Yair Lapid's Wrong-headed Advice From His Right-hand Man

Yair Lapid's trusted adviser, Uri Shani, has committed several gaffes lately. Anyway, what does he know about economics?

Ofer Vaknin

When Finance Minister Yair Lapid called Bank of Israel Governor Karnit Flug last Friday to ask for a meeting of reconciliation after having hurled a series of personal insults at her earlier – Flug agreed. She did not enumerate all the humiliating things he had done to her. She merely mentioned remarks by Uri Shani, Lapid's close associate, who told Yehuda Sharoni (of the daily Maariv) that same Friday that she was only “a kind of clerk, not an elected official.” The meaning was obvious. Shani was sending her a signal that said, “Shut up, you clerk, and do as you’re told.”

First of all, setting the disgusting chauvinism aside, Shani would do well to realize that the governor of the central bank is not a “clerk,” but a statutory appointee, according to the Bank of Israel Law. Moreover, while the government chose the bank’s governor, the president was the one who appointed her, to emphasize her absolute independence.

Lapid cannot scold Flug or tell her what to say. She is not part of Yesh Atid’s chorus of 18 dwarves, nor is she one of the Finance Ministry’s economists who have to hold their tongues and not say what they really think of their minister’s policy. By law, Flug is completely independent — and, Mr. Shani, it is fortunate that she is.

Shani was compelled to apologize after the conversation between Lapid and Flug. He said his statement had been a slip of the tongue, but added that he had forgotten to tell Sharoni that what he was saying to the reporter constituted "deep background information.”

In other words, Shani still thinks that Flug is only a “clerk,” and that the only problem with the incident is that his statement should have been quoted as having come from a “close associate of the finance minister” rather than explicitly in his name.

But that is not even the whole story. When Sharoni contacted Shani and told him, “Understand that I am quoting you” – Shani replied cheerfully, “No problem.” So this was not forgetfulness. It was a targeted strike that was planned in advance.

Shani does not stop when he ought to. During that same brief Maariv interview, he said that the budget deficit could be increased to 3.5 percent because Israel had discovered natural gas. But the connection here is the opposite: The purpose of the revenue from the sale of natural gas is to facilitate a situation in which there are lowered taxes and a smaller deficit, not a larger one. But what does Shani know about economics?

During that interview, he also lashed out at Dr. Michael Sarel, former treasury director of economics and state revenues, who resigned over legislation that aims to reduce VAT to zero percent. Shani said Sarel had “behaved hypocritically.” Sarel, a hypocrite? He gave up a position of great power and influence and resigned over a matter of principle. He should be given a citation for outstanding service, not subjected to baseless smears of his reputation.

Shani’s return to the topic of zero-percent VAT reminded me of what he said a few weeks ago: that he, not Lapid, had been the one to come up with that whole idea. By doing so, Shani the faithful adviser turned his boss into just another copyist without any stance of his own — and yet Lapid still likes him.

Lapid did the right thing this week when he cut 1.9 billion shekels (about $530 million) in the 2014 budget. Although it would have been wise to make cutbacks according to priorities, and even to slash salaries instead of activities, sometimes time is of the essence and there is no other choice.

Of course, all the ministries that operate in the realm of social affairs are suffering from the budget cuts, but that is what happens when a government decides to go to war. There is actually a change in priorities here: more for the army and less for education, health and welfare. There are no free lunches.

But none of that has apparently made any impression on Housing Minister Uri Ariel, who handily won the Endless Hypocrisy Award this week. He voted in the cabinet meeting against the cutbacks after demanding a deeper incursion into Gaza rather than demanding that there be an end to the war, heaven forbid. So what if it would cost a few more billions of shekels? Ariel is opposed to cutbacks. He is merely in favor of wars.

Lapid knows that the budgetary slashes of 2014 are only the first course before the cutbacks of 2015, which will be several times larger. That is when his leadership will be put to the test.

Will he do the right thing and save us from a crisis by keeping the deficit low, or will he listen to his good adviser Shani?

Nir Keidar