Analysis

Thank Yair Lapid for Sparing Israelis Any More Election Economics

The Yesh Atid chairman's refusal to back the Haredi draft bill changes the rules of the game: Had the situation continued for much longer, the damage to the economy could have been egregious

Yair Lapid at a press conference, Jerusalem, December 24, 2018.
Oren Ben Hakoon

Thank Yair Lapid for early elections. It was the Yesh Atid party leader’s belated realization that he had erred politically when, on a first of three Knesset votes required to become law, he supported the bill on military conscription of ultra-Orthodox men.

Lapid had played into the hands of Prime Minister Benjamin Netanyahu by supporting legislation whose current wording will give too many ultra-Orthodox men a ticket out of the army and in doing so undermines the national interest.

Lapid was all but ready to do Netanyahu’s dirty work by enabling an especially problematic bill to pass with the critical help of Lapid’s opposition party, thereby extending the life of the Netanyahu coalition. The prime minister couldn’t have been happier.

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Lapid’s announcement Monday that Yesh Atid would not vote for the legislation in the second and third readings changed everything. Without Lapid and, so it seems, without the votes of Avigdor Lieberman’s Yisrael Beiteinu party, the ultra-Orthodox conscription bill would never pass a Knesset vote.

Without the law, the coalition couldn’t continue and so two hours after Lapid held his press conference, Netanyahu announced elections for April 9. We therefore owe Lapid our gratitude because the legislation would have done everything for the Haredim, the ultra-Orthodox, and nothing for the rest of Israel.

It would have allowed ultra-Orthodox men to obtain final exemption from army service at age 24, just like today, ensuring that they are trapped in the yeshiva until they are no longer able to pursue a secular education and find a place in the labor market. For that reason, the treasury, the Israel Democracy Institute and experts involved in Haredi employment all agree that the age should be lowered to 22.

Some secular Israelis viewed the higher exemption age as revenge of sorts, a way of imprisoning ultra-Orthodox men in yeshivas and punish them for not serving in the army. But the ones who are really punished by this system are secular Israelis, as a result of the fact that Haredim don’t serve in the army or get jobs and pay taxes. It’s secular Israelis who are left to carry the burden.

The bill was also supposed to impose financial sanctions on the yeshivas if they failed to meet their quotas for the draft. It would have deprived them of government assistance in proportion to the shortfall from the recruitment quotas: A 15% shortfall in draft recruitment would have led to a 15% drop in aid the following year.

It sounds reasonable on paper, but in real life, the Haredi political parties could have easily gotten around that problem by demanding an increase in the aid budget for yeshivas from their coalition partners the following year. It was concern over political manipulation of the financial penalties that provided Yisrael Beiteinu the excuse it needed to withhold its support for the very same Haredi conscription bill that Lieberman had proposed when he was defense minister.

The great concern among those who work in the field of ultra-Orthodox employment was that Netanyahu, in his attempt to trap Lapid (who voted for the bill on its first reading) and Lieberman (who proposed it as defense minister), would insist on advancing the bill without changing a single comma.

The legislation pertains to an issue that is crucial to the future of the Israeli economy, that determines whether the ultra-Orthodox, who are forecast to comprise one-third of Israel’s population by 2060, are to be integrated into the labor market. The political cynicism that justified anything to keep the coalition intact would have reached new heights with this bill if it had become law.

But the bill isn’t the only thing Lapid has spared us from. He has spared Israel from being governed by a transitional government focused on imminent elections that legally had the powers of a permanent government.

That is because the law bars transitional governments from taking any significant economic decisions, in other words in engaging in election economics. What it doesn’t do is prevent a government that in gearing up for elections in all but name, but isn’t called transitional, from acting with a free hand.

Had the situation continued for much longer, the damage to the economy could have been egregious. We were witness to that with the effort to get the Haredi conscription law passed regardless of the economic consequences.

We saw it earlier with Finance Minister Moshe Kahlon’s refusal to raise milk prices and in his surrender to the milk lobby to avoid it. We saw it with Kahlon’s desperate effort to reduce electricity rate hikes by eliminating the excise tax on coal, his attempt to appease bakeries planning to raise bread prices with subsidies and to food makers threatening to do the same, by reducing duties on imported food inputs.

Ostensibly, the Netanyahu government passed the 2019 budget at the beginning of 2018 to ensure that its budget controversies wouldn’t cause the government to fall and to prevent the budget from being used as an election tool. In practice, however, the government itself has repeatedly opened the budget to hand out political goodies.

A portion of the problem is that Kahlon is not part of the ruling Likud Party, but only head of a junior coalition partner. He sees his job as creating support for his Kulanu party rather than as a tough professional who makes difficult decisions.

The next government, whoever may lead it, should learn this lesson and make sure that the finance minister belongs to the ruling party. That will preserve the populist tendencies of whoever holds the portfolio. Another lesson is that budgets easily turn into political tools no matter when they are approved.

Israeli politicians are excessively populist, and too weak and too focused on the short term. They are never sure the voters will support them and are constantly wooing them with instant, visible benefits. That helps them in the short run, but it weakens them in the long run, because voters ultimately want leaders with principles