Civil Fights: The best long-term investment Israel could make

Since debt servicing swallows one-third of our national budget, paring down debt would free up billions for other goals.

By EVELYN GORDON
lots of money 88 (photo credit: )
lots of money 88
(photo credit: )
The Knesset has begun debating the budget for 2009-10 and, as usual, MKs are lining up to demand more government funding for various worthy causes. This begs a question: Have they simply not bothered to read the budget proposal, or are they cynically ignoring it to score electoral points? Because anyone who has read the bill would realize that over the long run, there is only one way to increase government spending on important goals such as education, health and welfare: pare down debt. The single largest item in the budget is neither defense nor transfer payments, but debt repayment. At NIS 111.4 billion, this will account for fully 31.5 percent of all government spending in 2009. That is almost double the 16.2% allotted to defense, the next largest item in the budget; almost triple the NIS 37.4b. allotted to education, including higher education; and 3.5 times the NIS 32.1b. allotted to health care. Clearly, if we did not have to allocate such a huge percentage of the budget to debt repayment, we would have tens of billions of additional shekels every year to devote to education, health and welfare. This makes paring down debt the best long-term investment the country could make. Unfortunately, the proposed 2009-10 budget does the opposite: It will almost triple the annual budget deficit as a percentage of gross domestic product, from 2.1% last year to 6.0% this year and 5.5% next year. In shekel terms, this will increase the total debt level by about NIS 15b. this year and another NIS 14b. in 2010. Thus in future years, the amount we will have to spend on debt repayment will increase still further, leaving even less money for health, education and welfare. The debt level, at 78.3% of GDP in 2008, is already high by international standards: The average for OECD countries (i.e. the developed world) last year was only 57.0% of GDP. Even the US, now reeling from a financial crisis caused in part by excessive debt, has a lower debt level than Israel; its debt totaled only 73.2% of GDP last year. But the 2009-10 budget proposal would make the situation far worse: It calls for raising the debt to 84% of GDP in 2009 and 87% in 2010, thus reversing five years of steadily declining debt levels. And of course, that is just the opening shot: Now that the budget has moved to the Knesset, MKs are seeking to increase expenditures still further - without, needless to say, proposing any compensatory cuts or revenue-raising measures. In short, they want to increase the debt, and hence the burden on future generations, even further. ANY ATTEMPT to alter the budget now admittedly faces two objective hurdles. First, we are already halfway through 2009, so the 2009 budget must be passed urgently, leaving no time to go through it with a fine-tooth comb looking for places to cut. Second, we are in a recession, making this the wrong moment to cut big-ticket items such as welfare or unemployment benefits. Nevertheless, both these problems are solvable. First, the Knesset could split the 2009 and 2010 budgets and pass only the former immediately; that would give it another six months to thoroughly scrutinize the 2010 proposal. Second, it could actually go through the 2010 budget looking for places to cut instead of places to add, because there are many places where expenditures could be cut without harming vital needs such as education and defense. To cite just a few examples: Why is the government spending tens, if not hundreds, of millions of shekels a year to run the country's only two national radio stations? (The actual sum is unknowable, since Army Radio falls under the defense budget, which is classified.) In a modern democracy, there is no justification for the government having a monopoly on national radio. Moreover, airwaves are valuable commodities. Hence not only could the government save money by privatizing these stations, it could earn money by auctioning them off. Why are army officers doing purely civilian jobs - engineers and economists, for instance - allowed to retire with full pension while still in their 40s? For combat officers, an early retirement age makes sense: These officers must be in peak physical condition, and few people in their 50s and 60s retain that level of fitness. But engineers and economists in the civilian world work well into their 60s, and there is no reason why their counterparts in the defense establishment could not do the same. This would save millions, if not billions, in completely unwarranted pension expenditures (again, since the defense budget is classified, the actual sum is indeterminable). Why is the state funding haredi schools that refuse to teach core curriculum subjects such as English, science and math? There is no reason for the government to subsidize schools that, by failing to prepare students for the modern job market, encourage lifetime dependency on government handouts - and, even worse, teach their students to view such dependency as the ideal. Parents could still send their children to such schools, just not on the taxpayer's dime. This, too, would save tens or even hundreds of millions of shekels in completely unjustified outlays. Clearly, this job should have been done by those who prepared the budget; that it was not is greatly to Prime Minister Binyamin Netanyahu's discredit. But with the government having punted, only the Knesset remains. Knesset members frequently complain about the legislature's dismal image; it is the branch of government for which the population consistently expresses the most disdain. That, however, is precisely because MKs so often prefer engaging in headline-grabbing, irresponsible rhetoric to doing the job they are paid to do: crafting serious, responsible legislation. If instead of constantly demanding more spending with no thought for how to finance it, MKs were to start dealing seriously with the country's threatening debt, this would do much to rehabilitate the Knesset's image. In short, this is Knesset members' golden opportunity. Unfortunately, I would not bet on their seizing it.