Slicing bread

Linking more reasonable tax rates to higher bread prices is demagoguery at its worst.

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November 1, 2005 23:50
4 minute read.
JPost talkback add

JPost talkback add. (photo credit: )

It was a forgone conclusion that yesterday's hike in bread prices would trigger an indignant outcry about indifference to poverty. This happens whenever bread prices are adjusted. There is, after all, a powerful symbolic association between bread and sustenance. It is this connection, presumably, that impelled then-premier Menachem Begin to forbid the scrapping of bread subsidies back in the early 1980s. Begin and others were no doubt sincere when they conceived of bread subsidies to help the poor at a time when it was considered normal for the economy to be treated as an extension of the government budget. In our current context, however, it is more common for such emotive factors to be manipulated cynically, as a knee-jerk reaction, without regard to the real facts of economic life and with a view to making political capital. This is what happened in February 2004 - the last time bread prices went up (by more than 14 percent at the time). The present increase (6.57%) is no exception. The cheapest standard loaf of light or dark unsliced bread is up from NIS 3.25 to NIS 3.45. When an election campaign nears, populist motivations often supersede sound economics. The bread price hike has become enmeshed in the politics of the much-touted "war on poverty" that Ariel Sharon, Shimon Peres and others are claiming to lead. All these poverty warriors seem to agree that the reformist path staked out by resigned finance minister Binyamin Netanyahu must be abandoned or at least watered down in order to return to old patterns of election-season largesse. The bread price-hike actually goes against this trend, but the greater impact on the economy - and the poor - will come from the "war" being waged in their name. The real losers of undoing the painful but essential reform process that Netanyahu kick-started would be the poor. Their salvation ultimately lies in economic growth, not populist electioneering. If our politicians really cared about the poor, they would be slashing regressive taxes - such as the Value Added Tax - which hurt low-income households much more than raising the price of bread. No less irresponsible are all of Sharon's political antagonists and fair-weather friends who promote populist policy. The National Religious Party and Shas lost no time announcing that they will submit no-confidence motions over the price increases. The clamor was no less fierce from Labor quarters. Deputy Minister Orit Noked branded the price hikes "scandalous." Her colleagues charged that the same government that lowers income tax for the rich denies bread to the poor. Linking more reasonable tax rates to higher bread prices is populist demagoguery at its worst. Nobody plots to make the rich richer by oppressing the impoverished. Such claims are unconscionable distortions. Bread is among the few remaining regulated basic food products, precisely to keep it affordable. At the same time, however, it must also remain available. If baking standard bread becomes a losing proposition, fewer and fewer bakeries would agree take part. The bakeries' major moneymakers are already specialized breads, outside the price-control framework. These not only account for bakeries' income, they are also what the public consumes. The consumption of standard bread is steadily declining, among all social strata. Bread cannot be baked in a vacuum. The cost of flour, fuel, wages, etc. must be factored in and these have all gone up considerably. Not factoring in production costs and not readjusting retail prices can lead to the closure of bakeries and the layoff of workers. Equally unacceptable is the notion of subsidies high enough to prevent any changes in basic-food costs. That would force the average taxpayer to artificially prop up producers, while the beneficiaries would hardly be the poor that populist spokesmen claim to champion. We can all still recall the situation of not too many years back when cows, poultry and other farm stock were fed on standard bread. It was literally cheaper than chicken feed. Indeed, it was so cheap that merchants from bordering Arab countries began buying up Israeli bargain-priced bread. Thus the Israeli taxpayer unwittingly ended up supplementing the diets of Arab consumers as far away as the wealthy Gulf states. Twenty agorot more for a standard loaf seem to us as the lesser of all possible absurdities.


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