New elections now
Whatever happens, the 2013 budget is going to be very tough. There will be a need to cut not only NIS 14 billion but also to raise taxes because of the expected drop in growth.
Had Prime Minister Benjamin Netanyahu not pulled a last-minute about-face in May when he was expected to call a September 4 election, we would now be three days after that national election. The coalition contacts would be well underway and the parties composing the coalition would realize that their first and most urgent mission would be submitting the 2013 budget.
Instead of that, we are in a state of great uncertainty now. No one knows whether Netanyahu is planning to continue with the present coalition and to present a budget, or to announce after the High Holy Days that there will be early elections. He says that it depends on the three coalition faction heads - Eli Yishai, Avigdor Lieberman and Ehud Barak - and whether they will be prepared to support the 2013 decrees.
It is not reasonable to expect them to do so. Yishai will not lend a hand to cutting child allowances, Barak will not go along with a reduction in the defense budget, and Lieberman will not agree to cuts in the Immigrant Absorption Ministry and the Public Security Ministry. The Likud Knesset members will also be opposed to any decree and any tax. After all, they want to be elected in the primaries. And the truth is that Netanyahu also fears the public's reaction to the decrees. Therefore it is fairly clear that the current government will not submit the 2013 budget and that elections will be held at the beginning of next year.
There is a substantial difference between a government in its last year of office and a government in its first year. A government that sees elections on the horizon is not capable of taking unpopular steps such as reducing wages, cutting stipends, imposing taxes on advanced learning funds, and making cuts in all the ministries, including the education and defense ministries. A government in its last year is afraid of the voters' revenge.
On the other hand, a newly-formed government has a horizon of four years. Therefore it is capable of imposing decrees in its first year with the realization that the first difficult year will be followed by good years and these will make it possible to expand and to add benefits that will wipe out the memories of the first bad year.
Whatever happens, the 2013 budget is going to be very tough. There will be a need to cut not only NIS 14 billion but also to raise taxes because of the expected drop in growth. It would be a mistake to take the easy path of refusing to raise corporate tax and income tax. This time the exemptions that have been given to the great and important ones must also be cut.
Netanyahu can regret that he did not hold the elections on September 4 but he doesn't have the right to cry about the mess we are in now. He is the person chiefly responsible for it. He and Finance Minister Yuval Steinitz increased expenditures in the past two years without worrying about the budget. They dished out checks that had no coverage, gave the doctors, lawyers and social workers generous salary raises, and increased both the defense and education budgets. They hired more workers and allocated more for highways, universities, the ultra-Orthodox, and poured money into the territories, into the outpost of Migron, and into everything that moves. No one heard the word "no" from them. The policy was "I have the cash." But now the time has come to pay up and the coffers are empty.
That was the original crime. It was followed by the sin. Because already at the end of 2011 it was clear that the economy was entering a recession and that the debt in 2012 would be tremendous. Therefore at the beginning of 2012, Steinitz should have submitted a plan for deep cuts for the current year and the year after. But Steinitz and Netanyahu wanted to be good. They hoped for a miracle that would arrange the numbers for them. Who doesn't remember how, until a mere few months ago, they were so terribly haughty and spoke about how good the economy was, while bluntly ignoring the drop in the rate of growth, the deficit in the budget, and the dark clouds over Europe.
Every "I have the money" policy is followed by a sudden upset that turns into a policy of "I don't have." The problem is that the upset arrived at the most inappropriate time - an election year. Therefore instead of continuing to change his mind back and forth and hope for some cosmic event that will transform the face of reality, Netanyahu must face facts and, even before the Jewish New Year, must declare a date for elections at the earliest possible opportunity. He must not sacrifice the economy and the country's stability on the altar of policy zigzags.