Israel's Housing Activists Are Misleading the Public

Fortunately, unlike social protest leader Daphne Leef, Prof. Manuel Trajtenberg has a few hours of economics studies under his belt. He knows all too well that when it comes to economics, there are no free lunches.

I dont know if Prof. Manuel Trajtenberg was hoping that the leaders of the tent protest would listen to what he had to say, but he surely didnt believe he would be subjected to such a barrage of insults.

Hes been trying to talk to them for weeks, to conduct a dialogue, but they are refusing to have any contact with him. Last week, protest leader Daphni Leef called on him to resign immediately from the futile committee so as not to be remembered in the history of the people of Israel as the individual responsible for governmental deception. Commenting on the panel itself, she added that it was a committee established in haste cynical, cruel and knowingly misleading the public.

And all this said without her exchanging a single word with Trajtenberg or seeing one of his recommendations.

So whatever the committee recommends is insignificant. The leaders of the protest will not agree to a thing, to any sensible solution that takes into account the limitations of the economy and the global crisis. They want to change the very foundations of the economic system; they are opposed to a market economy, to privatization, to competition and to free enterprise. They are interested in changing the system so that the state would manage everything, decide everything, determine everything, while the private economy becomes nothing more than surplus to requirements. Its enough to take one look at the radically leftist team of experts they have gathered around them to understand why Trajtenberg has become the new punch bag of their hatred.

Leef herself, in the space of just a month, has turned into an expert in macroeconomics. Without blinking an eye, she says there is no need to maintain the current budgetary framework, calling instead for opening up the 2012 budget and sharply increasing government expenditure (from 43 percent to 55 percent of GDP) for the sake of education, health, welfare and housing. She also has a huge list of demands, including dozens of clauses, that stretch out over eight pages.

In an effort to do right by everyone, Leef says budgets should not be diverted from one group to another. In other words, no one should be harmed, no group should suffer cuts, because everyone is deserving the ultra-Orthodox, the settlers, the disabled, the homeless, the renters, the parents, the single mothers, the middle class, the lower class, the elderly, those who want extensive and paid maternity leave, and also those who want a lengthy regular holiday. Everyone is deserving.

This is the new economy. It has no order of priorities. It doesnt do wrong by anyone. Everyone gets more, and thats it.

Fortunately, unlike Leef, Trajtenberg has a few hours of economics studies under his belt. He knows all too well that when it comes to economics, there are no free lunches. There is no such thing as making something out of nothing. He knows that in the first lesson of economics, one learns about the transformation curve, which explains why there is a need to forgo one thing in order to achieve something else.

Trajtenberg, therefore, has no intention of breaking the budget framework. He knows that increasing government expenditure and raising tax rates comes at a heavy economic cost. They are, in fact, a deadly elixir for growth and employment.

Thats because the more resources the government extracts from the economy, the less there are for the business sector, which can then invest less and produce less, leading to a drop in the growth rate, a rise in unemployment and a fall-off in tax payments. As a result, the state then finds itself in a crisis and suffering from high unemployment, and is forced to implement harsh cuts that harm society and the welfare of the population. This is exactly what is happening in a number of Western countries at present Greece, Ireland, Spain, Italy, France, Britain and the United States.

After all, we found ourselves in this terrible state back in 2003, when government expenditure reached 51 percent of GDP, public debt reached 99 percent of GDP, and no one in the world agreed to loan us a single dollar more.

That crisis, some eight years ago, forced the government to implement drastic cuts and a series of reforms that led to a reduction in the governments weight in the economy, lower taxes, growth of around 5 percent a year, a drop in unemployment to a very low level of 5.7 percent, shrinking of the public debt to 76 percent of GDP, and the achievement of the relative stability in which we find ourselves today.

This stability must be preserved. Therefore, changes can be made in the field of taxation, and in the budget itself, too. But in no uncertain terms should the framework be broken.

Trajtenberg, therefore, is not the one who is misleading the public. He is the one defending it, including Daphni Leef.