Emergency Economic Plan Stuck Fast

Prime Minister Ehud Olmert said this week that he'd support the Finance Ministry's emergency economic plan if it passed the hurdle of the Knesset Finance Committee. Well, it hasn't yet. Finance Minister Roni Bar-On's program has incurred intense opposition in the parliamentary panel, not only among members of the opposition but among Knesset members belonging to the coalition as well - including representatives of the Shas and Labor parties.

"It's an illusion," said Avishay Braverman, Laborite and chairman of the Knesset Finance Committee yesterday. "The [emergency] program has nothing new to offer. It merely recycles old ideas in a new cover."

Knesset sources surmise that Shas will tip the balance one way or the other. Its support won't be free: Members of the religious party are demanding inflated budgets for day care and other social issues, such as broader assistance and training for the unemployed.

On Sunday Olmert canceled a press conference at which Bar-On had been expected to present the details of his plan to stimulate Israel's economy in the face of the global crisis. The prime minister explained that before the details were made public, the plan should receive preliminary approval from the Economic Cabinet and then the Finance Committee.

Meanwhile, Japan became the latest country to tip into recession yesterday. In fact, all 30 members of the Organization for Economic Cooperation and Development have been declared to be in recession, which means at least two consecutive quarters of negative growth.

Now it seems that Bar-On's plan will have to be changed to make it through the Knesset, most probably by diverting more money to the poor, and canceling budget cuts.

Finance Committee members complain that some of the steps Bar-On is proposing had been moves that the Finance Ministry itself rejected in the past, such as giving small businesses more time to pay VAT (so they don't have to pay tax on their invoices before they collect payment from clients). Another moldy treasury idea that died, only to rise anew now, is creating funds to support small businesses, say the sources.

Bar-On's plan will cost about NIS 10 billion to execute, and since he doesn't mean to allow the government to increase its deficit (he says), the budget proposal for 2009 will have to be cut commensurately.

The Finance Committee also dislikes the idea of chaining the emergency plan to the 2009 budget law.

Shas, which has etched representation of the poor on its flag, has two representatives on the Finance Committee, Amnon Cohen and Yitzhak Vaknin. The latter has stated that he opposes Bar-On's plan as is, and means to demand significant expansion. Vaknin says he is mostly concerned about the ramp-up in dismissals as the manufacturing and technology sectors, to name but two, brace for recession.

Meanwhile, Shas chairman Eli Yishai convened the party leadership last night to discuss the latest wave of dismissals. Histadrut labor federation chairman Ofer Eini attended the meeting, as did Shraga Brosh, president of the Manufacturers Association.

Labor also has two representatives on the Finance Committee, Avishay Braverman (the committee chairman) and Shelly Yachimovich, who has called on Bar-On to increase government spending. Both oppose Bar-On's plan.

While the treasury is insistent that the government deficit not exceed 1% of GDP in 2009, Braverman is calling for sharply higher spending that would increase the deficit to 3% or 4% of GDP.

"I support a comprehensive emergency program that would expand the state budget and divert money to infrastructure and projects stuck in the pipeline," Braverman said yesterday. But as is, he opined, the program wouldn't be able to deflect recession.

Yachimovich called the plan "superficial" and a "patchwork of programs that the treasury torpedoed in the past." She said that reviving the plan to encourage mothers to work implies that the public is stupid: It insults the public's intelligence.

Of all things, opposition member Reuven Rivlin came out swinging for the plan, if not on grounds designed to delight Bar-On.

Rivlin said it was the brainchild of Benjamin Netanyahu all along. "It's a pallid copy of the steps Netanyahu declared a few weeks after the economic crisis began," he said. The steps include investment in national infrastructures, support for small and medium businesses, and pursuing crucial tax reforms, Rivlin said.

Rivlin did however take a swipe at Bar-On, alleging that his motives for publicizing the plan were political, not professional. A few weeks before, Bar-On refused to take steps to shore up the pension funds and banking system, he said. However, if Bar-On actually does raise the plan for voting at the Knesset Finance Committee, the Likud would support it, Bar-On said.

Israel Beiteinu's representative on the Finance Committee, Stas Misezhnikov, says he hasn't made up his mind about supporting the program. He also said that he's been behind not a few of the steps being proposed now, but says he has to study the program before deciding on its merits.