Waste at the top / A government not governing
Netanyahu forewent value added tax on fruits and vegetables in July 2009 despite an agreement to impose VAT, so now he'll have to surrender all the economic principles he believes in.
The campaign to save the middle class has begun, but a more appropriate name for the effort would be the campaign to save the Likud government. The only thing that matters is that the electorate not be angry with Prime Minister Benjamin Netanyahu. As long as they don't vote for any other party, everything else is less important.
So who in the meantime is running the country? The populist triumvirate that is setting the pace of events: Histadrut labor federation head Ofer Eini, Manufacturers Association chief Shraga Brosh and Shlomo Buhbut of the Union of Local Governments. Netanyahu is afraid of Eini's threat of a general strike because he wants things to be quiet. Finance Minister Yuval Steinitz, too, is afraid of Eini. He's trying to meet with the union leader to exchange a few words about taxes, prices and the minimum wage. It's humiliating. This is a government that isn't governing. It's a government that's being dragged around.
Netanyahu is paying the price of his past conduct. Who better than he knows that giving into pressure encourages greater pressures. If you forgo value added tax on fruits and vegetables, as happened in July 2009 despite an agreement to impose VAT, you'll have to surrender all the economic principles you believe in.
Netanyahu is paying the price of the Western world's most bloated and wasteful government: 29 ministers and eight deputy ministers. Just a couple of weeks ago he gave that ridiculous five-member Atzmaut faction of Defense Minister Ehud Barak four ministerial posts. Netanyahu doesn't understand that this incurs the public's wrath and a sense of waste.
Netanyahu himself, in his first term as prime minister, passed a law providing that the cabinet would have just 18 ministers.
At the time, he understood the symbolism of projecting efficiency. That's no longer the case. He's sure that with more posts, budgets and perks, he'll buy the ministers' goodwill and save his job, but if this isn't buying the chance to rule, what is it?
Netanyahu and Steinitz are paying the price of the large and bloated budget they passed just a month ago in the Knesset. They agreed to give everybody what they wanted. They gave every government ministry lots of additional funding, from the police and immigrant absorption to the environment. Everything's important. There are no priorities. They distributed billions to yeshivas and Shas religious seminary students, increased social welfare allocations, gave the railroads more, increased grants to industry, hired more people and raised their salaries. Yesterday the defense budget got another NIS 700 million.
At the beginning of the year, the local authorities threatened the mother of all strikes. Netanyahu and Steinitz got scared and increased equalization grants by NIS 800 million. Eini threatened a strike and won a generous wage agreement for the public sector. Then he supported a strike by port workers, who are particularly well paid. The Finance Ministry is weak, so why not take when you can?
And then came the day to pay up. That means higher taxes because you can't increase spending without raising taxes. It doesn't work.
In economics, there's no such thing as a free lunch. So that same generous Finance Ministry had to levy additional taxes on fuel, to impose VAT on water and increase public-transportation fares.
There is one correct solution to this chaos: Present the cabinet with a program of budget cuts of several billion shekels. With the money that is saved, the public's tax burden, including that on fuel, will be reduced and the increase in water rates will be moderated.
The middle class will not be saved by a discount of a few agorot on gasoline. The moment the public thinks the government up there is wasteful, nothing will stop the anger.