The finance minister is confused. He has forgotten that he is the most senior economic affairs minister, the one responsible for growth, unemployment, stability and the budget, and has decided that he is actually a social affairs minister. It sounds much more attractive and popular to him. That is why he was in a hurry to call a news conference to declare that he is aiming at closing social gaps, reducing poverty and building a stronger and more equitable society. For that reason, he announced a plan for negative income tax, for obligatory pensions and for raising the tax on company cars.
In this way, Avraham Hirchson created confusion. He overtook those championing social issues from the left and made off with their agenda. They are the ones who are supposed to be doing good, to push for a larger budget and bigger grants for the weak and the poor; and he is the one who is supposed to be the cruel treasurer who will give nothing, who will not distribute and not add funds but will forever make cuts.
That is the way of the world, and it goes round well when everyone fulfills the right job and shouts at his colleagues on time. And then both sides grow weary, sit down to negotiations and reach an agreement in which the socially concerned receive some of their demands, and the finance minister defends the budget and the economy - and each side announces it is the winner. This way, the finance minister gets his good points from the business sector and the economists, and those with social concerns get their points from the public. Each side gains political capital, and everything is in place.
But what happens when the finance minister smashes this solid structure and turns into someone with a social conscience? Total chaos is created. A state of bewilderment. And those with social concerns have no choice but to attack all the minister's plans to show who really is the one with a social conscience.
Therefore, Defense Minister Amir Peretz, who considers himself the leading social affairs minister, criticized Hirchson's plan for negative income tax across the board. Peretz said it was a bad plan, that negative income tax is good for the employers, instead of being good for the workers, and that it is better to raise the minimum wage. He is even opposed to raising taxes on company cars.
Even MK Silvan (Social) Shalom is vehemently opposed to the plan. He wants to push forward his own plan, and what right does the finance minister have to interfere in the matter? And the leading socioeconomic institute, the Adva Center, also announced it is opposed to negative income tax as "a Trojan horse that could destroy the social security network from inside." And Dr. Zvi Schuldiner, chairman of an association committed to social justice, said Hirchson's proposals are intended to prove that we have a so-called social government, while actually these are "steps that are really not social."
The plan for introducing a compulsory pension is facing similar opposition. Those with social concerns say it will hurt those with low wages. And the chairman of the Histadrut labor federation, Ofer Eini, expressed vehement opposition to its introduction by the finance minister. It was preferable, he said, to have negotiations between him and the employers. After all, if this does not happen, how can he show the workers an achievement?
The members of the Knesset Finance Committee are also opposed. They announced they do not agree to raise the value of the use of a company car to the extent that the treasury wants, and they are planning to initiate meetings with the directors of the leasing companies, the high-tech workers, businesses chiefs and the Histadrut to change the treasury's proposal, which "instead of strengthening the middle class, harms it."
The finance minister's advisers apparently have forgotten the entire political bible. They did not tell the minister there is a high additional expenditure of 3.3 percent (which as usual is defined as "one-time") in the 2007 budget, which is an indication to the public that there is money in the coffers. And the moment the plan for negative income tax was added, which increases government expenditure and bureaucracy, this indicated to the public that there is an "I have" finance minister who does the exact opposite of what a finance minister should do: to make the budget smaller and reduce bureaucracy.
The truth is the treasury's plan for negative income tax is indeed a bad one. It is complicated and difficult to apply, it increases bureaucracy and makes it necessary for a family to go to the tax assessment office to get a payment. And even more problematic: It will barely increase the number of workers in the economy.
Kobi Haber, the head of the Finance Ministry's Budgets Division, and Yarom Ariav, the new director general of the ministry, should have met with Hirchson and explained to him (eye-to-eye) that in the long run, he would not benefit from the move. Because those with social concerns would present him as someone who is pulling the wool over the public's eyes, as someone who throws a few dry bones to the weak but, in effect, gives them nothing and merely makes the employers richer. The socially conscious will be obliged to present plans that are much more far-reaching, with several times larger sums and full government funding of compulsory pensions - otherwise there is no justification for their existence, and they know that very well.
Here is one concrete fact: It transpires that poverty not merely slowed at the beginning of 2006 but actually lessened during the entire year - and will continue to diminish in 2007 as well - if the rapid growth of the economy is maintained. That is Hirchson's job - to worry about growth. He can leave the rest to those with social concerns.
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