Think about it: The budget as a reflection of a political reality

The problems with the new budget are of a different nature.

By
October 19, 2014 21:23
Yair Lapid

Finance Minister Yair Lapid. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

As a result of Operation Protective Edge, the state budget for 2015 will not be submitted to the Knesset for approval by November 1 as required by law, nor will it be approved before December 31. There is no problem with that, as long as the budget is approved by March 31, 2015. Should the budget fail to be approved by that date, new elections will be have to be held. That scenario, however, is unlikely to occur.

The problems with the new budget are of a different nature. The first problem is the decision of Finance Minister Yair Lapid to put off dealing with the budget deficit by simply increasing it from 2.5 percent of GDP to 3.4% of GDP.

Be the first to know - Join our Facebook page.


This means simply deferring the need to take measures to deal with the excessive deficit from 2015 to 2016 – by which time “either the nobleman will die or the dog will die” (according to the famous Yiddish tale). Or in other words, either the government will fall apart and new elections will be held, in which case somebody else will have to deal with the mess, or a miracle will take place and off-shore oil deposits will be discovered.

Either way, most responsible economists – including the governor of the Bank of Israel, Karnit Flug, who believes that the deficit for 2015 will actually reach 3.6% of GDP – claim that Lapid’s strategy is highly irresponsible and opportunistic, and results primarily from his desire to avoid raising taxes at all costs, for no better reason than that he promised not to.

As to the details of the budget, several points must be made clear. The first is that most items in the Israeli budget are rigid, because they relate to Israel’s foreign debt (close to 25% of the annual budget), salaries in the public sector (around 40% of the budget), and past commitments of various sorts. So in fact the part of the budget that is flexible is relatively small (there are no accurate figures), and it is mainly here that the government can make its priorities felt.

Unfortunately the Israeli government as such has no clear priorities. The various parties that make up the government have priorities, and the extent to which they manage to make these priorities felt within the budget depends on how popular these priorities are among the other coalition members, and on how good they are at horse trading vis-àvis the prime minister and/or finance minister.

For example, Bayit Yehudi has no problem getting budget allocations for settlement activities in Judea and Samaria, because Likud and Yisrael Beytenu support these activities.

With regard to 0% VAT on first apartments, on the other hand, Finance Minister Lapid has gotten his way in terms of budget allocation not because the prime minister agrees with this policy (he apparently objects to it), but because at the moment Prime Minister Benjamin Netanyahu does not want to give Yesh Atid an excuse to leave the government, and probably because he believes that the failure of policy to reduce housing costs is inevitable, and will contribute to burying Lapid and his party.

Then there is the problem of the defense budget. In Israel the defense budget constitutes approximately 20% of the total budget (including IDF salaries, already included in the 40% mentioned above). Nobody doubts that Israel’s defense needs are much greater than those of any other state in the world. Nor does anyone doubt that if insufficient resources are allocated for defense, the state’s continued existence might be at risk. However, the total lack of transparency of the defense budget, the alleged waste of resources of which many, including former Israeli generals, speak openly, and the unclear manner in which the Defense Ministry and the IDF set their priorities, leave a great big question mark on the whole issue.

For example, during Operation Protective Edge it transpired that even though the problem of the tunnels leading from the Gaza Strip into Israel was known about beforehand, the forces that entered the Strip to destroy these tunnels were ill-prepared and ill-equipped to do their job.

Indeed, if it weren’t for the high improvisational capabilities of these forces and their commanders, it is doubtful the mission would have been accomplished (the same, for that matter, may be said about the outcome of the Yom Kippur War).

What especially gives cause for despondency is that while insufficient resources were allocated to deal with the tunnel problem, apparently billions of shekels were wasted on preparations for a (totally unrealistic) attack on Iran.

True, all this happened during the term of the previous government, and concerns budgets for previous years, but there is nothing to reassure us that the current triumvirate makes vital decisions on budgetary allocations of billions of shekels on a better-reasoned basis.

However, what is most disturbing about the current budget, as with the budgets of previous years, is that it includes few if any provisions that are likely to reduce the cost of living, to eradicate poverty among the working population, to give 800,000 poor children in Israel a fair chance to improve their lot, to enable Holocaust survivors and other impoverished senior citizens to spend their last years living in dignity, to increase the participation of haredi (ultra-Orthodox) men and Arab women in the workforce, to provide adequate or more than adequate education, health and welfare services to all and to reduce the level of inequality in the society between rich and poor, and between Jew and Arab.

Here the problem is ideological. Though there is one true social democrat in the current government (Amir Peretz from Hatnua), at least among the ministers who count the majority are extreme laissez-faire liberals, who believe that market forces should be left to do the job, even though it has been proven beyond doubt that extreme laissez-faire economics simply cannot deliver.

In economic terms the bon ton in the government circles that count today is that those who call for increased rather than decreased government involvement in those economic spheres in which the free market cannot deliver are old-fashioned Bolsheviks. The fact that those who call for stopping the rush to privatization in all spheres of the economy and social services, and for imposing restraints on corporations and tycoons for whom the profit motive is the be-all and end-all of all their activities, are usually also those calling for stopping Jewish settlement activities in Judea and Samaria, for the two-state solution and for the upholding of the basic human rights of the African refugees/job seekers in Israel merely strengthens the delegitimization of their economic agendas.

Perhaps the maverick Moshe Kahlon, if and when he decides to form a social minded right-wing party, could help, together with other social-minded left-wing and sectorial parties, to bring about a change in how Israeli governments try to address and tackle the socio-economic problems enumerated above.

However, in the current circumstances, and with the current government, the 2015 budget is unlikely to bring a new message of hope, or even a reduction in the price of Milky puddings, not to mention apartments.

Hold tight folks, and keep your life jackets close by – it’s going to be rough sailing.

The writer is a retired Knesset employee.


Related Content

April 24, 2018
Grapevine: When patriotism gets priority

By GREER FAY CASHMAN

Israel Weather
  • 16 - 31
    Beer Sheva
    17 - 25
    Tel Aviv - Yafo
  • 15 - 27
    Jerusalem
    16 - 27
    Haifa
  • 19 - 32
    Elat
    18 - 32
    Tiberias