Better Than Herod? Israel's Finance Minister Is Bringing the Country to the Abyss

Finance Minister Yisrael Katz last week compared himself to the legendary ruler. But he and 
his boss, Netanyahu, are wreckers, not builders when it comes to fiscal policy and government

Meirav Arlosoroff
Meirav Arlosoroff
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Finance Minister Yisrael Katz at a press conference, Jerusalem, July 1, 2020.
Finance Minister Yisrael Katz at a press conference, Jerusalem, July 1, 2020.Credit: Emil Salman
Meirav Arlosoroff
Meirav Arlosoroff

I am not a doctor, but let me reveal a shocking medical discovery: An enlarged ego is a contagious disease. Our prime minister, Benjamin Netanyahu, has suffered from the syndrome for quite some time and it seems he has passed it on to his finance minister, Yisrael Katz.

“I have led the most amazing reforms in the history of Israel, in which we are developing two new maritime ports. My name will be associated with it forever,” Katz said last week in an interview with the Calcalist financial daily, referring to his previous stint as transportation minister. “It’s like King Herod, who built Caesarea port when he wanted to turn Israel into an international trade center. He didn’t succeed. I succeeded.”

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In his mind, Katz is greater than the Second Temple-era king of Judea and is convinced that history will remember him. He may be right, but permit me to risk a different prophecy – that Katz won’t be remembered for the ports but for his term as finance minister. And, as things have turned out so far, he stands to be remembered as one of Israel’s worst finance ministers. Like Katz, most of the them belong to Likud and were responsible for bringing us the hyperinflation of the 1970s and 80s.

A Likud spokesman has accused Netanyahu’s coalition partner, Kahol Lavan, of creating a “government inside the government.” But the absurdity of that claim is that it applies to Likud, which under the leadership of Netanyahu and Katz, works to undermine the government to further their own political agendas.

This is exactly what happened when Katz last week at a meeting of the Knesset Finance Committee approved a 4.2 billion shekels ($1.23 billion) supplement to the education budget. As with every budget supplement these days, when the government doesn’t have a 2020 budget and is spending along the lines of the 2019 budget, it has to be approved as an amendment to the Basic Law. That’s how all the extra spending on the coronavirus is being legislated.

No one disagrees that schools need the extra 4.2 billion shekels, but it’s hard to imagine what was added to that supplement. For the first time in Israeli fiscal history – and that is a historic achievement for Katz – the budget framework was broken to the tune of 1 billion shekels due to reservations submitted by a Knesset member.

Reservations like these are presented all the time and finance ministers always block them because lawmakers aren’t supposed to set the budget framework without the government discussing and approving it first. But last week Katz approved the 1 billion in reservations submitted by Kahol Lavan's Eitan Ginzburg and Likud's Ofir Katz that will go for a one-time grant to people qualifying for negative income tax.

Netanyahu and Katz then touted the grant on their social media, which is yet another example of the new way fiscal policy is being managed.

The problem is that the government should be studying the issue. It is true that we’re talking about low-income earners, but those who will be getting it will do so based on their 2019 income. Those who have been put on unpaid leave this year due to the coronavirus aren’t entitled.

You could have defended a 1 billion shekel aid program if Netanyahu and Katz had proposed boosting the budget for negative income tax in the coming year. A plan like that would have constituted a wage subsidy that encourages low-income workers to look for a job. That would have been an effective employment-incentive measure that would have yielded its fruits in the next several months.

Prime Minister Benjamin Netanyahu, right, listens to then-Transportation Minister Yisrael Katz during the weekly cabinet meeting in Jerusalem, May 12, 2019.Credit: Gali Tibbon / AP

But Netanyahu and Katz wanted something that would put money into people’s pockets right now, so they announced the grant without taking the time to design a proper policy to bring to the cabinet for approval. It would have also required the treasury to come up with a way of paying for the program, meaning cutting some other budget item. But Katz doesn’t have the patience for that.

In fact, Katz was afraid of bringing the proposal to the cabinet so he took the Knesset bypass route. Recall, it was the same tactic he used in the Knesset Finance Committee to get an 11 billion shekel increase in the 2020 budget last week.

Interior Minister Arye Dery also likes to work in the government's back, with Katz’s support. Another amendment to the Basic Law, which was submitted during deliberations over the extra education spending, allowed for 700 million shekels to be allocated for food coupons for needy families.

Dery’s plan defined need families as those who qualify for reduced municipal taxes, which in practice means families with large numbers of children and those are mainly the ultra-Orthodox - his constituency - and Israeli Arabs.

Like with the negative income tax grant, the connection between the subsidies and the coronavirus is at best tenuous. Many of the Haredim that will be getting the coupons aren’t in the workforce at all, so they haven’t been hurt by the pandemic unemployment crisis. Naturally, the finance and justice ministries demanded that the cabinet set criteria for awarding the coupons.

Interior Minister Arye Deri, in the Knesset in Jerusale, Augsut 12, July 7, 2020.Credit: Adina Valman/Knesset

But we’re in an era when ministers get around such obstacles with the help of the Knesset. The criteria set in an amendment to the law states that “the grant and assistance will be provided by the Interior Ministry in accordance with equality criteria set by the interior minister; the criteria are not subject to public notice.”

Take note: The amendment says that the interior minister can decide all by himself without ever informing the public how he is allocating hundreds of millions of shekels, much less with any staff work or Knesset oversight.

The bottom line is obvious: With the cooperation of the Knesset, there is no longer any input by government officials and there is no longer any budget law. The Basic Law has turned into a handy tool ministers can use to act unilaterally.

The Deep State that Netanyahu talks about is here, but far from being the victim of it, he and his ministers have created it by circumventing normal rules and procedures

Netanyahu and Katz are their own greatest admirers, but in contrast with Herod. their self-admiration is disconnected from their personal accomplishments. Herod was the greatest builder in 3,000 years of Jewish history, but if Katz enters the history books it will be as the destroyer of all the work that’s been done since 1985 to create a credible Israeli fiscal policy.

Netanyahu’s contribution could be the reverse of what he once promised: Instead of being one of the 15 best countries in the world, Israel will revert to Banana Republic status.

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