Breaking the First Law of Politics

In coalition politics, the finance minister must always be a member of the ruling party. Israel’s current budget mess is a prime example of what happens when you break with convention.

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Former Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu.
Former Finance Minister Yair Lapid and Prime Minister Benjamin Netanyahu.Credit: Oren Nachshon

It happens every once in a while. An article I wrote a year or two before suddenly is revealed to be very relevant, and I have a dilemma: Say nothing, or mention it and risk violating the rule of giving oneself a pat on the back? I decided to tell.

At the beginning of February 2013, immediately following the last Knesset election and when the idea of appointing Yair Lapid as finance minister was raised, I wrote here in Haaretz (“Needed: A horse thief for finance minister,” Feb. 5, 2013) that this was an impossible offer, since the first law of politics says the finance minister must be a member of the ruling party.

This is the only way the prime minister can steal horses together with his finance minister and distribute political funding – all this for the sacred goal of remaining in power.

It is impossible to appoint to this sensitive position someone with a different worldview, someone supported by a different set of voters and who is also a potential rival for prime minister. It is political suicide.

Despite this seemingly logical analysis, Prime Minister Benjamin Netanyahu appointed Lapid to head the Finance Ministry, while his people explained he had no choice. He had promised the Foreign Ministry portfolio to Avigdor Lieberman, Defense to Moshe Ya’alon and Lapid deserved a very major ministry – and Finance was all that was left.

And that is how, even though Lapid did not want the treasury, and Netanyahu was far from thrilled about it, the political considerations led the two to violate the first law of politics. And as a result they – and all of us – are paying the price, until this day.

There are still a few naïve people among us who believe the present struggle between Netanyahu and Lapid – over the size of the deficit, the defense budget, raising taxes and tax exemptions – revolves around economics. Not a chance. It revolves around politics: What will the agenda for the next Knesset election be, and who will win?

From his very first day in office, Lapid has positioned himself as the defender of civil society and the great warrior of the middle classes. This is his strategy, and he has not retreated an inch from it. He doesn’t hesitate to be the Santa Claus who passes out gifts worth hundreds of millions of shekels for various goals; he objects to raising taxes; and proudly waves his zero-VAT banner on new apartments. After all, the middle class hates taxes and loves discounts.

So what if the budget deficit passes the 3 percent limit (of GDP) and reaches 4 percent, or even 5 percent? The deficit is just some nonsense from economists who know nothing about the real world, Lapid thinks. Have you ever seen a deficit with your own eyes? It is clear the general public also doesn’t understand about deficits, but understands very clearly when someone passes out gifts in the form of zero VAT and no tax hikes.

Netanyahu has a different strategy. He is “Mr. Defense.” He is the great road warrior who says, “Life comes before quality of life, and security comes before everything else.” He is signaling to us, “Only I can save you from the evil people surrounding us. And to do so, I will increase the defense budget. Lapid does not understand anything about this, he even wants to cut defense spending, heaven forbid – and then who will protect Israel?”

Netanyahu – who understands economics – cannot order Lapid to give up on his zero-VAT plan and present a responsible budget with a 3 percent deficit. Lapid will answer him, “If you force me to do so, I will quit. And then we will have elections, in which I will be the socioeconomic good guy and you will be the defense bad guy, and who do you think will win?”

This is how our balance of terror, whose results are so dangerous, was created: Netanyahu will add billions to defense, while Lapid will add billions to education, health, welfare and his zero-VAT plan. The result will be a huge budget deficit of 4 percent to 5 percent, meaning an immediate financial crisis, the lowering of Israel’s credit rating internationally, the raising of interest rates, a halt to investments, a damper on private consumption, higher unemployment and a stock market plunge.

This is the belated revenge of the first law of politics. It was lying in wait quietly around the corner for a year and a half, until it found the opportunity and struck harshly at those who violated it. And at us, too, the peons in the game, who as usual will pay the price.

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