Follow Swiss Example - Don't Up the Budget

Raising the budget is the most anti-social-justice step there is.

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After four years of serious budgetary mistakes, the penny has finally dropped and the government of Israel now understands that it has to correct the damage it did in 2010. This week it decided to slow down the growth rate of the budget from a scandalous 4 percent a year to a more reasonable 2.6 percent. Yet while the direction is right, the magnitude is certainly not.

Those who mistakenly call themselves proponents of social justice have come out against the change. From their point of view government expenses should continue to grow at a high rate, while taxes on individuals and businesses should rise. What they actually want is for the “fat man” (the public sector) to get fatter and for the “thin man” (the private business sector) to turn into a heap of bones.

They don’t want to understand that even now the public sector is growing too large, too clumsy, inefficient and hugely manpower-heavy. They don’t understand that when the budget grows at a fast rate, the extra money will go as always to the strong pressure groups – the army, the settlers and the big unions. They shut their eyes and don’t want to know that if we continue to raise taxes, the result will be that talented young people will leave the country, investments will not arrive, growth will stop and unemployment will grow. And therefore increasing the budget is the most anti-social-justice step there is.

When the report on salaries in the public sector was released not long ago, it emerged that they have long surpassed those in the private sector. It also became clear that any addition of human resources over the past 18 months was absorbed by the public sector, and the private sector netted no new workers. Dismissals were equal to hiring. So perhaps the time has come for the public sector to start major streamlining. Why not; is their blood redder?

People who want to increase the budget and raise taxes compare our data to other member states of the Organization for Economic Cooperation and Development. That is a bit strange. Since when do we want to be likened to the “average”? Why not excel? Do we want, for example, for the quality of our pilots or our doctors to be “average”? And why do we have to take into consideration the average of failing countries in the throes of fiscal crisis, bankruptcy and severe unemployment of the young due to unbridled growth of budgets and allocations, such as Greece, Spain and Portugal?

Why should we not try to emulate successful countries, whose public outlays are lower than ours, but still provide services on a higher level than we do, like Australia or Switzerland? In Switzerland the level of public expenditure is only 34 percent, taxes are low, there is no deficit and unemployment is 3 percent, inflation is zero and only 8 percent of families live below the poverty line.

Neither must we take security and interest payments out of the statistics. That is a known trick economists play: shooting first, then drawing a circle around the spot where their shot landed. If we have two weights on our back, in the form of security outlays and interest payments, what is the logic of adding another heavy sack in the form of the fat, inefficient public sector? We should be doing the exact opposite: reducing the security budget and the public debt.

And so, in light of all these considerations, the Finance Ministry’s Budget Division should go back to the old formula from the days of former Prime Minister Ehud Olmert and former Finance Minister Roni Bar-On, and insist on only a 1.8-percent growth rate of the budget – in keeping with the population growth. After all, the military budget does not have to grow at all when the population grows, which would leave more for health, education and welfare.

It’s too bad that Amir Levy, head of the Budget Division, went soft and did not resist the pressures of the Bank of Israel and the Prime Minister’s Bureau. An increase of 2.6 percent is too large, it does not constitute belt-tightening and does not allow for tax-cutting and quick growth.

And so another mistake joins a long series.

The Good Old Days: Lapid and Netanyahu during the previous government.Credit: Emil Salman

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