Means Well, Does Bad

A finance minister cannot allow himself to be 'good' nor can a finance minister take the social crown upon himself.

The new finance minister, Abraham Hirchson is a nice, likable man. He doesn't yell, he doesn't get angry, and he doesn't raise his voice. He takes advantage of every opportunity to tell us that he is interested in being a "social" finance minister - one who narrows gaps and helps the weak. "One has to act with mercy," he said this week from the Knesset podium when he presented the 2006 budget.

With all his heart, Hirchson represents the "good" finance minister, the one who cares, the one who wants to solve problems. But a finance minister cannot allow himself to be "good." Nor can a finance minister take the social crown upon himself. He must not engage in "solving problems," because for every problem he solves, 100 new ones will immediately crop up.

A finance minister has to be "bad." He has to be a person who likes to say, "No." He has to be of the "I haven't got it" type, a kind of mean treasurer who guards the coffers with all his might. Because if he wants to play the "good" guy, the social guy, what will the welfare minister do then? What will the labor minister say? What will the health minister request? What will the education minister demand?

After all, they have to pass him on the left. They have to demand and he has to face them down - and thus create a balance. Otherwise, the entire system gets confused and goes awry.

Hirchson made his first mistake right at the outset, when he said (on the advice of his friend, Prime Minister Ehud Olmert) that budgetary expenditure must be expanded. Instead of an increase of 1 percent, Hirchson recommended increasing expenditure by 1.7 percent a year. This not only means an additional expenditure of NIS 1.6 billion, but is also a very bad signal to the economy - as if to say we have already reached dry land and now we can spend more. Increasing the budget means a larger debt, more oppressive interest, lower growth and fewer new jobs - nothing but bad.

Apparently, Hirchson and Olmert fail to understand that it will not stop at 1.7 percent. Because if the finance minister signals that he has money, demands will immediately begin to come in from the other government ministers, the Knesset members and the various interest groups. Thus, in the near future, ahead of the talks on the 2007 budget, we will be entering a whirlwind of strikes and crises - because at the top, everyone is "good."

Hirchson should have done exactly the opposite. He should have created an image of "I haven't got it." During the first year of the establishment of the government (that is, in the budget that was passed in the Knesset on Wednesday), he should have demanded a large cut, of NIS 5 billion, which is the right thing for this moment in time, in a situation of high growth in the private sector.

Let's not forget, after all, that on the horizon is a plan, called convergence, that will cost tens of billions. The suitable reserves should have been prepared now. He should not have been content with a laughable cut of NIS 1 billion.

Hirchson should have put together a clear plan for a cut in the defense budget, by means of a law that would define a regular annual decrease, totaling NIS 1 billion, every year for 10 years.

He should have determined that not only would government expenditure not increase, but would be frozen and that the deficit would decline to zero. There is, after all, so much waste in the government, and our debt is large, burdensome and dangerous.

Had he chosen this path, the ministers and the Knesset members would have realized that they are dealing with a serious finance minister, a mean treasurer, who has no intentions of giving them anything; and they would have immediately stopped demanding additions and gone on the defensive to prevent their budgets from being cut.

Instead of the wild atmosphere that developed in the Knesset and in the coalition during the budget discussions, a responsible mood would have prevailed.

But Hirchson sent out signals of "I've got it." He announced increased expenditure in the 2007 budget, conceded the equalization of National Insurance Institute child allowances, and even enlarged the health-services basket without cutting anything in parallel. He also hastened to pay NIS 592 million to the opposition parties for absenting themselves from the vote on the budget - instead of demanding coalition discipline. Budget department officials are already working on the 2007 budget - and the anxieties are great. The demands on the part of the ministers are enormous. Each of them has tremendous development plans that cost billions, and every Knesset member has wonderful ideas for increasing his involvement in expenditures. The pressure groups are also girding their loins.

This year will require the signing of a wage agreement in the public sector. Under the current atmosphere, the sky is the limit. Does Hirchson remember that the government of Yitzhak Rabin botched things and caused a crisis and a recession - in the wake of total surrender in this regard in the mid-1990s?

And there is also the issue of the reforms, which are the real fuel for growth. The reform of the Israel Electric Corporation is essential; there is a need to split up and privatize the Israel Airports Authority, to sell significant parts of the defense industries, to close the Israel Lands Administration, to sell all the land to the general public, and to streamline the process of planning and construction - all of which would move the economy forward.

To do this, the finance minister and the prime minister must change direction. They must be less nice and less considerate. They must face down the strong workers' committees and huge economic interest groups. But they should know that at the end of the road, someone who is seen as "bad" today will become a success story in the future.