Analysis |

Netanyahu Government Doubled Budget Deficit to Buy Votes

With a budget deficit of NIS 39 billion in 2012 and an expected cut of NIS 14 billion in 2013, Haaretz's Nehemia Shtrasler says it's time for Israel's leaders to disclose their fiscal plan.

Nehemia Shtrasler
Nehemia Shtrasler
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Nehemia Shtrasler
Nehemia Shtrasler

The Finance Ministry's announcement on Sunday that Israel's budget deficit for 2012 was more than double the government target makes it impossible for Israel's leaders to cover up their irresponsible behavior any longer.

No longer will Finance Minister Yuval Steinitz be able to compare Israel favorably to Europe, not after the announcement that the 2012 deficit was 4.2 percent of the gross domestic product, far exceeding the government's target of 2 percent. No longer can Prime Minister Benjamin Netanyahu engage in wordplay about growth and employment. The fact is that the two of them failed miserably in their primary task: protecting the public coffers.

Not only has the deficit grown to dangerous proportions that will require painful budget cuts this coming year, but the public debt remains stuck at a very risky 74 percent of GDP. With this kind of fiscal management, there is no way Israel will ever get the debt down to 60 percent of GDP, the level needed to preserve economic stability and growth.

The 2012 deficit of NIS 39 billion testifies to the policy of waste and reckless spending that has characterized the past two years - all to pacify the voters. This display of election economics has now blown up right in our leaders' faces, but we will all pay the price in a few months, after we've cast our votes.

It's clear the Netanyahu government must be criticized, though it depends on who's doing the criticizing. The opposition parties dare not utter a word of condemnation. They supported, encouraged and applauded every time the Netanyahu government increased spending. In fact, they wanted even higher salaries, larger budgets and more extensive grants. How can they complain now about the deficit?

That's why Shelly Yacimovich's talk of "social hell and economic chaos" is laughable. She supported every strike, every salary increase, the demands of every union, and every increase to the budgets for education, defense, the settlements, the Haredim, the yeshivas, the child allowances, the Gush Katif evacuees, and for anything else that moved. Never did she say a word about where the money would come from. Is there no limit to audacity?

Steinitz and the budget officials say the deficit stems from an unexpected drop in revenues due to the global recession, that therefore it's not their fault. That's equally laughable, to put it mildly.

It all started with the original sin: the new fiscal rule of 2009 which allowed the government to increase expenditures at a faster rate without any parallel increases in taxes.

To bridge this gap would require a stroke of magic, but there was no need to engage any sorcerers. All that was needed was for the treasury "professionals" to supply a "forecast" indicating that tax revenues in 2012 would rise by 8.8 percent without any rise in tax rates. This revenue forecast, which was totally divorced from reality, certainly is the fault of the state revenue department and the budgets department. But it allowed Steinitz and Netanyahu to "forecast" a budget deficit of 2 percent. Anything will hold up on paper and the voters will be content.

The treasury knows that 2013 will be even worse than 2012. It will be necessary to cut NIS 14 billion in expenses and raise taxes by NIS 5 billion. Yet even on Sunday, Steinitz was telling "The Savings Program" on Channel 2 that there would be no need to raise taxes - and he wasn't prepared to say a word about expected cuts.

Enough of these illusions and sleights of hand. It's time for our leaders, once and for all, to tell the truth about what awaits us this year.

Prime Minister Benjamin Netanyahu, left, and Finance Minister Yuval Steinitz during a cabinet meeting, July 30, 2012.Credit: Flash 90

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