Manuel Trajtenberg, who headed the public committee convened by the government to fund ways of lowering the cost of living in Israel, has told TheMarker that in the current economic climate, he finds it difficult to believe the government will succeed in meeting its 2013 deficit target, even after widening it to 3% of gross domestic product.
The Tel Aviv University economics professor called for an increase in both the corporate tax and income tax on individuals.
Trajtenberg made his comments to TheMarker on the sidelines of last week's Caesarea Economic Policy Planning Forum at the Dead Sea, where Bank of Israel Governor Stanley Fischer took Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz to task for their plans to raise next year's budget deficit to 3%. Fischer called for a ceiling of no more than 2.5%.
In his own public remarks at the conference, which was sponsored by the Israel Democracy Institute, Trajtenberg said any public policy designed to support the middle class and to narrow social welfare disparities must go hand in hand with responsible economic policy. He said in the current economy, that would require raising everyone's taxes.
"In my remarks, I stressed the need to raise taxes because if we don't do that, we could find ourselves in a much worse situation than a 3% deficit," Trajtenberg told TheMarker. "We need to see to it that we have a serious and responsible economic policy for the long term. The corporate tax and the income tax on the entire population need to be raised."
When asked how he squared this with his committee's efforts to ease the burden on the middle class, he responded that there were routes other than lowering taxes to achieve that goal. He said the last thing last summer's protesters would have sought was a financial crisis brought about by fiscal irresponsibility.
"I was in Spain [last week] and I saw what was brewing there and the dangers lurking for us around the corner. I say these things out of concern and because I care about the issue of social welfare," Trajtenberg said.
Asked what the greatest accomplishment of his committee was, Trajtenberg expressed pride over resulting legislation providing free preschool education from age three and for the halt to scheduled tax reductions. His committee's report advocated increasing the tax burden on the highest income earners.
Regarding the protesters' demands for increasing the government's share in the economy, he offered a trade-off instead, saying the growth in defense spending should be curbed in order free up resources for the civilian sector.
"Increasing the budget isn't everything," he said. "I was the head of the planning and budgeting committee of the Council for Higher Education when budgetary reform was required. You must think about outputs vis-a-vis the budget."
Trajtenberg counseled the social justice protesters to have patience, urging them to press their case within the political system directly.
