Shas will have to backtrack from its demand to increase child allowances, according to a source close to the Sephardi haredi party. "There is just no way that in the present economic climate any government will be crazy enough to return child allowances to the level they were at in 2001," said the source this week. "Eventually [Shas Chairman] Eli Yishai is going to have to come to that realization." The source said that in its 2006 election campaign, Shas emphasized economic issues, and specifically promised to reverse cuts to child allowances. The party is now in the uncomfortable situation of having failed to deliver on one of its central promises to its constituency. "Back in 2006 we thought that [Binyamin] Netanyahu's economic policies would be a complete failure," said the source. "But a few years down the road, we see that Netanyahu has been proven right. Nobody wants to go back to a socialistic welfare state." However, all Shas officials who spoke with The Jerusalem Post on the record denied that there was any intention of backtracking on the demand to increase child allowances. "Increasing child allowances remains one of our highest priorities," Shas spokesman Roi Lachmanovitch said this week. "Our demand is modest," said Lachmanovitch. "We want a NIS 30 increase per child per month. This alone would lift half a million children above the poverty line and it would only cost about NIS 1 billion. But the Treasury is opposed to any increases for ideological reasons." Shas Chairman Eli Yishai reiterated his demand this week that a significant addition to child allowances be a precondition for Shas's joining any future government coalition. Transportation Minister Shaul Mofaz, who is vying with Foreign Minister Tzipi Livni for the leadership of Kadima, was presented with Shas's demand for augmented child benefits during a visit at the home of Shas mentor Rabbi Ovadia Yosef earlier this week. Sources said that Mofaz promised to look into the issue. Even Netanyahu, whose neoconservative economic outlook clashes with Shas's demands, nevertheless told senior Shas officials recently that he would consider raising welfare benefits on the basis of income level, according to the haredi weekly Mishpacha. Still, in the Treasury there is stiff opposition to any increases in child benefits or any other welfare transfers that discourage citizens from joining the labor market. Raviv Sobol, a senior Treasury official, told the Post Thursday that the type of benefits demanded by Shas would be detrimental to the Israeli economy on several levels. First, an increase in benefits would upset the delicate balance between the budget deficit and gross domestic product, one of the key indicators determining a country's economic stability. Sobol said that every NIS 50 addition to child benefits, which are presently NIS 152 per child per month, adds about NIS 1.6b. to the budget. Second, said Sobol, child benefits and other welfare payments are counterproductive because they lower the incentive to work and create a "culture of poverty." "When children grow up seeing their parents live off the dole, that has very negative consequences for their future," he said. Finally, said Sobol, welfare payments given in the form of child benefits do not fight poverty in an effective way because the money is not earmarked for the poor. Rather, payments are made to everyone with children, both rich and poor. "We at the Treasury recommend alleviating poverty in other ways - for instance, providing heavily subsidized child care that makes it easier for women to work, or improving education." Nevertheless, Sobol, a veteran Treasury official, admitted that if the next prime minister chooses to disregard the advice of his economic staff, he or she could raise child allowances "in a second." "If the stability of the government coalition depends on giving Shas an increase in child allowances, it does not matter what we say or do, Shas will get what it wants," he said.