The Prime Minister's office is worried.
Finance Minister Benjamin Netanyahu managed, against all expectations, to squeeze the bank reforms through the Knesset Finance Committee. After several long months of his public image at low tide, Netanyahu managed a comeback and positioned himself as a finance minister leading the country's economic reforms. Anxiety at the Prime Minister's Office increased.
Two days after the Bachar reform passed the Finance Committee, Sharon's staff went on the attack. The office put out a statement to the press with the headline: "The prime minister instructed the finance minister to implement negative income tax." What the statement didn't say was that it was the finance minister's initiative, and that one day earlier, Netanyahu had brought it to the prime minister.
The attempt by Sharon to steal Netanyahu's goodwill for reforms in taxes or banking is doomed to failure. As far back as the plan for stabilizing the market 20 years ago, every substantial economic measure, good or bad, has been associated with finance ministers. Whoever despises the economic policy of today's government attributes it to Netanyahu, and whoever adores it clearly sees Netanyahu as the only one responsible.
But there is one economic issue - very weighty, very consequential - in which the prime minister can have tremendous influence. This is an issue for which he can grab all the glory. It's the most substantial economic issue for which the prime minister traditionally decides, and with which the finance minister is forced to live.
If the Prime Minister's Office staff is looking for an economic achievement for the prime minister, its true object should be the fight over the defense budget. It's an annual bloody battle, at the end of which the Finance and Defense Ministries get deeply entrenched in their respective positions, and the prime minister is called on to decide between them. The decision almost always favors the generals.
The battle over the defense budget was launched yesterday in the pages of Haaretz when the Defense Ministry accused the treasury of trying to enlarge defense cuts to NIS 4.5 billion.
Just note the terminology, and you will see how the Defense Ministry maintains the most sophisticated operators; they've managed to sell us the story as "an accusation." That is, they've caught the Finance Ministry staff "red-handed;" those cheeky rascals have tried to make the biggest cut in the budget - a grave crime against the defense of the state.
The overriding concern of the Defense Ministry is to prevent the public from distinguishing the considerable difference between "defense" and "defense spending." The minute you regard them as indivisible - it is clearly catastrophic to impact on defense spending - because then you impact on defense, and nobody wants to risk that.
To the deep regret of the army, most of Israel's taxpayers are those who do reserve duty. As a result, they are well acquainted with the military system, its outrageous wastefulness, inflated salaries and pensions, and the bloated slice of its budget siphoned off to bureaucracy.
Luckily for the army, the defense system's budget is the most hermetic, secret and opaque of all government budgets, and therefore, the extent of waste and corruption are known to only a few happy taxpayers. This enables the military system to keep living in the best of all worlds in an era of rapidly spreading poverty.
The defense establishment's claims that "there's nowhere to cut" can only raise a bitter smile from anyone familiar with the military setup.
The simple facts are known to everyone: The defense budget for 2005 is all but identical to that of 2003, while in the intervening two years, the most dramatic changes to have overtaken the military system in eons have taken place: Iraq was toppled, Syria cut down to size, Egypt is trying for the most part to cuddle up to the Americans, and the infitada flame has dropped by three notches.
The crumbling of all these fronts over the last two years has left the army bereft of the conventional weapon with which it would have demolished any attempt by the Finance Ministry to force it on a diet in any recent year.
But in all areas relating to public relations and financial matters, the IDF retains its traditional values of resourcefulness and improvisation - and just yesterday the defense system heads gave the treasury due warning of their intent to use unconventional weapons in the annual battle.
Greater efficiency, the Defense Ministry said at the end of last week, "means a reduction in benefits in the rehabilitation branch, a morally difficult step to take, and one it is doubtful the government will agree to." The first shot has yet to be fired in the battle over the 2006 budget, and the defense system is already sending the IDF disabled to the front lines. Only there among the disabled is there anything left to cut. In all other parts of the IDF - be they manpower, pensions, myriad advisers, billions flowing into grandiose projects - we've already finished cutting.
So if the prime minister wants an economic reform to his credit, here's an opportunity: ask the Defense Ministry to prepare, forthwith, a multi-year plan for deep cuts in defense spending, which will begin with the visible fat and proceed to re-thinking the whole array of expenditures. Of course, Sharon's general buddies won't like that, but Netanyahu's banker friends weren't crazy about kissing those provident and trust funds goodbye either.
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