A meeting between Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid earlier this week ended in failure. The two are slated to meet again today, this time joined by professionals from both ministries, which arouses hopes for success.
- Finance Ministry struggling to meet Defense Ministry budget demand for extra $3b
- Yair Lapid: The meek link in the chain
- Is Israel really in such bad economic shape?
- Netanyahu sounds a fiscal note at NIS 50-bill launch
- Netanyahu-Lapid standoff over budget shows no signs of abating
- Lapid won’t quit coalition over budget dispute
- Lapid vs. Lapid
- The army: Israel’s most important innovation
The goal of the meeting is to reach an agreement on the size of the addition to the 2015 defense budget. The treasury is willing to add 2.5 billion shekels ($693 million), but the prime minister is demanding a much higher amount – one that wouldn’t leave anything over for civilian needs such as education, health, infrastructure and welfare.
The defense budget shouldn’t receive any additional funds. The defense establishment ought to make do with its already enormous budget – 61.7 billion shekels in 2013 – and instead rethink its priorities and shift funds within its existing budget to meet them. Israel’s defense budget is higher than that of any other country in the region. Moreover, its strategic position isn’t any worse than it was before Operation Protective Edge in Gaza this summer.
The argument between Netanyahu and Lapid isn’t only over the defense budget. Lapid has been conducting an open-handed policy, allocating tens of millions of shekels to various goals. In addition, he is pushing his plan to eliminate value-added tax on purchases of first homes, which comes with a high price tag: three billion shekels a year. And while he isn’t willing to raise taxes, not wanting to disappoint his voters, he has no problem with raising the budget deficit to a dangerous level.
In contrast, Netanyahu wants a lower deficit. To meet this goal, he argues, all government ministries (except defense) should cut their budgets and various tax exemptions should be canceled.
But both of them should be told to quit gambling with Israel’s economy and devise a proper long-term economic plan that would prevent the economy’s ongoing slide into crisis.
Under a proper plan, the army wouldn’t receive any extra funds in 2015 (though it would be reimbursed for its outlays during Protective Edge); the zero-VAT bill would be shelved; and taxes wouldn’t be raised, though several tax exemptions (like the VAT exemption on fruits and vegetables) would be canceled. In addition, important reforms that would boost the economy would be carried out, including reforms of the monopolistic electricity and gas industries; the Israel Lands Administration, which is also responsible for the inadequate supply of housing; and the civil service, which suffers from excess bureaucracy and inefficiency.
That would give us a responsible budget with a low deficit that would return the economy to growth and increase employment, thereby benefiting all Israelis.