yuval steinitz 311.
(photo credit: Ariel Jerozolimski)
At first glance, the 2011-12 budget proposal, unveiled last week by Finance
Minister Yuval Steinitz, appears different from all those that preceded it. At
second glance, too. What’s striking is the relative absence of “goats.” These
are the local folklore equivalent of the red herring – something inserted by way
of an extraneous distraction which is eventually removed when
Thus, conspicuously missing are such star features of the
initial 2009-10 budget as value-added tax on fruits and vegetables, abolition of
the Eilat VAT-free zone, etc. These traditionally stir up raucous pandemonium
each budget season, only to disappear after ostensibly intense haggling as a
Treasury “concession” in return for the approval of some budgetary edict or
If anything, the slash earmarked for defense spending may be
Steinitz’s one outstanding camouflaged “goat.” By “giving in” to some extent to
the Defense Ministry’s protests, he may in the end require other ministries to
“sacrifice a little.”
Features like higher cigarette excises cannot be
counted in the goat category, as they are not likely diversionary tactics. Odds
are that they are seriously intended to stay and that there won’t be a
successful political crusade against them.
Indeed, barring unavoidable
modifications by the time of the final Knesset approval, this seems an almost
kind and gentle budget in comparison to the previous one, which was forged in
the aftermath of one of the harshest global economic crises.
There are no
ruthless spending cutbacks on most ministries, save for defense, which is slated
to lose NIS 1.4 billion from promised budgetary increases but will probably
suffer lesser losses.
In all, this is a hope-inspiring budget with an
accent on education – especially higher education to prevent greater brain-drain
– and on generating growth and new employment opportunities.
BUT HOW are
these eminently imperative goals to be paid for? Some costs will be defrayed by
whatever is ultimately cut from defense. Additional revenue is to be derived
from higher fuel taxes and levies on communications giants like cellphone
companies, as well as cable and Internet providers. But while these blows won’t
marshal popular outrage, cutbacks in assorted National Insurance Institute
benefits are sure to excite controversy, not least because the injuries here are
inflicted on the greatest numbers and the weakest members of
Broadly speaking, all NII benefits would be eroded by about 1.5
percent, while employers would be forced to pay nearly 0.5% more to the
Whatever is deducted from the already meager benefits for the
elderly and infirm can only be regretted, as these are recipients who cannot go
out and otherwise augment their incomes. In a way, the poorer segments of
society are also disproportionally whacked by the two-year postponement of the
next scheduled 0.5% reduction in VAT (from 16% to 15.5%). The national budget
would thereby gain NIS 1.8b., but VAT is a regressive tax primarily affecting
low-income households, where most earnings are consumed.
regrettable are higher contributions demanded from employers who enjoyed special
breaks in previous budgets and shouldn’t treat temporary discounts as permanent
Perhaps the most welcome move is to postpone increasing child
allowances by a year. Although this may well generate great commotion, there
never was justification for the increase. The government was plainly held ransom
by Shas. These allowances are a disincentive to work, chiefly in the haredi and
Above all, this budget will be significantly higher – by
NIS 16b. – than its predecessor, signaling perhaps that the frost of
is thawing, which is good news for us all. This appears to be a benign
comparison to the drastic measures currently demanded of some of the
Israelis wouldn’t be far off the mark to
this budget as a reward for our collective self-control and more
regulation than elsewhere during the recent international downturn.
better than most other countries, and this budget is proof
Nevertheless, as Steinitz warned, spendthrift budgeting
lackadaisical loss of control could still result in travails similar to
Spain and even Britain.