Israel's new budget is as sound as a shekel

MIDDLE ISRAEL: The government's inaugural budget is an impressive act of political humility and economic drive.

VARIOUS ISRAELI banknotes are displayed for an illustrative photo. The economy is well on its way to the pre-pandemic standards of budgetary discipline. (photo credit: NIR ELIAS/REUTERS)
VARIOUS ISRAELI banknotes are displayed for an illustrative photo. The economy is well on its way to the pre-pandemic standards of budgetary discipline.
(photo credit: NIR ELIAS/REUTERS)

They did it. Five months since assuming power, Israel’s strangest-ever coalition has passed a budget, an improbable feat that adds up to an impressive act of political humility and economic drive.

The political act began with a successful assault on the pandemic’s Delta variant. Now, after having shown they can fight a fire together, the coalition’s multiple opposites produced an ambitious budget, overcoming their deep differences not only on foreign policy, but also on domestic affairs.

The budget’s 40 reforms include the raising of women’s retirement age from 62 to 65 over the next 11 years. Its rationale is basic finance, reflecting rising life expectancies, easing long-term pressure on the pension industry, and completing then-finance minister Benjamin Netanyahu’s raising of men’s retirement age from 65 to 67 in 2003.

Previous attempts to pass this reform met resistance from women’s organizations. This government overcame them.

The pressure was even harder concerning the kosher-supervision reform, which allows competition in an industry that until now was an ultra-Orthodox cartel. Resistance was therefore fierce – at stake are thousands of jobs ultra-Orthodox politicians have been distributing for years – but it was overcome.

THE KNESSET building in Jerusalem holds one of the world’s smallest legislatures. (credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)THE KNESSET building in Jerusalem holds one of the world’s smallest legislatures. (credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

Industrialists also pressured. The budget’s importation reform removed protectionist regulation that demanded local standard tests for imported products that had already undergone such tests in their countries of origin. That resistance was also overcome, and the result will be lower importation costs, and lower consumer prices.

Transportation Minister Merav Michaeli opposed the new toll that will make non-local drivers entering Tel Aviv during rush hour pay five to 10 shekels for that pleasure. Michaeli called the toll “a regressive tax,” but was overruled.

Most crucially, investment in mass transit was nearly doubled, to NIS 35 billion. This includes a new Metro Law, which will set a framework for expanding Tel Aviv’s budding light-railway network into a subway system.

On the social front, monthly payments for the elderly and the disabled were raised. On the medical front, hospitals’ budgeting will be remodeled so it will be higher and more transparent. These are but a sample of 40 fiscal clauses that add up to the biggest set of budgetary reforms Israel has seen since 2003.

While at it, the government also struck a so-called “package deal” whereby the unions accepted a public-sector salary freeze for a year, while the Treasury agreed to raise the minimum monthly pay from NIS 5,300 to NIS 6,000 over the next three years, and the employers organizations’ agreed to add an annual vacation day and also allow a weekly workday from home.

On top of all this, the budget deficit will decline next year to 3.9% of gross domestic product, after having soared in the wake of the pandemic’s lockdowns and special spending to more than 12%. This means the economy is well on its way to the pre-pandemic standards of budgetary discipline.

This display of economic vision and political delivery received its most impartial compliment from the financial markets, where the shekel emerged as the strongest currency in the world, appreciating against the euro, the yen and even the Swiss franc, not to mention the dollar, which has plunged from NIS 3.33 on the eve of Naftali Bennett’s premiership to NIS 3.1 this week. The idiom “as sound as a dollar” might as well change to “as sound as a shekel.”

Yes, there are deeper reasons for the shekel’s strength, and it also poses problems, most notably diminishing profits for exporters. However, in terms of this budget’s judgment, it is an emphatic vote of confidence, one which may well be followed by a new upgrading of Israel’s credit ratings.

This, in brief, is what happened politically and economically. What, then, does it mean personally?

THE BUDGET saga has shed new light on three people. The first is Finance Minister Avigdor Liberman.

This column was critical of Liberman in the past for many reasons (see for instance “Poor man’s Churchill,” November 15, 2018), most notably for his imposition in 2019 of an early election five months after a general election (“Person of the Year,” September 27, 2019).

Now, however, the man whose 28 years in politics were often about demagoguery, bullying, and manipulation has emerged as a skilled negotiator and a flexible pragmatist. Maybe at 63 Liberman matured, and maybe this is just part of a calculated plan to storm the premiership from the political center. Either way, he has now led a big political move and while at it served the national interest.

The budget’s second hero is Prime Minister Bennett, who has displayed an ability to reconcile opposites and deliver lemonade from the bowl of lemons with which he emerged from the last election.

The budget’s last hero is Opposition Leader Benjamin Netanyahu, whose personal broadsides at Bennett in the Knesset’s budget debate were meant to change the subject, from what Bennett just did to what Netanyahu didn’t do.

Overall, during the 12-year premiership that ended in the summer, Netanyahu displayed none of the reformist zeal that drove his 2003-2005 term as finance minister. It is therefore frustrating for him to see so much delivered by a coalition that is so much weaker than those he commanded until 2019.

Even more frustrating for him is the collapse of his prediction that Bennett’s first budget will never get passed. Yes, most frustrating for Netanyahu must be the way this budget passed – a display of collectivity that was the antithesis of his own Bonapartist swagger; a teamwork joined by people whom over the years he abused, shed, and also fired, from Bennett, Shaked and Liberman to Gideon Sa’ar and Yair Lapid, people who now, in working together, have activated the power of the disempowered; the power of humility; a power which Netanyahu never deployed, and of which he doubtfully ever heard.

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The writer’s bestselling Mitzad Ha’ivelet Ha’yehudi (The Jewish March of Folly, Yediot Sefarim, 2019), is a revisionist history of the Jewish people’s leadership from antiquity to modernity.