The Harder Route

Good morning, prime minister-designate,

At the time of writing, the election results were unknown. But even if the final outcome is not as expected, it's a fair bet that the two biggest winners will be waving the banner of a civilian agenda; an agenda of diplomatic solutions, an agenda of leaving the territories behind.

The future government's economic policy will be decided well before the next cabinet is sworn in. It will happen the moment a new finance minister is chosen. The position must be filled by someone who wants the job full-time, who sees it as his mission and political destiny.

The Finance Ministry needs a professional, not a political hack who just wants a political power base from which to spout political declarations. The Finance Ministry needs a minister committed to instituting responsible economic strategy with a neye on the long-term.

The Finance Ministry needs a minister with a modern economic perspective who can excite, convince, and persuade the public to him.

The Finance Ministry needs a minister who can turn his back on the wealthy families and the powerful lobbies, who believes competition and a free market were designed to serve the public at large and not just the well-heeled.

As I write, the signs are showing a major triumph for Pensioners' Party, which will make it into the Knesset for the first time. This is no coincidence - it reflects a change in public sentiment. Israelis aren't being propelled by emotion regarding the security situation in their votes; they are considering the social agenda as well.

Mean to the aged

Right before the elections, the Bank of Israel announced that Israel's welfare subsidy policy has been cruel to the elderly in recent years, compared to global norms.

To this day the treasury is manned by people who created that economic policy. It wasn't that being mean to the old was their philosophy: it was simply the easiest route to achieve the results they wanted.

The time has come to take the harder route.

The easy solution for the old, disabled and needy is to increase spending. The budget surplus created in the past two years would allow that fairly easily. But it would be a terrible mistake. Weak populations need help, but there is one proper way to do that.

Now that the polls are closed, the truth must be told: The clock cannot be turned back. We cannot be dragged back to the age of stipends that disincentivize people to work.

Nor can we go back to living in massive deficits, mushrooming national debt and new taxes. None of these will relieve poverty. They will trigger the (inevitable) downtick and throw us back four years in time: backs to the wall, desperately hacking at budgets without discrimination.

We face a historic opportunity to set a new agenda.

Civilian agenda

For the first time, there could be a majority of ministers with a civilian agenda who understand that the economic model of occupation has failed, and that the economic model of a big army and a small state has also failed.

A long-term program of budget cuts in the bloated defense sector, in cash flow to the settlements and in the black holes of the public sector could redirect huge resources to social causes. We must not and need not increase the tax and government spending burden to deal with the chasms created in our society.

The last cabinet that was sworn in February 2003 faced a huge challenge. The economy was on the verge of economic crisis, financial markets here and abroad were blocked before Israel, the financial sector was vulnerable, and rapid and difficult measures were necessary to restore stability and return to growth.

But the challenge before the government that will now be formed is even greater. It must preserve the last government's responsible economic policy. It must continue to institute structural reforms (which have largely ground to a halt in the last year). It must slash flab from the public sector.

Most of Israel's leaders have won their glory through success in periods of crisis and emergency. Now we need leadership that knows how to create responsible long-term economic policy, despite being in the midst of an upcycle in economic activity.