Only a new government will be able to carry out the extreme cuts, without which we're likely to deteriorate into a situation like that of Greece, Spain, Italy and Portugal.
There's one decision that Prime Minister Benjamin Netanyahu sorely regrets - his decision two and a half months ago to add Kadima to the governing coalition and cancel early elections. Back then, at the beginning of May, his political situation was excellent. The polls predicted he would win a sweeping victory in the early elections due on September 4. His rivals, Kadima leader Shaul Mofaz and Labor Party chief Shelly Yacimovich, were in dire straits.
But since Netanyahu doesn't know how to make a decision and always prefers to put off until tomorrow what must be done today, he gambled on an alliance with Mofaz that would give him another year in power, a quiet and pleasant year. It turns out that even a political whiz can make a mistake.
Netanyahu keeps telling us how successfully his government has handled economic affairs and how living standards have gone up, but the truth is, all the economic indicators are negative. It's as if he and Finance Minister Yuval Steinitz were dancing on the deck of the Titanic and ignoring their job of staying at the helm and saving us from drowning.
They should have done that a long time ago. At the beginning of the year they should have made deep budget cuts and increased tax revenue - not by raising tax rates, a move that would harm growth - but by canceling tax exemptions, waging war on the black market, altering the law that encourages capital investment and imposing a value added tax on fruit and vegetables.
But Steinitz and Netanyahu evaded these issues. They don't feel good about making cuts and demanding taxes. They hoped for a miracle that would make the figures work, but it didn't come. Also responsible for the mistake is budget chief Gal Hershkovitz, who gave the two backing not to act in 2012 and to wait for the 2013 budget. But it turns out that the situation has worsened and the deficit is now expected at 4 percent, which is really scary.
So Steinitz and Netanyahu can no longer evade the issue. They have to act now and present a plan for cuts and tax increases that will be implemented this year.
Based on the budget rules, the government can increase the 2013 budget by around NIS 20 billion nominally. But it turns out that its commitments and promises about salaries, road construction, universities, the Trajtenberg report, the army, the police, the ultra-Orthodox and all the ministries already amount to NIS 34 billion! That is, around NIS 14 billion must be cut.
These are giant and unprecedented numbers. But that's not all. To reach a deficit of 3 percent, the government will be forced also to raise taxes to the tune of NIS 12 billion. So Netanyahu's hands are shaking. What will he tell the voters?
He talks a good game about growth and living standards, but he's the one who brought us to this deep nadir with his "generous policies." He's the one who changed the budget rules so he could spend more, and he's the one who signed the checks that weren't covered, which come due in 2013.
Despite the crisis threatening us, there's no chance the government will do what's necessary. After all, this is going to be an election year and Netanyahu's entire new philosophy is about "doing good for the people." If that's the case, how will he cut so many billions during an election year? Likud MKs won't support the cuts, and there's no chance Shas and United Torah Judaism will either.
And of course, there's a significant difference between a government in its last year in office and a government in its first year. A government that sees elections on the horizon isn't capable of carrying out unpopular steps that will harm salaries, employment, pensions, welfare, education and infrastructure. It will be afraid that the voters will take revenge at the ballot box.
On the other hand, a new government has a four-year horizon; it can take measures in the first year knowing that the situation will improve in the coming years. In addition, new ministers and MKs always want to keep their seats, so they will vote for the measures.
If so, it's true that Netanyahu made a terrible mistake when he dropped the September elections, but he can still announce elections for the closest date possible. After all, only a new government will be able to carry out such extreme cuts, and without such a plan we're likely to deteriorate into a situation like that of Greece, Spain, Italy and Portugal.
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