"Yes to enlarging the deficit and no to an austerity budget that will be destructive for the economy," Minister of Finance Yair Lapid declared today at the "Calcalist" conference. "The 2015 budget I will submit to the cabinet in nine days deals mostly with the fateful dilemma of where to put the money. If we don't invest in education, there won't be any soldiers in the Unit 8200 (intelligence). I recognize the need to give answers to a series of new security threats."
Lapid told a story about a child in a community near the Gaza Strip who asked him whether he should still be afraid of the tunnels, and said, "There are places in the defense establishment with excess fat where we can save on costs, but we won't spare a cent when the lives of our children and soldiers are involved. We have two choices: to preserve the budget framework and a low deficit - I don't think that's the right choice. The last thing that the Israeli economy needs now is more taxes and more budget cuts. International experience proves that austerity budgets are ineffective. They strangle growth and entrepreneurship, and create a mood of hopelessness. After a lengthy war, such a budget would be destructive for the Israeli economy.
"The middle class feels that the country treats it like a milch cow there's nothing left to milk. The other choice is not to raise taxes, enlarge the deficit, and provide a solution for defense needs, while at the same time improving social services and providing a solution for economic growth. We have to recognize that a low deficit is not a goal in itself; it is designed to enable the economy to cope with external events over which we have no control, like Operation Protective Edge."
Lapid called for lowering the cost of living "even by 0% VAT, which will help the soldiers who have withdrawn from Gaza."
"I don't deny that there is a certain price to pay for raising the deficit, but we came here to change priorities in favor of the middle class, and change has a price." In his speech, Lapid mentioned former President Shimon Peres, "who was one of the best ministers of finance we ever had," who advised Lapid when he first became minister of finance "to always remember that not deciding is also a decision, and usually the worst one of all."
Lapid noted that the direct aggregate cost of the four operations and wars Israel was involved in over the past eight years was NIS 16 billion. "To this must be added the cost of the European boycott and the cost of defending isolated Jewish communities in Judea and Samaria," he said.
He added that we need a more level-headed diplomatic policy, especially where the US was concerned. "Decisions like that published yesterday on appropriating 4,000 dunam (1,000 acres) of land in Gush Etzion raise the question of why they had to be taken now. This was an underhanded move that was not brought to the cabinet for approval. It's also hard to maintain the world's support like this. What was so urgent about creating another crisis with the international community?"
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2014
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