Kahlon Cannot Be a Socially Oriented Finance Minister

The most important advice to the next finance minister is this: Listen to senior treasury officials. Don't neglect them the way Lapid did.

Nehemia Shtrasler
Nehemia Shtrasler
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Moshe Kahlon, January 8, 2015.
Moshe Kahlon, January 8, 2015.Credit: Moti Milrod
Nehemia Shtrasler
Nehemia Shtrasler

Immediately after his electoral victory, Benjamin Netanyahu said that this time he would assemble the government within three weeks, but it won’t happen.

The task of assembling a government will take six weeks. He gets four weeks and a two-week extension. According to Parkinson’s law (coined by the British historian in 1955), “Work expands to fill the time available for its completion.”

That’s exactly what happened in the previous elections. In the first month, negotiations progressed sluggishly, and the potential partners carried out a long list of tricky maneuvers - until it became clear that time was running out. Everyone coalesced around what was possible, not what was desirable.

The designated finance minister, Moshe Kahlon, also has to descend from the clouds and return to the reality on the ground. He cannot be a socially oriented finance minister. It’s an oxymoron. A socially oriented finance minister makes a joke out of his fellow ministers. He outflanks them from the left, and offers himself the best of everything, like raising the minimum wage, adding treatments to the national health basket of services, increasing entitlements, establishing daycare centers, adding to the education budget and so on.

That’s the way he steals the show from the welfare minister, the health minister and the education minister. He leaves them no choice but to be even more extreme in their demands. If they don’t they’ll look like they’re empty handed.

The end is clear. It will lead to runaway spending, a huge deficit, crisis, unemployment, and an emergency plan to cut the budget that will hurt the lower classes. Been there, done that more than once.

The finance minister has to be economical. It’s his job. He is the one who has to worry about a low deficit and implementing reforms. He is supposed to leave the social causes to his fellow ministers. They are the ones who need to demand increases from him, and he is the one who needs to barter and argue and agree in the end to only some of the demands, for he is the one guarding the cashbox.

But don’t worry. He has plenty to do in the field of reforms. He has to reduce the cost of living and rein in the out-of-control housing prices. He has to deal with the plethora of monopolies pervading the economy and introduce competition. He has to deal with pension agreements in the Israel Defense Forces and the low rate of employee contributions made to defined benefit plans. He has to raise the retirement age for women from 62 to 67 and introduce administrative control over the civil service's workforce.

These are important areas. The one who tries to touch them will encounter the country’s strongest economic forces: the Israel Defense Forces, the agriculture lobby, capitalists, the big unions, the Histadrut labor federation, the food giants and all of Israel’s monopolies and cartels.

He has to be protected from self-interested consultants. He better learn well the lesson of the fall of Yair Lapid, who had 19 seats and could have been an even greater reformer. If Lapid had managed that, he would now be a candidate for prime minister instead of a benchwarmer in the opposition.

However, Lapid preferred to listen to so-called friends, who advised him to be nice and not argue with anyone, except the ultra-Orthodox. He listened, for example, to his associate Uri Shani, who advised him to go with the zero-VAT plan. Members of the treasury's budget division tried to prevent him from going through with this serious mistake, but he listened only to Shani. He bet the house on this plan, and he lost it all.

Thus, the most important advice to the next finance minister is this: Listen to senior treasury officials. They want the best for you and for the economy. Don’t neglect them the way Lapid did. Indeed, every finance minister who worked with them benefited from doing so.

Tomorrow, the president will put Netanyahu in charge of forming the next government, and the countdown will commence. Did we already mention Parkinson’s Law?

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