Netanyahu Should Have Told Israelis: There's No Free Lunch

Netanyahu wants to keep gas prices lower by reducing the excise tax. It is legitimate for the state to reduce taxes, but it's not legitimate to fool people and talk only about one side of the reduction without explaining the move's economic significance.

Public pressure to bring down gasoline prices has made Prime Minister Benjamin Netanyahu uncomfortable, so instead of telling it like it is, he has asked his director general to figure out a way to prevent the price hike. The people don't like high prices, and Netanyahu doesn't want to make anybody angry.

But Netanyahu knows better than anyone the basic reason gasoline prices are rising. After all, he's the one who has demanded, in the name of the State of Israel, that the world impose harsh sanctions on Iran. Constraints on Tehran's oil exports have been decided on, and the world fears a military conflict with Iran. So where's the surprise that oil prices are rising? After all, you can't demand sanctions, threaten military action and then cry when the outcome affects your pocket.

Benjamin Netanyahu - Moshe Milner
Moshe Milner / GPO

Netanyahu wants to keep gasoline prices lower by reducing the excise tax. The state can reduce taxes; that's legitimate. But it's not legitimate to fool the people and talk only about one side of the reduction without explaining the move's economic significance.

Netanyahu knows that the budget is in bad shape. In the global recession, many Israeli companies are losing money or making meager profits, which causes tax revenue to fall. We already know that the resulting budget deficit will be NIS 13 billion greater than had been planned, and that's dangerous.

In addition, this year we have a serious problem with spending. A Bank of Israel study shows that the budget has been breached by NIS 6.4 billion. That happened due to cabinet decisions such as the wage agreements with the doctors, the increasing of the minimum wage, salary hikes for outsourced workers, free education for children from age 3, and the addition to the defense budget.

So the moment Netanyahu gave in to the pressure and decided to reduce the excise tax by 10 agorot, he should have proposed a way to fill the coffers, where the deficit has grown. He has to show where to increase taxes and where to cut spending; otherwise it's a matter of producing something from nothing.

The prime minister should have told the people this simple truth. Because in economics there's no free lunch.