional, it is not for retirement. Now the retirement It seems further than ever. The important thing is next year. I always tell my friends ‘cheers and we’ll talk tomorrow’. Well, that, but in general ”, he concludes.

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