The Bottom Line / Riding the Budget

The Finance Ministry plans huge investments in railways in the years 2003 through 2008.

The Finance Ministry plans huge investments in railways in the years 2003 through 2008. The treasury will put NIS 10.5 billion into capital subsidies and NIS 13.5 billion into financing the development program, while Israel Railways, for its part, will raise NIS 6.5 billion from the public.

So where did the treasury suddenly come up with billions for investment in trains? After all, the deficit is huge and oppressive.

Budgets director Uri Yogev found a gimmick. The NIS 13.5 billion investment in the development plan won't be posted as a budgetary expense, but as a share acquisition in Israel Railways, allowing it to "go under the radar" and not increase state spending.

What a wonderful invention: It feels as good as going commando. So why not develop the idea and use it to list all the billions in roadworks as share purchases in the Public Works Department, or building classrooms as share purchases in "Schoolchild's Construction Company?" The separation fence could be the acquisition of shares in "Israel Fence." All this would easily abolish the budget deficit.

For years, cabinet ministers have tried to convince us that investment is not spending and should be posted "under the line." But treasury officials stood up to them like a fortress wall. The most important job of the budget division chief is preventing this sort of creativity, preventing all sorts of extra-budgetary hocus pocus. His job is putting a mirror in front of the ministers that shows them that all government spending will be listed immediately - because every expense impacts Israel's macroeconomic situation, regardless of if you call it spending, investment, transfer, or "share purchases".

So, if Yogev insists (scared Netanyahu?) on this creative accounting trick, he doesn't deserve his job.

There is more to wonder about investment in trains. Until a few years ago, the budgets division was the biggest opponent of investment in the railways - and with good reason. Research from around the world indicated that railways don't fulfill the huge hopes pinned on them. In most cases, investment inflates to twice the planned numbers; the number of passengers is half that of projections; and the brand new rails have almost no impact on congestion on the roads. Many transportation experts see huge railway investment plans as a big waste of public money. The problem is that politicians love trains. They have the sheen of huge deeds; and in foreign countries, there are many fast and fancy ones. We all even remember the romantic movies about America's Wild West - conquered using trains, of course.

But in a small country like Israel, with serious budget problems, it would behoove Yogev and Netanyahu to stop and review the feasibility of the huge train investment, against something far simpler, and far more flexible and efficient - upgrading the bus system. The only problem is that buses have no political sheen so they stand no chance against the elaborate ribbon-cutting ceremony for a shiny new train line.