Good and bad news

The good news is that we’ve just been promised that the 2013 state budget won’t bring tax hikes in tow. Prime Minister Binyamin Netanyahu himself announced that for all to hear at a news conference, which is akin to urging the citizenry to read his lips.

The bad news is that bad times are ahead, that government revenues are bound to diminish, a fact which will force the Treasury to conjure up other ways to cover the shortfall. This must inevitably boil down to a slew of unpleasant (if not worse) economic edicts that, though not constituting higher direct taxation, will cost us just the same.

Cautions about likely hardships ahead unfortunately weren’t sounded clearly at the press conference that Netanyahu held last week with Finance Minister Yuval Steinitz and visiting Organization of Economic Cooperation and Development Secretary-General Angel Gurria. That’s regrettable because the public needs to be prepared. It should know what’s in the offing.

That said, the pat we got on the back from Gurria was well deserved. He was right to praise the government for the conscientious way it ran the economy, thereby achieving quite remarkable growth, keeping the lid on unemployment and inflation, while maintaining an admirable debt-to-GDP ratio.

When other OECD members – richer and bigger than Israel and unencumbered by our overriding existential concerns – are in deep trouble on all the aforementioned fronts, we certainly have lots to be proud of. This is something to bear in mind given the propensity of Israelis to grumble.

The collective carping that abetted last summer’s social protests indeed now costs us and deepens the fiscal deficit. There are no free lunches. The implementation of various aspects of the Trajtenberg Report recommendations needs to be paid for. The middle class will have to foot the bill for the benefits it agitated for. That makes an already increasingly gloomy forecast all the more ominous.

When this is coupled with the euro zone’s woes, it becomes all too obvious that there will be much less in the national kitty to fund assorted superfluous Trajtenberg projects. The European crisis and the hardly less menacing American difficulties threaten the entire global economy with a slowdown and a credit crunch of severity at least equal to that which paralyzed markets in 2008.

Consequent drops in demand overseas and in exports would in turn reduce government income.

That will force an across-the-board slicing of ministerial budgets and attendant cutbacks in services to the public. These would be accompanied by higher indirect taxation that, contrary to Netanyahu’s talk about more money in our pockets, will mean less available cash for most everybody.

It’d be prudent to clue the public in and put it on alert. To foster rising expectations that negate the bleak assessments afflicting our foremost trading partners can only lead to a letdown, with its own detrimental socio-political ramifications.

To be fair, Steinitz came close to sounding the alarm when he noted that the government faced a choice between responding to popular demands, and breaking the budget framework. Responding to every need, he stressed, would expose Israel to hazards akin to those of Greece, Spain, Portugal or Ireland.

That’s all true. But more specific warnings of precisely what’s looming out there are mandatory right now. People have to be told what we’re up against, with no obfuscation or gloss. Economic conditions are fast transmuting before our eyes, but most Israelis fail to grasp their significance and continue to judge reality by yesterday’s terms. This needs to stop.

The pieces of the puzzle need to be assembled into a comprehensible picture. Along with falling tax revenues, we see a freeze in real estate prices, a stronger dollar and weaker shekel and a foreboding lull in export orders.

The responsible thing to do is tell it like it is and not play along with spendthrift populism, as Netanyahu somewhat did when asserting that “there is no conflict between managing a free economy and social justice.” Instead, he should have emphasized that we can’t have our cake and eat it too.