Analysis / Let's Not Waste Tax Receipts

No one expected 6.6 percent growth in the first quarter of 2006, and no one expects growth in the remaining three quarters of the year to remain so high. What is surprising in the Central Bureau of Statistics' figures is the magnitude of the numbers, not the general tendency.

It has been clear for several months that the economy is growing quickly, and the high government tax revenue figures were an early indication of this.

In this respect, the CBS figures are heartening but not encouraging. They are heartening because it is good to see the economy growing. They are not encouraging because they may come at a high price. The price is a sense of prosperity, with a Knesset that is divided and lacking coalition discipline.

The price is unreasonable political pressure to increase budget spending. These pressures will be fueled by the growth and tax revenue figures.

In Israel, where long-term planning means next week, the achievement of quick growth and a large tax-revenue surplus could be wasted in a moment.

This achievement, which could be exploited to invest in a better future for the economy - in education, in reducing the national debt to increase the budgets that will be available to future generations, in widening tax brackets for medium-wage earners - could be lost by wasting money on bread subsidies or restoring benefits that do not provide an incentive to go out and work.

It is easy to plead for those hungry for bread - even though those in the the bottom decile actually usually eat pita bread - and to forget that the way to abolish hunger is to invest in better education for disadvantaged children.

The treasury, the finance minister and the prime minister are now in an unenviable position.

They have a tough time ahead, ironically because times are so good, and one can only hope they can cope.