Olmert's Mistake

Olmert should have started out his stint as finance minister in a completely different way. He should have said that the deficit that Netanyahu planned (3%) was too high and should be reduced to 0%, and instead of increasing the budget by 1%, it should be decreased by 1%.

There is nothing that acting Finance Minister Ehud Olmert likes more than scolding journalists. This is, in fact, his nature: to castigate and insult anyone possible. Therefore, when he presented the 2006 budget this week, he said scornfully: "Election economics is a concept of commentators and journalists. There has not been and there will not be an election economy." Indeed?

In order to clarify things from the outset, let it be said: The 2006 budget is an elections budget. Although it is not a Salah Shabati-type elections budget, it is an elections budget of the fawning-fearful type. It is a fact that when then-finance minister Benjamin Netanyahu presented it to the public in August, he hastened to say that it was a "budget without decrees."

On previous occasions when he presented a budget, Netanyahu boasted of its changes - the cut in guaranteed income allotments, the allotments for children and wages in the public sector, the stringent diet he imposed on "the fat man," the sharp cut in pension conditions, the postponement of retirement age, the dismantling of the Ports Authority, the cutting down of the banks - and then all of a sudden he declared: "There are no decrees."

Netanyahu made a mistake. He so much wanted the public to start loving him again that he abandoned his way. He should also have included in the 2006 budget a package of cuts and efficiency measures in education, health, welfare, defense, transfer payments, subsidies and everything that moves. He should have presented in the budget a series of reforms and changes in all the cartels and monopolies - as he had in his previous years as finance minister.

This is also the advice that should have been given to him by budget division head Kobi Haber. He should have persuaded Netanyahu to formulate a plan for specific cuts in every ministry and every division - and there is a lot to be cut in this profligate government. Instead he took into account "the political reality" in an election year, and submitted a wishy-washy budget. With no message. The budget division's suggestion to make a "flat" cut (at an equal percentage) in all the ministries is embarrassing. This is totally throwing in the towel. Are there not important matters in which there should be no cuts, as well as a wasteful system that can be made more efficient? Have they forgotten at the budget division how to distinguish between what is important and what is superfluous?

Olmert took up the position unprepared and unrehearsed - and fell immediately into the trap. Instead of acting like "the treasurer of evil," he declared war on poverty and said that if he could, he would increase expenditures in the budget commensurate with the rate of population growth. He repeated these statements this week.

The politicians do not need more than this. They realized immediately that the dams had burst, and it was possible to start presenting demands. Indeed, the Labor Party is already presenting a NIS 4 billion plan for a war on poverty, the Health Ministry is presenting to the government a plan for a war on bird flu for a total of NIS 190 million, ministers and MKs are readying NIS 8 billion in proposals for additions, and this is only the beginning. The moment "there are no decrees" and the atmosphere is one of "I have" rather than "I don't have," the sky's the limit.

In the current situation, when Olmert presents the NIS 1 billion plan for the war on poverty, they will say that he is miserly and evil and that it's too little, too late. Even if he proposes NIS 4 billion - he will receive the same criticism. A finance minister can never be "good." The other ministers and MKs will always want to distribute more. They, after all, don't need to give an accounting of the expenditures.

Olmert should have started out his stint as finance minister in a completely different way. He should have said that the deficit that Netanyahu planned (3 percent) was too high and should be reduced to 0 percent, and instead of increasing the budget by 1 percent, it should be decreased by 1 percent. After all, we suffer from a huge public debt that constitutes 100 percent of GNP, and this must be dealt with. Cutting the budget today is also correct from a macroeconomic perspective, because when the economy grows and demand increases, it is just the right time to decrease government expenditures to leave as many resources as possible to the private sector, and therefore, encourage growth and employment.

Olmert should also have brought back the momentum of reforms and the war on monopolies: He should have dismantled the Airports Authority, transferred Israel Lands Administration lands into the public's hands, split and privatized the Electric Corp., raised the price of water for farmers, carried out the reform in Mekorot, split the refineries and privatized Israel Military Industries (Ta'as).

Had he done so, everyone would have understood that they were dealing with a serious finance minister, a person who is not afraid of pressures and workers' committees, and is not influenced by election considerations. If that were the case, the demands of ministers and MKs would have been very limited.

And then, when that same evil finance minister gave in a little to the leader of the Labor Party, Vice Premier Shimon Peres, and handed a little to Interior Minister Ophir Pines-Paz, and distributed a bit to Shas, and gave something to Shinui, and even agreed to implement a rational plan for a war on poverty by encouraging work - everyone would have been happy. The budget would have passed without deviations, and the economic and social results would have been excellent.

But Olmert chose a different path - one at the end of which he will both eat the bitter fruit and be expelled from town.