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As the noose tightens around Prime Minister Ehud Olmert's neck and the scent of elections wafts through the air, the battle is heating up for the crown of social populism. This time it is a fight between two veteran rivals: Social Affairs Minister Isaac Herzog and Industry, Trade and Labor Minister Eli Yishai.

Herzog fired the first shot. This week he presented a new plan: a savings account for every child. The government will deposit NIS 50 every month, and with an interest rate of 5 percent annually (which does not exist), when the child reaches the age of 21 he will have NIS 17,600 at his disposal. This lavish sum will "extricate him from the cycle of poverty" and will therefore completely change his life.

Yishai heard this and blew a fuse. For years now, he has been leading the fight to increase the National Insurance Institute allotments for children. But all of a sudden along comes Herzog, who "doesn't understand the needs of poor families because he comes from a culture of plenty," and proposes a plan that is suited to "the children of the capital market and not to the children of poverty," whom Yishai knows personally.

Economic theory says that Yishai's plan is better. That is because one of the biggest mistakes any government can make (especially ours) is destructive paternalism: The government is prepared to give money, but on condition that it tells the citizen exactly what to do with it. But what if the family wants to buy a computer for the child, which will perhaps extricate him from the cycle of poverty even faster? Or maybe the parents want to pay for private lessons for the child? Or buy him books or a guitar? After all, the parents know what to do with the money better than Herzog and all the NII experts.

Herzog's plan would also require creating a new agency, the Children's Savings Authority, which would supervise the millions of savings plans, lay down conditions, decide what to do with new immigrants, set transaction fees and establish an appeals committee. In short, lots of work and lots of salaries for bureaucrats.

Therefore, in the argument between Herzog and Yishai, Yishai is right. But is he also right in general?

For more than a year now, Yishai, who is the Shas party chairman, has been threatening to resign from the government if Olmert does not increase NII allotments for children. His aim is to increase the allotments only for families that have many children - that is, from the fifth child on. He wants to cancel the revolution that Benjamin Netanyahu (now a Likud MK) brought about in 2003, when he was finance minister: the transition from NII subsidies to work. He wants to return to the good old days when the allotment for the fifth child (and subsequent children) stood at NIS 855 a month, while the allotment for the first child was only NIS 171.

Yishai is not at all worried about the figures that show that the larger the family, the less likely the head of the household is to work and the deeper the family's poverty. From his perspective, let there be as many children - and hence, as many more potential voters - as possible, and let them all be dependent on him for their subsistence. He will see to getting subsidies for them.

Yishai understands that cutting NII allotments would decrease the number of children in large families. Indeed, the cut in child allotments has already led to a change in ultra-Orthodox society: More and more Haredim are going out to work these days, and there has also been a decline in the birthrate. In the Haredi town of Betar Illit in the West Bank, the birthrate dropped from 8.9 children per woman in 2001 to 7.7 in 2006, while in Modi'in Illit, the birthrate dropped during those years from nine children per woman to eight.

Therefore, anyone who truly wants to decrease poverty must continue the policy of cutting the allotments, along with encouraging education and employment. Anyone who is truly concerned about Haredi children must ensure that they study the "core curriculum" instead of fighting to eliminate it from their schools. The moment they study science, mathematics, English and history, they will have the tools and ability to enter the labor market and earn well, exiting the cycle of poverty.

Moreover, the level of education and knowledge among the general population must be improved, especially in outlying areas. The reform in education that was approved recently is not enough. It is also necessary to establish heavily subsidized day-care centers to make working outside the home worthwhile for both parents. The data show that the poverty rate among families in which both parents work is only 4 percent.

The National Council for the Child resolved the conflict between Yishai and Herzog with amazing ease: It endorsed Herzog's savings plan, but added that it is first necessary to increase NII allotments for children. In other words, a policy of having it both ways, which does not recognize the limitations of the budget and economy.

The council should know that the cabinet is slated to meet in the near future to decide on a cut of more than NIS 10 billion in the 2009 budget. The ministers will have to decide whether to make cuts in security, education, welfare or infrastructure. Where will the money to increase the allotments be taken from?