Yair Lapid presents: the no-choice budget. Not what he intended. Not what he planned. But that's what there is. There has to be a budget, there have to be cuts, and they have to pass on time. If not, the government falls, and the government doesn't want to fall just yet.
Instead of dealing the blows where they were needed, cutting excess spending and being capable of standing by such cuts, what is known as setting priorities, Lapid chose the easy way out, and had a go at everybody. Egalitarian to his soul. A real social worker. It turns out that this suits his partner in the decision making, Prime Minister Benjamin Netanyahu, who got badly beaten up when he started to create some kind of new order in the economy when he was minister of finance in the previous financial crisis, and since then has avoided confrontation and ceased to stand up for his real views.
In particular, Lapid did not want to quarrel with Histadrut chairman Ofer Eini. So it took just one evening at Lapid's house for Eini to come out smiling. Now it's clear why: no abolition of the tax exemption for advanced training funds; no VAT on fruit and vegetables; no new order in the ports, Israel Electric Corporation, Mekorot, the Airports Authority; no attempt to deal with the cost of living; the lightest of taps, without real commitment, for the bloated civil service budget; and that's it. Even the defense budget gets an empty page. Lapid and Netanyahu chose a high "one-time" fiscal deficit this year, and stories about a strict budget with a 3% deficit in 2014.
The government will remain bloated, too involved in the economy, and without any mechanism for emerging from crisis to growth. Worst of all: exactly the same people will continue to work, serve in the reserves, pay taxes only more so. In short, there is not much coverage for the key sentence in the budget proposal, that "it corrects structural distortions going back decades… creates a sense of equality, and is aimed at benefitting the working person whose efforts keep the Israeli economy going."
At best, at the most optimistic assessment, Lapid simply didn't have time to learn and understand. Had it been only up to him, he would have preferred to set a budget for the rest of 2103, and then work on a budget for 2014 that would include all the changes and reforms that he dreams of introducing for the benefit of the ordinary working person. For now, it's important that the Ministry of Finance should make clear that it regards the budget and Economic Arrangements bill as a first wave of reform, to be followed by further waves of reforms and structural changes, in separate bills, by the winter session of the Knesset.
Now the budget goes to the cabinet. With a chirrup here and an amendment there it will pass. The drama will be in the Knesset. The budget will not come out the way it goes in. Will the Finance Ministry manage to keep control of it such that only the things it never really intended are taken out? That's very doubtful.
Published by Globes [online], Israel business news - www.globes-online.com - on May 9, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013