Evading Netanyahu's Trap

New Finance Minister Yair Lapid has lesson to learn from the prime minister's stint in the job.

It is widely assumed that Prime Minister Benjamin Netanyahu denied Yair Lapid the foreign ministry and maneuvered him into the role of finance minister during the largest budget cuts in a decade in order to trip him up. According to this hypothesis, Netanyahu hopes Lapid will fail as finance minister and lose his public glitter because of the thanklessness of the job nowadays.

Lapid consulted with a long list of politically-savvy Israelis before accepting the role and is well aware of this assumption. If Netanyahu is indeed setting him a trap, Lapid is headed right into it with open eyes. But wasn't he supposed to have an operational plan to avoid the trap?

At this point it doesn't seem Lapid has laid out such a plan. His response to proposals by treasury officials with regard to necessary cutbacks was almost childish: They don't suit him, he doesn't want them and other cutbacks should be found that are nicer. Such a response, perhaps tolerable in other circumstances, is juvenile when facing the most severe measures in the state budget Netanyahu carried out in 2003.

There's no way to square the circle, no black magic: NIS 13 billion to NIS 15 billion are missing on the expenses side of the state budget, and the revenues side is missing billions of shekels too. Assuming Lapid doesn't want to go down as the finance minister who signed off on Israel's financial collapse, what exactly does he suggest doing?

Lapid's stubborn intent to remain nice to his bloc of voters, particularly those in the upper middle class, is in direct contradiction to economic reality. The finance minister can't be nice at a time like this, and any such attempt is doomed to failure. In fact, this will play right into the hands of Netanyahu: It means Lapid will need to retract his words time and again – whenever the depth of the budget hole forces him to accept cutbacks that he said he wouldn't, or agree to even worse measures – until his public image is completely wiped out.

Lapid would be better off learning from Netanyahu rather than employing such futile tactics. As we recall, Netanyahu faced a similar situation 10 years ago. Prime Minister Ariel Sharon didn’t trust him. He suspected that Netanyahu, aspiring to recapture the job of prime minister, might undermine him. The role of finance minister at the time, in the midst of the worst economic crisis Israel has ever known and with the second intifada raging, was a thankless task that could be expected to destroy the political career of anyone occupying it. Despite all this, Netanyahu's term as finance minister from 2003 to 2005 relaunched his political career and in fact put him back on track to contending for the premiership.

Without any concealing or denying

How Netanyahu accomplished this was by doing the exact opposite of Lapid. He looked the entire public in the eye and told it the truth, the whole truth and nothing but the truth: The situation is bad, it's going to get worse, you will pay a steep price and suffer – but as a result Israel's economy would pull through and everyone will be better off in the medium and long run.

Not only did Netanyahu tell the public the truth, he also acted precisely accordingly: The budget cutbacks of 2003 were probably the harshest since the 1985 economic stabilization plan. Netanyahu was a brutal and ruthless finance minister who showed not a moment's pity for the public and was oblivious to its wishes. He also took advantage of the economic crisis to execute, in addition to severe cutbacks, a host of tough and controversial structural reforms.

All this was done with a total openness and honesty uncharacteristic of politicians, without concealing or denying anything. The outcome was Israel enjoying afterwards five years of rapid growth, gathering strength to weather the 2008 financial crisis successfully. This is how Netanyahu made a name for himself politically and economically.

Lapid can, and should, learn from Netanyahu that the way to succeed as finance minister when the going is tough isn't by softening the blows and promising the public that everything will be alright. Promises like these are destined to smash against the rocky cliffs of reality.

The way to succeed is precisely the opposite: Look squarely ahead and explain that the situation requires difficult measures while promising that these measures will bear fruit – even if it might take several years – and milk the hardship for all its worth. This means exploiting the hardship to implement tough but daring steps that are ordinarily very hard to implement.

One such critical move – putting a more equal socioeconomic burden on the Haredim – is already underway thanks to Lapid, and rightfully so. But make no mistake: Israel's severe structural problems don't begin and end with the Haredim. If Lapid wants to become a distinguished financial minister like Netanyahu before him, he'll needs to push through critical structural public sector reforms in the domains of electricity, the ports and the sector's overall hiring and pay regime.

He'll also need to address Israel's immense lag in productivity resulting primarily from the failure of the education system, lack of competition and inefficiency in the public sector (bureaucracy). Besides the Haredim, Lapid also needs to deal with the acute problems afflicting Arab society, meaning he'll have to address the thorny relations between Israel's central and local governments.

Lapid has his hands full of problems, and there's no call for unnecessarily creating any more. Telling Riki Cohen of Hadera that she won't be affected by the budget cutbacks when it's not true is creating an unnecessary problem. Telling her she'll need to pay a price, however, but that in return her tax money will now go to a fairer and more efficient country is the way he can safely escape the tough problem he faces and evade Netanyahu's trap.
 

The Good Old Days: Lapid and Netanyahu during the previous government.
Emil Salman