Yes to a 2-year budget

Has so positive a goal tamed the partisan hullabaloo? Not by a long shot.

The Knesset yesterday took its first step toward approving Israel’s second two-year state budget – for 2011-12. The cabinet had earlier endorsed the move.
The fundamental rationale for departing from our annual, unsavory budget rites is to reduce the usual prolonged pre-vote haggling and to ensure a longer budget cycle, thereby giving the legislation a chance of actually impacting the economy before the next round of aggressive horse-trading begins. In short, decrease the commotion and the controversy, and maximize the benefit.
Has so positive a goal tamed the partisan hullabaloo? Not by a long shot.
The very proposal for a second two-year budget has triggered an outcry. Opponents note that Israel is the first country to have opted for a longer-term budget and that the precedent – the 2009-2010 budget – was at the time hyped as a strictly one-time, emergency measure. The fact that the government is now seeking to go down the same path again, it is argued, is an abuse, an unacceptable demonstration that, in the Israeli context, there is nothing so permanent as something provisional.
The 2009 innovation was indeed ad hoc. When the Netanyahu government took over, the world was still reeling from the multiple afflictions of a global economic crisis that had exceeded ordinary recessionary spates and alarmingly resembled near-depression. Israel’s economy fared better than many others, but wasn’t immune to the ill-effects.
Grappling with the crisis and crippled by the election campaign, the Olmert government had failed to pass the 2009 state budget. By mid-2009, the country was still being run, month-by-month, on a 12th of the 2008 budget. The resultant strain on national resources, and the fundamental inefficiency of this arrangement, were considerable.
In response, the new Netanyahu administration submitted a groundbreaking two-year budget, geared to administer more than temporary palliatives for what was left of 2009 and prepare for 2010 as well. The idea of maintaining that two-year practice now, with no similar crisis, has broadened the scope for controversy.
IT IS being argued, for instance, that the longer the budget’s applicability, the lower its flexibility. At times of drastic change, it might be harder to make the necessary adjustments. Yet fix-ups would be just as necessary in the event of crises triggered during a normal, one-year budget period. Tools for modification always exist. Israel managed throughout most of 2009 on its 2008 budget configurations, devised long before the worldwide economic tumult.
A more trenchant argument is that a two-year budget strengthens the executive branch, weakens the legislature and hence upsets the delicate equilibrium. Extended budgets do theoretically rob parliamentary pressure groups of an entire year’s worth of political capital that they rake in as each budget-season reaches its springtime climax.
Here, indeed, lies the core cause of the current shrill protests. A two-year budget plainly deprives politicians of clout. They lose half the chance to make their voices heard and present their demands. Instead of annual intervention, they are reduced to a two-year cycle.
Unfortunately, bitter experience has shown how negative such intervention can be. Budget time offers matchless opportunity for unabashed political blackmail, predicated on the premise that no government can lift more than its political weight. A crazy-quilt coalition cannot dismiss the narrow interests of its various components. This year, too, we can expect the familiar pandemonium, the red-herrings, the outrageous extortion, the threats and the inevitable real and/or apparent compromises.
However, if the two-year budget eventually passes, we will at least bespared the same hijinks next year. Industrial quiet will be assured andbreathing space secured for less jittery economic management.
Plainly put, the budget-centered political tugs-of-war are detrimentalto the national economy. The less frequent the tussles, the better offwe are.
That, incidentally, is why the OECD and the International Monetary Fundso strongly back Israel’s two-year budget. We wholeheartedly agree withPeter Doyle, head of the recent IMF mission to Israel, who wroteFinance Minister Yuval Steinitz: “We see the government’s decision toadopt two-year budgets as integral to the success of the new fiscalrule... It will avoid the burden of annual budget negotiations andthereby allow greater focus on efficient implementation of expenditurepolicies.”
The two-year state budget “will help to anchor market expectations andconfidence,” Doyle stressed. “This is critical given still heighteneduncertainties in the global economy as well as ongoing geopoliticalissues in the region.”