Executive Summary |

Lapid’s Mistakes, Kahlon’s Lessons

In his brief stint as finance minister, Yair Lapid made several critical mistakes, among them arrogance and short-term thinking. The result: Humiliation and long-term failure.

Sami Peretz
Sami Peretz
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Moshe Kahlon.
Moshe Kahlon.Credit: Nir Kafri
Sami Peretz
Sami Peretz

The prevailing opinion is that Moshe Kahlon could be the Yair Lapid of the next election: a new party with nice ideas that will be an election-day surprise and win many Knesset seats, some out of hope for someone new and others out of disappointment with the existing political constellation. But Kahlon has an advantage over Lapid: He can show proof of his performance as the communications minister who brought down cellphone rates. That is something every Israeli feels in his wallet, and can serve as a basis for further promises of bringing down the cost of living, even though doing so in different areas will be much more complicated and less dramatic.

Lapid went into politics from his Friday night program on Channel Two and weekly column in Yedioth Ahronoth. He set up a party, enlisted high-quality people and won an impressive 19 Knesset seats in the last election. He made no real mistakes in putting together his slate of candidates or during the campaign. His mistakes began right after the election, and they came in droves.

The first was arrogance. In an interview he gave to the investigative television program “Uvda,” while still drunk with victory, Lapid said he would become prime minister after the next election. Even before setting foot in the Knesset and learning the difference between the Knesset Finance Committee and the Knesset Economic Affairs Committee, he was imagining himself gathering sufficient political power to reach the top. In this case, he admitted that he had misspoken. But his arrogance cost him dearly when Prime Minister Benjamin Netanyahu identified him as a threat and did everything possible to trip him up.

The second mistake was to accept the finance portfolio. While the Finance Ministry was where he could have made the changes he promised, it can also be a political graveyard. So it was admirable that he chose to take the job; his mistake was to do so despite lacking the necessary knowledge and experience to do so well.

His predecessor in the position, Yuval Steinitz, also lacked an appropriate background, but he was capable of listening to and trusting in the ministry’s professionals. But Lapid scorned the professional echelon and economists. The clamorous resignation of Michael Sarel, the treasury’s chief economist, in protest of Lapid’s zero-VAT plan, exposed the depth of that scorn.

His third mistake was to rely on party advisers Hillel Kobrinsky and Uri Shani, who urged him to adopt zero-VAT. Lapid put all his chips on his political advisers and not a single one on the professionals in his ministry.

Good advisers

Every leader and politician needs to be surrounded by good advisers. Kobrinsky can claim quite a few of Yesh Atid’s electoral accomplishments. He is in effect the party’s director general and often Lapid’s personal manager.

Although Lapid was not responsible for the dissolution of the government after less than two years, it was still a huge failure for the party that promised to bring a new kind of politics to Israel and to save its middle class. The people who helped him win the elections were not able to help him use his new power to move the Israeli economy forward.

In the current political system, no party can carry out even one-quarter of its goals. Anyone who does not understand this will not survive in the government. The one who realized this fairly quickly was Shelly Yacimovich. She declined to join Netanyahu’s coalition, saying it would not give her the opportunity to do what she believed in. She didn’t even try, and that cost her the leadership of the Labor Party.

Zero-VAT was a mistake from which much can be learned, about personal character as well as the economy. Lapid blindly followed Shani as if his political survival depended on it. In doing so, he made enemies out of Finance Ministry officials, the governor of the Bank of Israel and Netanyahu and his coalition partners. Lapid’s obsession aroused suspicion that he was hungry to chalk up a fast, “Kahlon-style” accomplishment at any price that would be easy to sell the public before he quit the government.

The criticism of this problematic proposal achieved the opposite: Zero VAT faded away in the Knesset and hurt the housing market by causing a drop in housing starts. It damaged the treasury senior staff’s working relationships with the minister and with the governor of the Bank of Israel. The one it helped the most was Netanyahu.

When Lapid was asked this week whether he intended to return to the media, he quickly said: “Never. I’ll be dragged out of politics feet first. I’m here for the long term.”

I do not know whether or not Lapid will go back to newspapers and television. I do know there is a gap between how he presents himself and what he does. Zero-VAT is an example of Lapid’s short-term thinking. While it’s an easy way to lower the cost of living, the housing market is complex and affected by many factors. Given Israel’s limited supply of homes, such a program would have only increased demand.

But Lapid wanted as many young couples as possible for his reelection campaign saying, “We couldn’t buy an apartment before, but thanks to Lapid we have a home today.” That short-term thinking ruined his career as finance minister. It also caused long-term damage by putting the issue of differential VAT on the table. Now, even Aryeh Deri and his Shas party are saying they won’t join the government after the election unless the VAT on basic foods is eliminated. If that should happen, Lapid can take the credit.

Making changes to the VAT is a solution backed by those who are incapable of introducing genuine reform that would truly reduce the cost of living. Lapid did not introduce significant reforms in Israel Electric Corporation, the civil service or the defense budget. He avoided such fights because he did not want to challenge pressure groups. Such battles can destroy politicians, but Lapid had promised to eliminate pressure groups from politics. Instead of breaking up monopolies, he began talking about price controls.

Going too far

Lapid went way too far with statements that only trapped him. When he joined the government, after being forced to cut the budget and raise VAT to handle the deficit, he declared: “Things will be better here in another two and a half to three years.”

What happened since then? Not much. Only a war against Hamas that lasted 52 days and a government that fell apart. His promise not to raise taxes also trapped him. He wanted so badly to be the good guy who kept his word, never realizing that the finance minister can’t be that kind of person. Actually, he did keep his word. But he is no longer finance minister.

P.S. I have nothing against political parties of the moment. On the contrary: let them come and change the moment, clean it up. Let them wage battle against the old party machines. Let them not be tied to the traditional power centers of the settlements, the Histadrut labor federation, the ultra-Orthodox, the pension system, the tycoons. Let them think about the general public, the good of all, not about who might be able to pressure them in a sensitive moment. Yesh Atid pretended to be that kind of party. Several of its ministers even attempted important reforms in health, education and welfare, keeping the public interest uppermost in their minds. But with the collapse of the government, all that effort has gone to waste.

As Lapid takes stock, he must ask himself whether it was worth wasting two years of the public’s time and energy on projects and ideas that will be eliminated because he could not set priorities properly, letting his love of zero-VAT lead him to lose it ans well as the reforms of his party colleagues Yael German, Shay Piron and Meir Cohen, the former health minister, education minister and social affairs minister, respectively.

This is an important lesson for Kahlon. He is still in the stage of building his party, and no one knows whether he will bring in skilled, talented and positive individuals who can serve the broad public interest. But even if he does so and makes it into the Knesset, that will be only the first step in meeting the promise to truly serve the public.

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