Former US Secretary of State Henry Kissinger once said: “Israel has no foreign policy, only domestic policy.” He was referring to the fact that Israeli foreign policy is dictated entirely by internal political concerns. The new “Budget Surplus Affair” and the question of what to do with the excess funds goes to show that Israel has no fiscal policy either, other than implementing measures that serve the political needs of Prime Minister Benjamin Netanyahu.
Higher than anticipated tax collection lies behind the “surprising” surplus that was suddenly discovered. It is safe to assume that low government expenditure in the first half of 2013, during the period in which the budget was not approved, also played a role. This discovery comes at a time when the Prime Minister is in a political crisis, at home and abroad. When this happens, Netanyahu says to himself: “What could be better than appearing to be someone who ‘eases the public burden’ by reducing taxes?”
There is no shortage of parties making strenuous attempts to rain on Netanyahu’s little political parade. For instance, the National Insurance Institute, which is making unwelcome long-term plans to reduce poverty rates and bring them down to OECD average rates.
Everything Netanyahu dislikes is contained within the National Insurance Institute’s plan - strengthening the social safety net, setting long-term goals for reducing the number of poor, and, most of all, a rational debate about priorities. From his perspective, it is much easier, more marketable, and more election-friendly to appear to be a fiscal White Knight. In other words, as the knight in shining armor who strikes the evil bureaucrats in the Treasury Department and distributes money to the middle class.
This in the hope that the next time a fiscal crisis strikes, those same middle-class voters will forget the previous round and will somehow accept the “unavoidable” need to raise taxes again.
This all serves to emphasize the rotten manner in which this government, and previous governments, managed fiscal planning. Instead of real planning, in Netanyahu’s previous term, we were given the foolish “two-year budget,” which served as a Band-Aid, and prevented real discussions about fiscal policy. Meanwhile, the two-year budget was cancelled, but the political desire to prevent any real debate is still with us.
The whole discussion about the “surplus” is just a waste of time. Our society and economy are in need of a long-term master plan, with social goals alongside economic goals, with clearly defined priorities - a transparent framework within which the public will receive accurate information regarding what and whom money is being spent on, how much is being invested over the Green Line, the scope of tax incentives and exemptions, and to whom they are being awarded, what the per-child education budget is in each of the various population sectors, etc.
Israeli society is not the IDF’s ATM machine
If such a debate were to take place, one that would examine the needs of Israeli society and not just the Prime Minister’s needs, we would be able to design a real fiscal policy. The implementation could be based on annual budgets, which the Knesset would debate annually, in keeping with the long-term goals. Our society and economy need to have their budgets rebalanced between income and expenditure, with increased government expenditure and rebuilding of safety nets.
Israel needs an effective retraining system for the unemployed, and an effective day-care system. Israel needs an immediate reduction in class-size in the public schools. Israel needs to reexamine its tax system and to decide who should be bearing the burden. The Israeli economy needs to define boundaries of fiscal significance for the defense industry and to make the General Staff of the IDF aware that Israeli society is not their personal ATM machine.
Unfortunately, none of this will happen. We will read about and hear about these surpluses and about fights between ministers in the media. There will be presentations and press conferences. But the heart of the matter, the most essential, critical issues, will be left outside this time too.
Published by Globes [online], Israel business news - www.globes-online.com - on November 20, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013