Jpost editorial: The two-year budget

The talk in financial circles these days is that we are due another two-year state budget, of the sort we knew on three occasions from 2009 and until 2014.

By
April 25, 2015 22:04
3 minute read.
money

Shekel money bills. (photo credit: REUTERS)

 
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The talk in financial circles these days is that we are due another two-year state budget, of the sort we knew on three occasions from 2009 and until 2014.

No surprise here. Coalition formation time breeds speculation especially on economic policy in all of its ramifications.

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The current haggling season is no exception and reviving the biennial budget is only one of many spins making the rounds.

But in contrast to a plethora of largely populist proposals, a return to the two-year budget is one that should be weighed seriously. During the period they were in force, they did our economy nothing but good.

The fundamental rationale has not changed. The prime benefit is reducing the wrangles that are a fixed feature of our annual budget rites by doubling the plan’s lifespan.

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This allows the budget a minimal 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.

This is vital when the governing coalition is stitched of many factions, each of which can hold the aggregate to ransom and exact a payoff for its continued cooperation.



Budget showdowns were the foremost grounds for calling several early elections in recent years. The recurrent and well-founded fear is that each Knesset splinter might extort a heavy price for its support, aware that without passing the budget the government falls. This, in itself, is impetus enough to preempt the annual budget agonies.

Even now, with the Likud having emerged considerably stronger from the last electoral bout, the coalition in-the-making is still a political crazy-quilt, tugged hard by contradictory, spendthrift pressures, exacerbated and fueled by the fervor of glib slogans of the sort that propelled Moshe Kahlon’s neophyte Kulanu list to overnight success.

Our first two-year budget – for 2009/2010 – was at the time hyped as a temporary, one-time emergency measure.

The entire world then reeled from the afflictions of the global economic crisis that exceeded ordinary recessionary spates and alarmingly resembled near-depression.

Israel did better than other economies 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 running 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 as well.

Those who oppose a return to a two-year budget maintain that the longer the budget’s applicability, the lower its flexibility. That at times of drastic changes it might be harder to make the necessary adjustments. Yet fix-ups would be just as needed 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 the two-year budget strengthens the executive branch, weakens the legislative and thereby upsets a delicate equilibrium. Extended budgets do theoretically rob parliamentary pressure groups of an entire year’s worth of political capital that they cash in as each bargaining fest 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 restricted by a two-year cycle.

Budget time offers matchless opportunity for 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, and hence the familiar pandemonium, red-herrings, outrageous extortion, threats and real and/or apparent compromises.

A two-year budget can spare us half the high jinks. Industrial quiet will reign longer and time will be secured for less jittery economic management. Plainly put, political tugsof- war hurt the 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 heightened uncertainties in the global economy and mounting geopolitical concerns in the region.

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