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After a year of warfare against the whole world, Benjamin Netanyahu appears to have changed modes. Soon after he took up his post as finance minister, he declared world war on the public sector, saying that the public sphere is like a fat man riding on the back of the thin private sector. The thin man, unable to stand the weight of the over-weight piggy-back rider, is about to collapse, warned the new finance minister - and when the private sector falls, we'll all fall with it.

Netanyahu adopted the position of "I don't have anything" - he reduced income supplement allowances, cut wages of workers in the public sector, and trimmed the number of workers in this sector. He even waged a battle against the Histadrut labor federation, instituting changes in its pension funds. His goal was to create a new socio-economic agenda: there would be more competition and free market dynamics, and less government intervention; and there would be less bureaucracy.

It now seems as though one year of reforms was enough. Perhaps Netanyahu has decided that he's done enough in the economic sphere and received enough credit; now, he appears to have decided, the time has come for him to move into the political sphere and prepare for the struggle to inherit Sharon's post. Hence, he devotes increasing amounts of time to political matters, and less time to economic reform. And, in a bid to win public sympathy, he has started to distribute benefits.

Up to two months ago, had the labor and social affairs minister brought a proposal to increase senior citizen allowances, Netanyahu would have replied: over my dead body. For the economy is mired in crisis. There's nothing to be allotted. The deficit must be reduced; government spending has to be slashed. After all, we have to go on a diet and trim the "fat"; the "thin" must be strengthened, so as to increase growth and cut unemployment. I promise that when times get better, we'll generously increase senior citizen allowances.

That was the "I don't have anything" Netanyahu. Today, he is the "I have it" Netanyahu. The finance minister himself initiated increases in senior citizens' allowances, and so made a mockery of Labor and Social Affairs Minister Zevulun Orlev. Since when does the Finance Ministry propose spending increases? Now Orlev will have to come with a yet more prodigal proposal for allowance increases, so as not to trail behind the Finance Ministry.

Two months ago, had Education Minister Limor Livnat presented to Netanyahu the Dovrat report, which refers to increased wages for teachers, Netanyahu would have laughed aloud: increased wages? Now? For I only reduce government expenditure and cut taxes. I don't raise anything. Why on earth would we increase teachers' salaries? In the future, when times get better, the salaries might go up.

That was the "I don't have anything" Netanyahu. The new Netanyahu replied indulgently to the education reform report, saying: "The Finance Ministry will allocate the sums necessary to implement the plan."

The Dovrat report pledges to comply with the state's education budget, apart from some "negligible" items such as free education for three- and four-year-olds, investments in teachers rooms for educators who are to work until 4 P.M. and wage increases. These expenditures might not, in fact, be negligible - but what's a few billion shekels to the new Netanyahu? The report concludes that teacher wage increases are to be counterbalanced by the dismissal of thousands of veteran teachers. That's a joke. Teachers have heard the words "salary increase," and that's enough for them. Teacher associations will demand the salary raises - as to teacher dismissals, the unions will get around to talking about them when times get better, if ever at all.

And Netanyahu can expect that once the teachers get their salary boosts, university lecturers will want their share of the spoils as well. And will doctors stand on the sidelines? Will anyone in the public sector keep mum? The wage reduction agreement in the public sphere expires in June 2005. What does Netanyahu think will happen - that public sector workers will assent to more belt-tightening when the Finance Ministry is giving lavishly to the elderly, and to teachers?

Election year politics are a game of dominoes: once word about the new Netanyahu got out, workers around the economy sharpened their knives. Everyone knows that the "we are on the edge of the abyss" era is over, that there is now some spare change in the cash register and he who asks for more ends up richer for the asking. This is precisely the dynamic that destroyed growth in the 1994-1996 period.

In that earlier period, it was decided that teachers salaries, and only teachers wages, were to be increased, but workers throughout the public sector didn't pay attention to nuances and qualifiers in government statements, and demanded salary increases for themselves. The result was increased expenditure on public sector wages, large deficits in the 1996 state budget, which compelled deep cuts in the 1997 budget, and these deficits and cuts led, in turn, to stagnation and unemployment in 1997-1999. Are we headed toward a repeat of this cycle?