Rationalize the budget

You can tell a great deal about Israel by studying how it spends its money.

August 13, 2008 21:52
3 minute read.
Rationalize the budget

money 88. (photo credit: Courtesy)


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The most reliable indicator and truest measure of a society's priorities is how it allocates its resources. You can tell a great deal about Israel by studying how it spends its money. The Finance Ministry has unveiled its proposed NIS 319 billion budget for 2009 and on Sunday the cabinet will begin debating what legendary political scientist Harold Lasswell called the politics of "who gets what, when, and how." Approval by Prime Minister Ehud Olmert's cabinet would bind the next Kadima government (assuming one is formed). The Knesset is obliged to pass a national budget by December 31. Finance Minister Ronnie Bar-On cunningly submitted two alternative, comprehensive schemes for cabinet consideration. Since the Treasury is loath to increase either taxes or government spending, both versions demand that ministries make do with less. In one version the bulk of savings would come from defense; in the other, the axe would fall more heavily on social programs. "Budget 1" would command NIS 2.1b. in defense cuts, along with NIS 117 million in social spending reductions, and a cut of NIS 30m. in monies for local government. "Budget 2" would cut NIS 900m. from defense, but NIS 1.2b. from social welfare, while hacking NIS 160m. off local government. Bar-On recommends Budget 1 - cutting defense so social programs suffer less. Too bad he hasn't offered a third, less draconian and more equitable reduction plan. To be fair, Israeli "hyper-pluralism" - in which single-issue parties act as if there was no collective interest - tempts the Treasury to rule with an iron hand. Recently, for instance, the legislature went off and spent NIS 740m. beyond the NIS 301.5b. budget for 2008 without making provisions for covering those new expenses. REGARDLESS of which 2009 budget is adopted, the Treasury wants to cut subsidies for extra-curricular education, road safety instruction and government contributions to the health funds. Citizens will have to pick up the slack. We will also likely be paying more for public transportation, saying farewell to educational television and the post office bank, as we know it - perhaps, gasp, even to the police orchestra. The news isn't all gloomy. The Treasury wants to spend more on improving the infrastructure in the periphery; to create incentives for cheaper cable and satellite television; and to press transit cooperatives into purchasing more large-capacity buses. THE PROCESS by which Israel develops its budget is not the most rational method for allocating resources. With the Finance Ministry's monopoly on the data, there is really no one who can authoritatively challenge Bar-On. Who is in a position to ask whether cutting defense makes security sense? Could citizens trust self-interested Defense Ministry bureaucrats' claim that proposed cutbacks go too deep? Did the Treasury take into account that procuring weapons systems is not like buying widgets, and that annual budgetary fluctuations can wind up costing more than they save? Can the Knesset Foreign and Defense Committee be counted on to scrutinize the defense budget and make informed decisions? In the social sphere, the Treasury proposes to reduce the universal child stipend from NIS 153 to NIS 135. As a bargaining chip against Shas, which is demanding an increase in child allocations, this may be a smart political gambit. But if the goal is genuinely to save money, what does Bar-On propose to do with that money? Israel needs to develop a culture of budgetary oversight beginning with the ministries themselves. The Treasury must stop demanding across-the-board cuts that slash blindly at deserving and undeserving outlays alike. Instead, the prime minister should be demanding that his ministers go through every item in their budgets, then propose rational savings to the Treasury. The Knesset needs to establish a nonpartisan structure - akin to the US Congressional Budget Office - to objectively evaluate the Treasury's budgetary proposals. Perhaps the existing Information and Research Center of the Knesset could evolve into such a mechanism. Moreover, individual MKs need resources to hire expert staff who can help them evaluate the budget, make informed decisions and conduct oversight hearings. Instead of a false debate that asks MKs to "choose" between security and welfare - why not develop the tools for informed and rational decision-making?

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