At the end of February, after several weeks of political drama, automatic cuts totaling $85 billion in the US Federal budget, known as the sequestration, came into effect. The measure originated in the compromise between President Barack Obama and the Republican majority in the House of representatives in which no agreement for an across the board cut the budget would be signed before the end of February 2013. The logic behind this measure is apparently simple: the across the board cut is a terrible option and so the president and congress will be compelled to reach a better agreement.
They haven't reached agreement and the cut has gone into effect. The important point is that nobody in the US in the political system, media or academia feels that this is a desirable cut. On the contrary, an across-the-board cut that does not take into account economic priorities is considered a crude tool whose damage will result in the loss of thousands of public sector jobs, a slowdown in growth and even recession.
It is well worth we Israelis remembering these matters in a couple of weeks when the new Israeli government tries to build a budget for the next 18 months. The new budget will need to plug a NIS 40 billion budget deficit hole, which will require decision on the following fiscal steps. It is fair to assume that at the heart of the new economic plan an across-the-board cut will be required as well an increase in the tax burden, layoffs and salary rise freezes.
In contrast to the US, across-the-board cuts are greeted with understanding in Israel. The phrase across-the-board cut is considered as acceptable by politicians. For years they have formed the basis of budgetary policies every time that there is a need to solve a deficit problem.
What do these across-the-board cuts in government ministry spending contain that make them desirable to ministers, MKs in the outgoing coalition and probably the new coalition? The answer is clear. Such a cut avoids the need to talk openly about priorities and what is more important than what. It is true that across-the-board government cuts usually include exceptions such as special education, welfare and other matters exempt from the axe but this is a step designed to legitimize a tool that everywhere else is considered undesirable.
Budget crumbs
In order to understand why such a step is undesirable, one needs to look at government civil expenditure and the services provided under Israeli jurisdiction. Years of across-the-board cuts imposed by Israeli governments have reduced the country to one of the lowest of any developed state when it comes to providing services to its citizens. The protocols of the Trajtenberg Committee discussions showed us just how grave the situation is even in the eyes of government officials and professors. What is even more serious is the fact that despite the declarations of recent months, the likelihood of socio-economic change is zero. The fact that ministers are prevented in their discussions from talking about priorities does not mean that there aren't in fact government priorities. Every Israeli citizen knows what are the genuinely important things in Israel, and who needs to get by with budgetary crumbs. What will be different this time, perhaps, is the situation in the haredi (ultra-orthodox sector, where the population is likely to slip down one or two places in the budgetary pecking order. The wealthier population is likely to get a bit more from the finance ministry. But the basic structure will stay the same.
Ultimately, the lack of serious discussion by the cabinet and Knesset on allocation of income and resources and social policies, allows the politicians to carry on playing games and push Israeli society into an ever darker abyss without ever formally making any decisions to do so.
The difference between what has happened so far and what will happen in the coming months is that the new government will cover up its new actions under the "equality of burden" label, and it is a good bet that someone will say that this policy needs us to impose an "across-the-board" cut.
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2013
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