Budgetary problems

Plainly put, political tugs-of-war hurt the national economy. The less frequent the tussles, the better off we are.

February 6, 2013 21:19
3 minute read.
PM Netanyahu at defense budget cabinet meeting

PM Netanyahu at defense budget cabinet meeting 370. (photo credit: GPO / Amos Ben-Gershom)


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The Treasury’s decision to produce yet another twoyear budget – for 2013-2014 – is already drawing fire, no less so than did its two predecessors.

The fundamental rationale against our annual budget rites is that delaying some of the protracted haggling and ensuring a longer fiscal cycle allows the budget a chance to actually impact the economy, before the next round of aggressive horse-trading begins. In other words, the aim is to decrease the commotion and curtail the controversy.

The expected hullabaloo over the 2013 state budget was the prime reason for calling an early election. It was feared that each Knesset splinter would extort a heavy price for its support, aware that without passing the budget the government falls. The logic behind the early election was to try for a stronger coalition.

Yet the precise opposite occurred. The new 19th Knesset is even more fragmented and makes the 18th look good. This adds impetus to preempting the annual budget agonies.

The present setup has all the makings for a worsethan- ever showdown over the budget. The coalition, whenever it is formed, will perforce be more of a crazyquilt than the previous one. Against this background, looming menacingly, is a growing national deficit that require spending restraint.

Nevertheless, contradictory spendthrift pressures are exacerbated by populist demands left over from the 2011 social protests and fueled by the fervor of assorted slogans that propelled Yair Lapid’s neophyte Yesh Atid list to overnight electoral success.

Our first two-year budget – for 2009-2010 – was at the time hyped as a one-time emergency measure. That the Treasury chooses to go down the same path for the third time, argue opponents of this course, is nothing short of abuse, underscoring that in the Israeli context there is nothing as permanent as something provisional.

Indeed, the 2009 innovation was ad hoc. The entire world then reeled from the multiple afflictions of the global economic crisis that exceeded ordinary recessionary spates and alarmingly resembled near-depression.

Israel’s economy did better than others but was not invulnerable to the ill-effects. Moreover, Ehud Olmert’s government failed to pass the 2009 budget. By mid- 2009 the country was still run on 1/12th monthly of the 2008 budget. The resultant strain on national resources was considerable.

In response, the then-new Netanyahu administration submitted its first two-year budget, geared to administer more than temporary palliatives for what was left of 2009 and prepare for 2010.

Those who clamor for a return to the one-year budget maintain that the longer the budget’s applicability, the lower its flexibility. At times of drastic change it might be harder to make the necessary adjustments with the longer cycle. Yet fix-ups would be just as necessary in the event of crises triggered during a one-year budget.

In any eventuality, tools for modification always exist.

The more trenchant argument is that a two-year budget strengthens the executive branch, weakens the legislature and hence upsets a delicate equilibrium.

Extended budgets do theoretically rob parliamentary pressure groups of an entire year’s worth of political capital that they rake in as each budget-season reaches its climax.

Herein lies the core cause for shrill recriminations. The two-year budget obviously deprives politicians of clout.

They lose half their ability to make trouble – instead of yearly mischief, they are reduced to a two-year cycle.

Budget time offers matchless opportunity for unabashed political blackmail, predicated on the premise that no government can lift more than its political weight. No coalition can dismiss the interests of its components.

This time, too, we can expect the familiar pandemonium, the red herrings, the outrageous extortion, the threats and the inevitable real and/or apparent compromises.

A two-year budget, however, can spare us the same hijinks next year. Industrial quiet will reign longer and time will be secured for less jittery economic management.

Plainly put, political tugs-of-war hurt the national economy. The less frequent the tussles, the better off we are.

Two-year budgets clearly allow greater focus on efficient policy implementation, which is critical given still heightened uncertainties in the global economy and mounting geopolitical concerns in the region.

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