Deaf to All Ears

1. Mofaz

Transport Minister Shaul Mofaz is annoyed at the dimness of the treasury. Last week he fired out a press release, in which he quoted El Al (TASE: ELAL) chairman Izzy Borovich and slammed the treasury for instructing Israeli government officials to fly Alitalia, which charges less than the privatized national Israeli airline.

"Dim" - a nice choice of word for Mofaz, a former army man. "Dim" could also be said of the way much of the elected officialdom feels about responsibly managing taxpayer money.

He thinks that Israel's public servants should faithfully stick to El Al. True, it isn't a government company any more; it's a privately owned one belonging to the Borovich family. But Mofaz thinks that Israel's public servants should fly an "Israeli" airline.

Doesn't Mofaz know that the only way to lower prices and get better services is through competition? Doesn't he understand that the Israeli government's deal with Alitalia makes El Al sweat and might enable the state to squeeze better terms from it in the future?

What does he care. Like all too many of his colleagues in the Knesset and cabinet, Transport Minister Mofaz has no great interest in the interests of the taxpayer, who pays for the air tickets of him and his cronies.

But Mofaz and his associates know well the interests of the El Al workers and the workers of many other monopolies.

In the past, this overweening concern for the airline might have been excused on the grounds that El Al belonged to the government. But it doesn't any more, it belongs to private businessmen and investors on the stock market. Yet Mofaz wants the state to fly Israeli.

Doesn't he know that the walls of protectionism were torn down 15 years ago? That the local industries underwent deep reform and are now totally exposed, which doubled exports and lowered domestic prices?

No. He doesn't need to know that, obviously; he certainly made it to a series of top posts in the army and government without being armed with that information.

2. Balashnikov

Another government official deeply worried about the dimness of the Finance Ministry people, and keenly attentive to his electorate (the people who own and work at El Al is Knesset director-general Avi Balashnikov. A week ago, he announced that the Knesset members would continue  to fly El Al (and the treasury and its deals be damned, evidently).

Beautiful, Avi! Impressive. This is a man of unshakable blue & white principles who kowtows to no finance minister, willing to take up arms against those horrid treasurymen who would sell our souls to the Romans.

Over whose money is Balashnikov going to war? His own? Of course not: it's the Knesset budget, a budget that gets approved year after year with zero public supervision.

Like Mofaz, Balashnikov is consistent. In his prior jobs he was also attentive to the giant corporations and their steamroller unions, and not quite as attentive to the interests of the taxpayer.

Until six months ago, Balashnikov was the director-general of the Communications Ministry. Under his reign, resolutions meant to handle the juggernaut oligopolies in the communications sector were held back. There were proposals on his desk to promote competition in the telecoms sector, but he had to think them through, and think and think.

One could understand him: the citizens who pay the cellular bills don't constantly ply his office, but the top brass at the phone companies did.

3. Give this man a Nobel in economics

A decade ago Shimon Peres and Yitzhak Rabin received the Nobel Peace Prize. Israelis have by now been awarded Nobel prizes for Economics, including Daniel Kahneman. We think the next Nobel prizes for Economics should go to Defense Minister Amir Peretz.

A week after the defense establishment began the spin of the decade ? an attempt to increase its budget by NIS 30 billion a year (NIS 30,000,000,000, in case big numbers confuse you), Peretz declared (last Thursday) that he would make sure the extra money for defense wouldn't be at the expense of welfare.

Goodness. So where is that NIS 30 billion to come from?

1. Raising taxes.

2. Borrowing.

3. Cutting the travel costs of public servants.

4. Cutting the budgets of the non-welfare related ministries.

5. None of the above.

The answer is 5, of course.


1. Raising taxes would be nice, but history teaches that it hurts economic growth, and would hurt mainly the middle class. It is not a practical answer in a world environment of dropping tax rates.

2. Borrowing is a good idea too, mainly while the U.S. is still protecting us with loan guarantees. But loans have to repaid, and they bear interest, too. Israel already has about the highest national debt in the world, relative to GDP, and interest payments (not defense) are the biggest budget item. Clearly, the ones who would have to pay the cost of more loans are the welfare budgets.

3. Peretz probably would not lend a hand to annoying El Al (or the workers of any monopoly who have power in the party centers).

4. Cutting non-welfare ministry budgets sounds terrific, but if Defense, Welfare and Education are spared from the ax, and interest on our dent, we remain with only 13% of the budget. It's going to be quite the challenge to squeeze NIS 30 billion from 13% of the national budget.

All we can do is therefore nominate Peretz for the Nobel Prize, for Economic Dimness, based on his proposal to increase the defense budget by NIS 30 billion in the very week that the Poverty Report came out.