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Shaul Mofaz set a record for cynicism this week. During the cabinet session on the budget, he said tearfully, "The poverty and income gaps are destroying the country. We must confront this issue." How moving. The previous evening, he met with the prime minister.

The subject: the defense budget.

The treasury presented a proposal involving a budget slash of NIS 1.5 billion, but then Mofaz presented Ariel Sharon with the "annual intelligence assessment," filled with horrifying projections; for example, that Iranian Shihab-3 missiles armed with nuclear weapons are aimed at the heart of Tel Aviv.

Never mind that according to a U.S. intelligence assessment, Iran will not acquire a nuclear capability for 12 years, and never mind that President Bush has become involved in the issue and has threatened Iran with sanctions. None of that matters. Israel's army must prepare itself for the threat immediately and consequently, there can be no reductions in the surplus of conventional forces, overblown command posts, service and pension conditions, grandiose development plans and excessive numbers of brigadier generals and their personal vehicles.

Nor can the army save a single agora in the wake of the withdrawal from Gaza. The defensive lines will be shortened, bases evacuated and expenditures on routine security measures drastically cut, but the budget wasn't cut when the army withdrew from Lebanon either, so why now?

Each year, the Israel Defense Forces invent a new threat. Before the Iranian missile threat, there was the "eastern front" fad. But King Hussein signed a peace treaty, the Syrian army is obsolete and feeble and and Iraq is under occupation. So what's left? Iran. Even if Iran agrees to nuclear supervision, the army which is convinced that Israel exists to serve the IDF rather than the other way around will come up with new threats: Pakistan and North Korea.

Mofaz succeeded. Sharon gave up NIS 850 million of the cut, which of course will come from the education, health, welfare, housing and investment budgets that is, at the expense of the very poor whose fate Mofaz is so concerned about. If this is not the height of cynicism, what is?

The Israeli budget is a very strange animal, with amazing flexibility. It does not matter how you turn it around and how many hundreds of millions are added to it, at the end of the day, Kobi Haber, the treasury budget director, will always say: We remained within the budget framework, we kept to the expenditure and deficit targets everything is in accordance with the plan.

And that is what happened this week too. The cabinet session was packed with election fever. Everyone wanted to do well by the people, to bestow budgets on "social-welfare targets" in order to garner points in the party's central committee. The person most responsible for this atmosphere of generosity was Sharon, who two weeks ago presented a new "set of priorities" that included all kinds of populist items, for a total additional outlay of NIS 1.1 billion money that will come from other social-welfare budgets as well.

The ministers got the hint: If Sharon has a new "set of priorities," so do they. Don't they also need to be able to boast to voters of their "achievements?"

As a result, every minister returned to his or her ministry and instructed the director general to urgently prepare a detailed list of all budgetary demands. And so, each minister arrived at the budget discussion armed with a huge shopping list, and instead of the how-much-will-we cut argument, we had the how-much-will-they-get debate, until the budget additions soared to NIS 1.6 billion.

Of course, Ehud Olmert, the new finance minister, didn't stay away from the party. He also came out with a declaration according to which he planned to increase the budgets directed at reducing poverty and income gaps. How then, after all this partying, was the deficit target not exceeded?

It turns out that Budget Director Haber, as well as his predecessors in that job, have been playing shell games with the public for years. Israel's national budget is the most obscure document imaginable. The official reserve is NIS 1.7 billion, but in actuality, Haber has a reserve of NIS 15 billion hidden in all kinds of budget items, and this is what he uses to maneuver.

He also has a phenomenal invention at his disposal: the flat cutback that is, an across-the-board percentage cutback in all the ministries. And indeed, the flat cutback was increased toward the end of the cabinet session to 7 percent, or 1.7 billion shekels.

At first glance, this would appear to be an additional cut but this is make-believe. The moment units are not closed down and manpower is not reduced, the flat cutback will return to the budget in one form or another. Moreover, if the cutback is implemented, it will come at the expense of long-term infrastructure and investment items, which are important to the economy but not to the ministers. All that matters to the ministers is endearing themselves to the members of their party's central committee when the latter soon begin choosing candidates for the 17th Knesset.