The emergency economic plan, passed early yesterday, will not set the economy back on the path to growth, but it is nevertheless important it was passed because it deals with the looming budget deficit. Without it, we would be stuck in a financial crisis, so it is reasonable to assume that following a small cutback in the deficit, the dollar will calm down and there won't be a pressing need to raise interest rates again.
It is hard to get enthusiastic over the plan's details because there is too much tax-raising and too little expense-slashing. Value-added tax is to go up, as are National Insurance contributions, health tax and duties on cigarettes and fuel. So are the National Insurance contributions paid by employers on their workers. The rest of the money will come from increasing the burden on recipients of unemployment benefit and supplementary income and the freezing of National Insurance allowances, cutting around NIS 1 billion from government offices and freezing pay in the public sector.
Two specific clauses in the plan really grabbed the public's attention: tax breaks to residents of outlying areas; and child allowances. According to the original plan, tax benefits for the Galilee, the Negev and the settlements were to be halved, in order to save NIS 750 million a year. But the Labor Party demanded the cutbacks be curtailed following pressure put on them by residents of the north, so the reductions in tax benefits were moderated, leaving another NIS 500 million hole in the budget.
As for the child allowances, the original plan called for a 20-percent reduction to any family where no member had served in the army. Several Labor Party members balked at this discrimination, and the furor grew when it emerged that Prime Minister Ariel Sharon had promised the ultra-Orthodox a way to get around it, by defining an army veteran as anyone who had turned up at the Army Induction Center (Bakum), even if they had not served a single day. And so Sharon showed his true colors: Outright discrimination against the Arabs, which brought out an even louder furor, and the proposal fell.
At the end of the day, the original suggestion was passed, and even that was a bad idea which fails the democratic test, but Shas claim they also have an assurance from Sharon that he will support legislation to correct the discrimination in Shas' favor, leaving only the Arabs out of the loop. In any case, the whole shenanigan is a direct result of the Halpert Law, which vastly inflated the allowance to the fifth child and onward, that is to the ultra-Orthodox and Arab sectors. So we wait for the final scene of the play, adding a new distortion to the original distortion.
The correct solution is to cancel the two distortions together. Take the total amount intended for child allowances - that's NIS 5.75 billion - and split it equally among all children. And as there are 2.2 million children in the country, so every one will get NIS 220 a month, whether Arab, Jewish, ultra-Orthodox or secular. This is the correct and fair solution. This is supported by both MK Shaul Yahalom of the National Religious Party and MK Avraham Shochat of Labor, and it is best that the solution be implemented posthaste before the Supreme Court debates the discrimination next week.
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