They Demanded Increments, Received Diktats

The public ultimately appreciates a man who says the truth and cuts when necessary - and there's no argument that cutting is necessary now.

Now that the cabinet has approved the taxes and cutbacks plan, everyone is turning furiously against it. Shas' ministers are the greatest experts in this field. They both voted against the plan and are giving media interviews against the "diktats," yet remain in the coalition to continue receiving the billions for yeshivas and yeshiva students and enjoying the ministers' chamois armchairs.

Then there are journalists who are taking a passionate stance against the blow to the middle class, and don't forget the social protest activists who say it's all a sham and the government is simply spitting in the public's face.

They have all forgotten they were the ones who had demanded increasing the government's expenses. These expenses did indeed grow at the amazing pace of NIS 15 billion a year, even before the huge budget breaches. The finance minister and treasury officials put together an overly optimistic forecast for tax income. They predicted the world would emerge from the crisis in 2012, so there would be a real 6.4 percent growth in tax income. This enabled them to waste a few more billions.

But Judgment Day arrived and it transpired that tax income had plunged and there was no choice but to raise taxes and slash the budget, to prevent a financial crisis a la Greece and Spain.

In contrast to the populists' arguments, the plan the cabinet approved on Monday strikes a blow at all classes. The lower class, which doesn't pay income tax, will pay more for its purchases due to the 1 percent VAT hike. The middle classes will pay both 1 percent more VAT and 1 percent more income tax, while the upper thousandth will pay those as well as a 2 percent "rich man's tax." The business sector will contribute its share and pay the 0.6 percent increase in employers' tax and the large international companies will pay NIS 3 billion to release profits that have been earned but not distributed to shareholders.

There is even a scheme to combat black capital, which is supposed to yield NIS 2 billion. But for that to work the cabinet must enact legislation to give the Tax Authority teeth - like confiscating debtors' cars, entering people's bank accounts and exposing companies that were set up merely to evade taxes. Will that happen? I doubt it.

I agree it would have been much better for the plan to slash the budgets earmarked for the ultra-Orthodox, the settlers and the IDF, as well as revoke the annoying tax exemptions of the privileged, like the VAT exemption on fruit and vegetables, the tax exemptions on employees' professional training funds and the ridiculously low tax (6 percent ) exacted from export companies. But since the cabinet was afraid of confronting groups with power and interests, there was no option but to raise taxes across the board.

A few Likud MKs said this week that Netanyahu was making a bad mistake by raising taxes and slashing expenses, because the public would take revenge on him on election day, as it did in 2006. That's one of those fairy tales that have acquired mythical status. Legend has it that Likud lost in the 2006 election (it lost 12 Knesset seats ) only because Netanyahu cut back pensions, allowances, wages and the budget in the years he served as finance minister under Ariel Sharon (2003-2005 ).

The truth is completely different. The public did not take revenge on Netanyahu because of the economy. The main issue in that election was the peace process - the disengagement from Gaza and Ehud Olmert's intention of carrying out the "convergence" plan in the West Bank.

The public realized there was a chance to solve the conflict and gave full credit to Sharon, who set up Kadima, and then to Olmert, who won the election and got 29 Knesset seats.

The Likud lost then because the nation was looking for hope, while Netanyahu and Likud were seen as the rejectionist front. Netanyahu was one of the rebels against Sharon. He zig-zagged for and against the disengagement until he finally came out against it and against any possibility of solving the conflict. This is what he paid for on election day.

The years in which, as finance minister, he slashed the budget, reduced allowances, enforced reforms and reduced taxes played in his favor. They built him up as one who understands economics, who saved the economy from disaster, who displayed courage in the face of pressures and demonstrations. So he had better do the right things now, too. The public ultimately appreciates a man who says the truth and cuts when necessary - and there's no argument that cutting is necessary now.