Our wayward budget spaceship
The 2009 budget is like a spaceship that has left the atmosphere and is hurtling above us, threatening to bring down the entire economy.
Roni Bar-On is a weak finance minister. He has no political leverage against Ehud Olmert. He cannot threaten him with anything. His intentions are good, he has the right economic approach and considers it essential to maintain budget discipline. But he does not have the power to carry it out. He is totally dependent on the prime minister.
Bar-On also does not have a power base in his party because Kadima is a virtual party devoid of discipline, and every Knesset member does whatever he likes.
Every MK comes up with populist and expensive bills to attract media attention without considering budget limitations, and Bar-On is unable to stop the flood.
The government is also increasing its expenses without restraint and the coalition isn't functioning. In fact, there is no coalition or opposition - everyone is in opposition against the government.
This is very different from the era of Benjamin Netanyahu and Ariel Sharon. The two maintained a balance of terror and Netanyahu constantly threatened Sharon's seat. Netanyahu had an independent power base in Likud and fostered party rebels for this purpose.
The result was an unwritten agreement between the two: Netanyahu didn't interfere with political moves and Sharon didn't interfere with economics - until everything blew up due to the disengagement.
Today - Ra'anan Dinur, the director general of the Prime Minister's Office, blasts the Finance Ministry and even puts together an alternative budget. Dinur wants to anchor the budget's structural changes and priorities. He asked the ministries to present their demands by mid-April for a debate in the Prime Minister's Office. He intends to bring the conclusions to Olmert.
Dinur wants to strengthen the Prime Minister Office's powers at the expense of the treasury. In short - to turn the Prime Minister's Office into a super-economic ministry above the treasury.
Senior treasury officials are fuming. They say Dinur is disrupting the cabinet's work and that the treasury is the only body authorized to present the cabinet with a budget proposal.
They are right. Dinur does not have an overall picture of the economy, is not familiar with the debt payment position, pension commitments or tax income. His intervention adds nothing but confusion, duplication and waste.
Bar-On suggested yesterday that Dinur look to his area of responsibility and not interfere with the treasury. But the finance minister should have attacked Olmert, not his messenger.
But as I've said before, Bar-On is weak.
In addition to the tussle over power positions and influence, there is an essential debate. The budget situation is very bad. This year we must immediately slash around NIS 1.5 billion because the cabinet generously increased its expenses for all kinds of projects and plans.
But this problem is dwarfed by the situation expected in the 2009 budget. Apparently the cabinet has put itself in a bind. It wanted to please the public so much that it committed itself in 2007 to high multiyear expenses that it cannot finance.
A Bank of Israel study shows that these plans - for social, welfare, infrastructure and defense projects - require increased expenses of 4 percent per year, from 2009 to 2012. This is in contravention to the budget law, which stipulates that expenses are not to increase by more than 1.7 percent annually.
The cabinet's commitments apply to all walks of life. The cabinet decided to adopt the Brodet Report, which increases defense expenses in 2009 by some NIS 3 billion. It adopted the education reform, which reduces the number of students per class and undertakes to build thousands of new classrooms. All these will increase the education budget by NIS 1.1 billion.
The cabinet also granted more privileges to reserve soldiers (NIS 200 million) and Holocaust survivors' pensions. It promised to allocate half a billion shekels for the pension-fund arrangement and NIS 1.5 billion for roads. The cabinet must transfer NIS 400 million to the health services and undertook to bolster the police by some 1,000 policemen (NIS 250 million).
Then there are the wage agreements in the public sector, which will cost another billion shekels, the lecturers' wages, which will cost NIS 340 million, and the arbitration on the doctors' wages, which is still underway.
So this year it's not a matter of putting the budget on autopilot as usual. These are not run-of-the-mill additional expenses generated by population growth. The 2009 budget is like a spaceship that has left the atmosphere and is hurtling above us, threatening to bring down the entire economy.
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