Jerusalem without gold
When you are a pauper and don't have a cent, you can't pretend to be a big shot and get away with it.
The year 2013 will be very difficult from a budgetary point of view. It will be necessary to cut billions of shekels, and sources in the Finance Ministry say there will be no choice but to raise taxes. But none of this is stopping the government from continuing to bribe the public even now.
During a festive cabinet meeting this week, on Jerusalem Day, the government decided to channel another NIS 350 million to the capital "for developing public and tourism spaces and enlarging the city's green lungs." These are clearly worthy aims, like many others, but where do they intend to take the money from when there is a threat of a deficit and everyone is talking about cuts?
One has to be totally cynical to do this. An allocation of NIS 350 million will not go into effect immediately and also not in 2013. According to the government's decision, it will take place only in 2014 - and by then, "everything will work out." That will be after the elections and who knows what kind of government will be set up and what its agenda will be? And it will always be possible to submit another plan for spending cuts.
But now it is possible to present the public with a festive decision in favor of the "reunited city" while the public applauds the good government that cares about the eternal capital.
This is precisely the system employed in the past three years by the duo Benjamin Netanyahu and Yuval Steinitz. They distributed checks most generously and conducted a policy of "I have plenty" which increased expenditures. However, the day has now come to pay up, but the coffers are empty.
Over the past two years, I have written here innumerable times that this is exactly what we could expect. But Netanyahu and Steinitz laughed, and continued to spend. Now they are no longer laughing.
Even Steinitz has begun to understand how bad a foul-up it is. At the Negev Conference this week he declared that "the upcoming budget will not be easy, it will be tough." But he immediately added: "We will try hard to make it easier for the citizens."
But it won't be possible to make it easier. The cuts will hurt the citizens. That is the price that all of us will have to pay for three "good" years. That is the price we will pay to prevent the economy from deteriorating like those of Greece and Spain.
Therefore we cannot allow ourselves to wait until 2013. We must not continue to live in 2012 with a deficit of 3.5 percent and do nothing. That is evading responsibility.
The government has committed itself to a deficit of 2 percent and it must stick to that. That is the ultimate test of credibility and it is important, too, from the point of view of the debt's size and the country's credit rating, interest rates, growth and unemployment.
Under present conditions one should not raise Value Added Tax or income tax. An act of that kind would deal a death blow to growth and employment. It is possible to make tax collection more effective, to fight against black capital, and to cancel tax exemptions such as those in the law encouraging capital investments and the VAT exemption for vegetables and fruit.
The correct solution is the introduction of cuts and efficiency measures in the government - cuts in defense and the enormous budgets for the ultra-Orthodox public, and efficiency measures in all other government offices.
If Steinitz says this is impossible, we will suggest he look at the Spanish government, which this week cut 21 percent (! ) of the education budget. It is better to take action now when the crisis is still manageable, rather than waiting for a big crisis before acting, which will be like open-heart surgery without an anesthetic. And if Netanyahu says it's impossible, we will remind him of the plan he carried out in 2003; a program of cuts, efficiency measures and reforms that saved the economy from rolling into an abyss and led it from deterioration to growth.
As soon as a program of this kind is put into effect, everyone will understand that we are dealing with serious leaders who will protect us from all the false prophets around. A move of this kind will tell the nation: We are not Greece or Spain; we will conduct ourselves with responsibility, we will reduce the deficit, we will reduce the debt and we will carry out reforms.
The result will be renewed trust in the government and the economy, and this will lead to a blossoming of investments, to greater private consumption and more activity. The economy will continue to grow at the desired pace of 5 percent a year, and all the problems forecasted for 2013 will suddenly be less threatening.
In order to prove it is serious, the government must make a preliminary decision now to cancel the NIS 350 million for Jerusalem. When you are a pauper and don't have a cent, you can't pretend to be a big shot and get away with it.