The Real Reason for Elections

After three years of an irresponsible, "no problem" fiscal policy, it's payback time.

After three years of an irresponsible, "no problem" fiscal policy, it's payback time.

Suddenly there's a huge hole in the budget, the country's balance of payments is negative, growth is slowing, unemployment is rising, no substantial reform has been implemented and the financial horizon looks gloomy and dangerous. That itself is enough of a reason for early elections.

Because unlike all the country's other problems, only one has a firm deadline: approving the state budget. The other problems can be handled by fudging a bit, debating endlessly or appointing a committee. But if there's no state budget by the end of March, the government falls automatically.

Therefore, with all due respect to the arguments about the Tal Law, which is dividing the coalition, the commitment to vacate Migron, which is not popular with the right, the concerns about U.S. President Barack Obama being elected again or about the protests expected this summer, the economic issue is what tipped the scales.

To straighten out the mess they'd made, Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz would have had to submit a budget with cuts and "decrees" totaling an incredible NIS 15 billion. They would not have a majority for this in the cabinet or the Knesset. Their coalition colleagues would not have agreed to it; they want to look like good guys in an election year. The truth is, Netanyahu and Steinitz don't particularly want to look like the bad guys, either.

The only solution was to advance elections and form a new government, which would in its first year be able to do what the current government in its fourth could not, with the sword of elections dangling over its head.

Over the past two to three years, Israel has been going in the opposite direction from the rest of the world. While countries in Europe understood that they had no choice but to make painful cuts to their budgets, Netanyahu and Steinitz were conducting a loose and open policy.

They changed the rules limiting spending (with the support of the Bank of Israel governor, who is now complaining about the deficit ) immediately upon taking office, and thus allowed an unprecedented increase in government outlays: a hike of NIS 18 billion in 2011, and another NIS 15 billion in 2012. With exaggerated optimism they estimated the economy would grow in 2012 by 6.2 percent when actual growth is only around 3 percent. They also committed themselves to implementing the expensive recommendations of the Trajtenberg Committee, such as free education from age three, without cutting the defense budget at the same time. After all, to cut is hard; to dole out money is popular.

And if all this weren't enough, we've recently seen evidence of blatant election-year economics. Netanyahu and Steinitz gave the public a break on gasoline prices and retirees a break on their taxes. They subsidized diesel fuel for the Israel Electric Corporation, alloted substantial wage increases to various pressure groups, granted billions to higher education, increased defense spending and gave out fat rewards to all the ministries and parties in the coalition.

It's fun to give out post-dated checks; the only problem is that at some point they come due, and the due date for these perks is the budget for 2013.

And when a "no problem" atmosphere prevails in the public arena, Knesset members don't want to fall behind. That's why they submitted dozens of private bills that "benefit the public" to the tune of billions of shekels, along with dozens of requests to the Knesset Finance Committee to transfer millions to various sectoral representatives, so that it would be clear which Knesset members deserve to be re-elected.

If we had a serious finance minister who had some political clout, he would have prevented this embarrassing performance. But Steinitz has no control over any Knesset members; they barely acknowledge that he exists.

The advantage of a new government is that agreements on vital budget cuts will be an integral part of the coalition negotiations. Immediately after a new government is formed, we'll be witness to a new economic plan that will slaughter sacred cows that right now can't be touched.

So while Netanyahu and Steinitz are responsible for the budget-busting, at least now, at the last minute, they are doing the right thing: advancing elections so that a realistic budget for 2013 can be submitted by the end of the year.

It's the only way we'll be spared the bitter fate of Greece, Spain, Portugal and Italy.