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Politicians from the Labor and Gil Pensioners parties Wednesday defended the NIS 10 billion in new social spending their parties were making a condition for joining the new coalition, saying it would strengthen society without damaging the economy.
The figure was a rough estimate thrown out by the media, economists and various politicians. It represented 3.6 percent of the 2005 state budget, the last budget to receive Knesset approval.
Labor MK Yuli Tamir told The Jerusalem Post she believed the new spending on wages, education, pensions and health demanded by all the parties interested in entering the coalition totaled between NIS 6b. and NIS 10b.
Financial experts such as Manufacturers Association President Shraga Brosh said that such an increase would have a disastrous effect on the economy.
Tamir and former Labor MK Elie Goldschmidt, who now serves as legal adviser for Gil, disagree. They said the economy could support the cost of helping citizens in need.
"This is a reasonable number," Tamir said, even though the total increase in the 2005 state budget over the previous year, for all needs, was NIS 8.4b.
Goldschmidt, a former chairman of the Knesset Finance Committee, said he believed there was funding that could be tapped for the increased services. He noted that there was a tax surplus of NIS 8b.
The spending demands from potential coalition partners was particularly significant because once Acting Prime Minister Ehud Olmert is sworn into office he will have only 45 days to pass a budget. Otherwise, a new election will be called.
The budget negotiations with coalition partners will be among the first tests of his leadership capabilities.
Labor wants to raise the minimum wage to $1,000, or about NIS 4,700, per month over a three-year period.
The party also wants to restore some of the cuts made in spending for senior citizens during the last few years and increase funding for education and health, particularly for life-saving medicines.
The Labor Party advocates legislation setting the minimum budget increase at 1.8%, to more accurately reflect the normal demands of economic growth, Tamir said. Current law mandated a 1% annual increase in the budget, Tamir said.
She said cuts could be made in ministries such as Defense that would offset the increased social spending.
"Israel has had a misleading order of priorities," when drafting past budgets, she said. The benefits of economic growth were not divided equally among all sectors of society, she said. Some spending changes did not serve those in need but rather benefited the upper echelons of society, Tamir said. In the past, the country dedicated all of its financial resources to dealing with crises rather than to preventing problems from arising in the first place, Tamir added.
The new budget reforms could represent a turning point for Israeli society, she said, and this held particularly true for education. Some experts say that Israel spends $100 less per pupil than other countries, she said.
The pensioners were looking to help the elderly by restoring benefits cut by then-finance minister Binyamin Netanyahu, retroactive to January 1.
Under their proposal, state pensions would be raised over the next few years to equal 20 percent of the average salary.
Gil's demands also included an increase in funding for the basket of health services, from NIS 200 million to NIS 400m and passage of a Pensioners Law that would protect pensioners' rights.
The party also demanded immediate assistance for 200,000 needy pensioners.
Ruth Eglash contributed to this report.
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