Taking Stock / Inconceivable

Much praise has been heaped on the treasury's economic program, the first real attempt to halt the rapid contraction of Israel's business and productive sectors by imposing a crash diet on the public sector. The plan's weak points, however, bear sober inspection.

1It is inconceivable to present a program based on cutbacks and lowering the standard of living for wide swathes of the population before presenting a diet plan for the government, including reducing the number of ministers, bureaus, aides, drivers, spokespeople, standard-bearers and the rest of the swollen entourages of our leaders. The ministers and Knesset members should also accept a dramatic drop in their standard of living if they want the public to accept the legitimacy of the economic program.

2 It is inconceivable to spearhead a program to rescue the Histadrut's pension funds, including partly retroactive worsening of pension conditions, without presenting a parallel program for handling noncontributory pensions.

It is pure hypocrisy on the treasury's part to present the tremendous actuarial deficit of the Histadrut's pension funds as a "ticking time bomb" without disclosing the actuarial liabilities of noncontributory pensions belonging to the nation's civil servants.

The treasury should immediately disclose these actuarial liabilities and reveal their frightening rate of growth in the last decade, the sources of that growth, the distribution among government offices and the burden it will impose on the nation's budget in each of the next 20 years.

3 It is inconceivable to present a plan to eradicate the Histadrut pension funds' deficit without presenting a plan to immediately halt the inflation of the noncontributory pensions' actuarial liabilities, which is a time bomb just as large.

The treasury is screaming about the Histadrut funds, which are based on cumulative pension plans, running actuarial deficits of NIS 146 billion. Why doesn't it disclose that if the same assumptions are adopted about wage rises and capitalization rates, the deficit of noncontributory pensions exceeds NIS 200 billion?

4 It is inconceivable that even a few percentage points be cut from the pay of civil servants earning NIS 4,300 to NIS 6,000 a month, under the current economic circumstances. Instead, the treasury should consider sharper cuts into the tubs of lard padding the public sector; the treasury knows perfectly well where they are, and that now is an incomparably appropriate time to target them.

5 It is inconceivable that cuts be made to welfare allowances, wages, and pensions before tackling pension and terms of service in the defense establishment. It is inconceivable that the defense establishment win every battle with the treasury over these terms, using violent means. This is an appropriate time to disclose the real costs of wages and pensions in the military, the wage rolls of which continue to grow. It is time to reveal the actuarial commitments for the defense establishment's noncontributory pension schemes, and to compare the resources streaming to Israel's warriors with those going to other office-holders.

6 It is impossible to restore foreign and local investors' faith in Israel's economic policy if the treasury persists in claiming that it is cutting the budget by only NIS 9 billion but is committed to a deficit of 3-3.5 percent for 2003. Cutting only NIS 9 billion from the budget will result in a deficit of at least 4 percent. The public should be told the truth: The government cannot meet its original deficit target for 2003.

The government should also admit that the key goal of its economic program is not to "restore growth" but rather to stop Israel's economic deterioration, which could trigger a foreign currency crisis, a breakdown in the banking establishment, or both. Economic growth will not return this year. At best, the erosion will stop.

The ultimate goal that Finance Minister Benjamin Netanyahu should present for the multiyear program is to reverse the ratio of the "thin and fat" men, to use his analogy. The public sector should "weigh" only 45 percent and the private sector, 55 percent. If that goal is achieved, all the rest will, more or less, fall into place.