The most important element in the Netanyahu plan is its timing: The finance minister had to bring his plan to the public yesterday so that he could make it clear to the cabinet on Sunday that there is nothing to discuss - the money is going to cut taxes, so they have to cut spending if they want more money for defense and the local authorities.
The ministers did not like the trick. Danny Naveh hurried to declare that "a cut in health funding is more of a threat to human lives than a cut in the defense budget." Where did the Naveh who wants to keep all the settlements and all the territories go? How does he expect a weak Israel Defense Forces to do all that? Netanyahu responded sarcastically: "They can cut the research budgets" - which finance salary increases for doctors and building expansions - "or they can put the patients in the corridors." Naveh will decide to put the patients in the corridors.
Education Minister Limor Livnat also did not wait. She said that children "who go home now at 1 P.M. will go home at 11:30 A.M." It will be terrible for our children to learn so little. It is no less terrible that the education minister threatens cuts in classroom hours when the education budget has billions of wasted money in unnecessary districts, an abundance of clerks, 800 unnecessary classroom inspectors and more.
There has been a debate about the plan inside the treasury for months. Accountant General Yaron Zelekha and state revenue director Meir Kaputa said that income tax should be cut to directly increase private consumption, which would spur growth. Budgets director Uri Yogev and Eitan Rub, the customs and VAT director, preferred cutting indirect taxes. They won.
The economic truth is that all our taxes are too high, so it is always good to lower them. But lowering indirect taxes looks smarter right now from a social standpoint, because it will do more for lower income groups, and lowering VAT and customs and sales taxes on food and electrical appliances benefits the poor relatively more than the wealthy. Lowering income tax, on the other hand, would do no good at all for people who earn less than NIS 4,000 a month, as they do not pay income tax anyway.
This was a golden opportunity for the finance minister to improve his image by appearing to defend the weak - and Netanyahu did not miss it.
Amir Peretz and Ophir Pines-Paz listened, and their hearts ached. After all, they are responsible for the poor, how did Netanyahu steal their thunder?
The most important economic aspect of the plan is Netanyahu's insistence that he will not increase overall spending. If the ministers want more for security or local government, they will have to cut elsewhere. Netanyahu is correct to insist on this principle, because a basic conditions for sustained, viable growth is a reduction in the size of the government, leaving more for the private sector.
The only question is whether he will withstand the enormous pressure he will feel from the ministers on Sunday. Will he manage to cut the billions that must be cut from the budget, without losing his tax cuts?
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