The Next Finance Minister?

The bottom line is that Shalom Simhon's approach to economics seems to be the opposite of what is good for the economy, and were it to be accepted it would lead us backward.

The sigh of relief in the Likud corridors could be heard from one end of the country to the other. Industry, Trade and Labor Minister Shalom Simhon declared in an interview with the daily Maariv: "I really don't want to be prime minister."

What would Prime Minister Benjamin Netanyahu do if Simhon were to compete against him for the premiership? How would he prepare for this great challenge? After all, we are talking about a minister from the Atzmaut party, which has a clear-cut worldview, having broken away from the Labor Party on the ideological grounds of seats and positions. The surveys forecast that Atzmaut will not win even one seat in the next Knesset, but it has one important achievement under its belt - the world record for political cynicism, with four cabinet ministers for five Knesset members.

However, if not prime minister, Simhon does want to be finance minister. I fell off my chair when I read that. Finance minister? With his opinions? It's no less amusing than the statement that he doesn't want to be prime minister. During the interview Simhon expressed dissatisfaction with the high prices of food in the country, but he ignored one small fact - that he personally is responsible for some of these exorbitant prices. Because Simhon has vehemently opposed the implementation of a central part of the Trajtenberg committee's recommendations - bringing down customs and opening up the economy to competition from abroad - despite the fact that free imports are essential to force local manufacturers to toe the line, engage in efficiency measures and bring down prices.

Simhon is not interested in understanding that. He and the director general of his ministry, Sharon Kedmi, were vehemently opposed to bringing down customs on industrial products and food. They were also against removing the artificial barriers that block imports, such as the Standards Institute and various strange taxes and excises. It is true that when this struggle against the Finance Ministry is over there will be some customs reductions, but that will be only after the fight with Simhon, and will leave the main area of fresh foods - such as meat, milk, fish, honey, olive oil and many other products - with an insufficient reduction. Instead of making the right move and opening up the economy, Simhon is proposing a new tactic to bring down prices - reducing VAT on food products to a mere 8 percent. But why only on food? Why not bring down the VAT also on gasoline, medicines, apartments, computers, electricity, water, books and so forth? What's wrong? Are they less important than food?

And there is another minor issue with regard to bringing down VAT - the state's revenues. A finance minister should know there is a debt of NIS 11 billion on the revenue side of the budget, and that next year the situation will be even worse. So how is it possible to forgo NIS 8 billion per year without taking into account the dramatic effect this will have on the deficit, the debt, the credit rating, the interest rate and employment?

Simhon has expressed strong criticism over Finance Minister Yuval Steinitz's conduct but he forgets to mention that, behind the scenes, a huge struggle is being waged between him and Steinitz. Simhon wants to impose a dumping levy on the import of mineral wool so as to protect the only manufacturer in Israel, which will thus become a complete monopoly, and Steinitz is opposed to it. Simhon doesn't understand that levies have a negative effect on employment. He also doesn't understand that the supposed protection of that manufacturer will force all young couples to pay more for buying or renting an apartment because mineral wool is a raw material in the building trade.

Simhon also wants to impose a levy on importing floor rags, in order to protect two firms in that field, but Steinitz is opposed to that too. Steinitz understands that a levy of this kind will turn the floor rag in Israel into the most expensive in the world. Just like the cottage cheese. By the way, Simhon also opposes importing milk products and therefore their prices will remain inflated forever. He also wants to impose a strange levy of $35 per ton on the export of scrap iron. Steinitz opposes this as well.

The bottom line is that Simhon's approach to economics seems to be the opposite of what is good for the economy. Were it to be accepted it would lead us backward. That is why Simhon is suited to being finance minister in exactly the same way he is suited to being prime minister.