Analysis: Yair Lapid’s credibility problem

While it’s certainly possible Lapid will prove to be true to his word further down the line, the Yesh Atid founder has yet to build any credibility.

Yair Lapid 370 (photo credit: Marc Israel Sellem/The Jerusalem Post)
Yair Lapid 370
(photo credit: Marc Israel Sellem/The Jerusalem Post)
In his short time in office, Finance Minister Yair Lapid has repeatedly gone through a well-worn litany of seemingly plausible excuses: Times are tough. This situation is unique. I need to make an exception. Just this once. I promise.
He’s against the two-year budget – but not this year. He promised to cut funding to settlements – but not with this coalition. He’s ready for war with the Histadrut labor federation – assuming there won’t be a general strike. He promised to maintain the nation’s finances responsibly – just not yet, as evidenced by his proposal to raise the deficit to 4.9% instead of making politically tough cuts.
While it’s certainly possible Lapid will prove to be true to his word further down the line, the Yesh Atid founder has yet to build any credibility. As a result, the excuses he has been offering for why he must repeatedly put off good policy decisions fall flat.
“It’s not clear why things are going to be easier a few months from now than they are now. In a sense, it’s sort of rolling the dice and hoping the situation will improve for whatever reason,” says Asher Blass, CEO of the Economic Research & Consulting Group (ERCG) and a former chief economist at the Bank of Israel.
Whether it’s the budget, facing down Histadrut chairman Ofer Eini, backing down on the retirement age for women or succumbing to teacher’s unions, says Blass, “the message is that he’s not willing to get anyone upset. If that’s what his concerns are now, those concerns will still be there next year as well.”
The budget is a prime example.
“Despite good intentions, there’s a reasonable chance that in 2014, too, the government won’t meet the new deficit target that was proposed just today,” predicts Harel Finance’s Ofer Klein.
Closing the spending gap for 2014 will be just as difficult, he notes, because a significant portion of the Treasury’s liabilities are from signed wage agreements and multi-year reforms already under way, such as the wage agreements with teachers and doctors, improvements in the conditions of contract workers and the expansion of mandatory education.
When it comes down to it, every finance minister feels that he faces a unique and difficult situation, regardless of how good or bad the economy or fiscal situation is. Today’s situation may seem unique for whatever reason, but so will tomorrow’s. And despite the politicians and pressure groups that would have people believing otherwise, Israel’s economic situation isn’t all that dire.
As European nations deal with high unemployment and are slashing budgets in a period of recession, Israel continues to grow at a moderate rate.
The budget cuts everyone always talks about? They’re not really cuts. The budget for 2013 will be larger than the budget for 2012, and the following year’s budget will be even larger. When people talk about cuts, they are actually referring to limiting how much the budget will grow – limits Lapid now wants to relax.
Scaling back overzealous expenditures promised by previous governments is not exactly austerity. If politicians cannot show some backbone when times are good, why should anyone expect them to when times are tough? Former Bank of Israel governor David Klein put it succinctly: “I think that we are on a slippery slope. You can always say ‘Okay, just this year; later I will take care of matters, next year will be better,’ but these are promises we’ve heard in the past.”
When asked when he intends to make the hard but necessary decisions for the country, it is unsatisfactory for Lapid to simply reply, “Yesh Atid” (“There is a future”).