Taking Stock / Gleam in Peretz' Eye

Amir Peretz is blooming.

The gleam has returned to his eyes, his friends and associates report. After the rough times before January's general elections, the massive dismissals at his beloved Histadrut labor federation, and the deluge of bad press about the huge deficits run up by Histadrut's pension funds, he's back on his horse, which is trampling all over the treasury's economic program.

Peretz is an old war horse himself, and for a change he understands that Israel's dire economic situation has narrowed his wiggle room. He knows that unlike in the past, the general public - which has no affiliation with the Histadrut - has much less patience for his and his labor committees' usual tricks.

The public wants a change. It wants to see the economy clamber out of the mud in which it's been sinking for two years. It wants to see the slide in the standard of living stop. It wants jobs to be created.

Peretz has therefore changed his tactics. Instead of denouncing the treasury's economic program, as usual, he published an alternative, which he loses no opportunity to promote in interviews with the press.

Peretz' program takes up 10 pages, in Word, and consists of five articles:

1. A mandatory 2-percent "loan" from taxpayers to the state, that would generate NIS 5 billion for the state.

2. Improving tax collection, generating another NIS 2 billion.

3. Reducing indemnity for employers: NIS 2 billion.

4. Canceling wage ceilings on National Institute Insurance: NIS 1.6 billion.

5. And while the smell of sacrifice is in the air, deferring cost of living increases.

Peretz' plan shows him as he is - detached from Israel's economic reality, oblivious to the destructive, long-term processes that have been persisting for years, and above all, a zealous protector of the wealthy Histadrut associates.

Let's start with his mandatory 2-percent loan, which can be more clearly dubbed a tax. It is not only a tax, it's one that would ultimately increase the government's debt. And the government's debt, as Peretz knows perfectly well, has been ballooning at warp speed in the last three years to the point of threatening Israel's economic stability and capacity to grow.

Now let's look at his idea of stepping up tax collection. That one's a real rib-tickler. Did Peretz invent a new mechanism to collect levies that our income tax mavens haven't thought of? Haven't the income tax collectors been running amok for six months now, turning every stone and squeezing every rock to extract the last shekel they can?

His third idea sounds great - reduce indemnity for employers. Meaning, the state should take from strong employers and give to the weaker ones. But every Economics 101 student learns that it doesn't matter who you tax; what matters is the flexibility of supply and demand in the market. The weak are usually the ones who end up with the tax bill. Reducing employer indemnity under current economic circumstances will be rolled over to the employees or increase the cost of labor, leading to additional dismissals.

The fourth proposal loses touch with reality again. Economists have already ruled that abolishing the wage ceilings for the purposes of National Institute Insurance would be a critical mistake after thousands of high earners already set up fictitious management companies. Everybody (but Peretz, evidently) concurs that the economy has reached a low point at which any more tax just winds up depressing growth and reducing the total tax take.

The fifth proposal is the most remarkable: Peretz proposes to defer cost of living, or COL, increases, which is the only mechanism protecting workers today.

Why would he do that? Why doesn't he suggest reducing the wage cost of people earning NIS 15,000 to NIS 50,000 a month by 10-20 percent? Why go straight for cost of living increases?

It is time for Peretz to explain clearly and frankly what he thinks about the most important part of the treasury's program - to lower wages of the public sector's top earners by 20 percent. That would include the wages of his friends at the Israel Electric Corporation, at the ports, at the local authorities, or in short - the wages of all the people appearing in the treasury wages director's eye-popping report every year.

Maybe before Peretz paralyzes the nation with the general strike he's whipping up, before he sickens the nation with piles of garbage, before he shuts down the airports ahead of Pesach and embitters the lives of millions of people - he should deign to divulge whether he supports the wage cut for his friends at the government monopolies and companies, or if he prefers to take the knife to the cost of living increase.