Yair Lapid: The Finance Minister Who Scapegoats His Own Economists

Lapid blames budget department staffers for the high cost of living. But in truth, the guilty parties are the cowardly politicians.

Nehemia Shtrasler
Nehemia Shtrasler
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Finance Minister Yair Lapid as the treasury presented its 2015 draft budget, September 28, 2014.
Finance Minister Yair Lapid as the treasury presented its 2015 draft budget, September 28, 2014.Credit: Emil Salman
Nehemia Shtrasler
Nehemia Shtrasler

Moshe shifted uneasily in his chair. He was listening to Finance Minister Yair Lapid and couldn’t believe his ears. Why is he attacking me? What did I do wrong?

This happened last week, when Lapid was speaking to the staff of the Finance Ministry’s budget department. He leveled withering criticism at these people with whom he works so closely, something no previous finance minister has ever done. Lapid has already done it twice.

Prior to that speech, Moshe was certain he belonged to an “elite unit” of the civil service. The heads of the department told him repeatedly that his job is to improve Israel’s economy and society, to encourage competition, carry out reforms, create growth, narrow social gaps and ensure stability – just as he was taught while studying for his bachelor’s degree at Hebrew University.

But now, the finance minister was telling him that he is nothing but a petty clerk who views his only goal as balancing the budget – someone whose tombstone will read, “Here lies balanced-budget Moshe.” And anyone who wants to go down in history like that is a miserable specimen.

Lapid explained to him that all the economics he learned in university is worthless, because to lower the cost of living, it’s necessary to do “other” things, like exempting first homes from value-added tax and imposing price controls. But Moshe was taught that these are two of the worst possible ways to lower the cost of living, and his experience in the field has taught him that the theory he learned was correct.

Balanced-budget Moshe understood from the minister’s speech that a large budget deficit isn’t a catastrophe. But then he recalled that this is exactly how Greek finance ministers talked, until it all ended in an enormous economic collapse, bankruptcy and widespread unemployment.

Balanced-budget Moshe also recalled that there are other finance ministers in this world – for instance, those of Switzerland and Germany, who believe in a balanced budget with no deficit as a basic condition for stability and growth. And in fact, Germany is Europe’s growth engine, while Switzerland has for years enjoyed exceptional stability, a high standard of living and narrow gaps between rich and poor. So perhaps Germany and Switzerland are the right models?

In that same speech, Lapid blamed budget department staffers for the high cost of living. But the truth is the diametric opposite. The guilty parties are the cowardly politicians, who for years have refused to implement any of the department’s recommendations.

To lower housing prices, you don’t need zero VAT – you need to shut down the Israel Lands Administration and sell all the state’s lands to the public. To lower food prices, you don’t need to subject additional products to price controls – you need to lower customs duties, break up the monopolies, end the practice of exclusive importers and so forth.

In the latest budget, balanced-budget Moshe proposed three reforms that would lead to lower food prices in three product categories: sheep’s cheese, eggs and fish. Agriculture Minister Yair Shamir opposed all three, and Lapid caved in without a battle. He didn’t want to pick a fight with the farmers.

Balanced-budget Moshe also proposed that Lapid raise the retirement age for women, give civil service managers more authority to determine the size and tasks of the workforce, raise pension contributions made by public-sector workers, eliminate the “bridging pensions” paid to army officers between the end of their military service to when they reach the official age of retirement, reform the Israel Electric Corporation, and several other similar steps that would increase productivity and lower prices. But Lapid didn’t want to fight with anyone.

He clearly had no problem telling department staffers, “We must be more resolute in lowering the cost of living and increasing growth.” They should be resolute? Surely. But what about the minister?

At the end of that day, the penny finally dropped for Moshe. His job is to be the scapegoat. He must assume responsibility for all the failures – in housing prices, the cost of living and economic inequality. He must understand that all the mistakes were his, because the minister can’t be wrong. The minister is God, and God never makes mistakes.

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