The Bottom Line / Starting on the Wrong Foot

As things stand today, the government seems unnecessary. Who needs 22 ministers and 12 deputy ministers when a single minister can fill so many different roles: vice prime minister, minister of industry, trade and labor, finance minister, and also de facto foreign minister? The fact is that Ehud Olmert, not Foreign Minister Silvan Shalom, was sent to meet with Condoleezza Rice to discuss the continuation of the peace process.

Moreover, there is a conflict of interest between at least two of the jobs Olmert holds: industry minister and finance minister. Let's assume that Olmert I (the industry minister) asks Olmert F (the finance minister) to increase the Investment Center's budget. What would Olmert F decide? And what about if Olmert I supports Coca-Cola's request for a grant - what would Olmert F say to that?

Last week, I promised to continue analyzing the statements that Olmert has made in the few days since he became finance minister. One of the most prominent dealt with instituting a negative income tax in 2006. That was a populist statement, since it entails a major expense that is not included in the budget, as well as lengthy preparations. Moreover, there is an ministerial committee studying this complex issue right now. So why rush to make statements before the committee presents its conclusions?

Olmert also promised to set up a national task force to fight poverty, with a budget of a few hundred million shekels. Where will those millions come from? There are only NIS 500 million left in the general reserve, and these are earmarked for "buying" parties (United Torah Judaism, Shinui, Labor and MKs from the Likud) to support the 2006 budget in the Knesset.

Perhaps Olmert is thinking of "postponing" investment in roads and infrastructure and using this money for the war on poverty? But that is election economics. Or perhaps he wants to exceed the spending cap? But that would cause interest rates to rise and harm people with mortgages and overdrafts.

Olmert has another diagnosis: "The Finance Ministry is too strong. The [other] ministries need to be given greater discretion in spending their budgets." That sounds nice, and very democratic. But what would happen in real life?

Ministers have always wanted maximum flexibility to transfer money to different budgetary line items, because they know what wonders they can work. For instance, transferring funds from the infrastructure budget to employment subsidies. Or increasing loans and grants to young couples who buy apartments. It's excellent for one's ratings on the eve of an election, but the minute the money runs out, the minister says: We cannot discriminate between couples; we must increase the budget.

If we lived in a perfect world, the Transportation Ministry - not the treasury - would be proposing port reform and pushing for an open skies policy. But not only is the ministry not proposing such reforms, it is trying to torpedo them. If we lived in a utopian world, the Infrastructure Ministry - not the treasury- would be pushing to reform the Israel Electric Corporation and split the Oil Refineries. But Benjamin Ben-Eliezer opposes electricity reform, and this week he succeeded in torpedoing (at least for now) the plan to split up the Oil Refineries.

The Oil Refineries' union appreciates this greatly, so Ben-Eliezer will gain another few votes in the upcoming Labor Party leadership primary. But the economy lost big-time. Instead of two refineries (one in Haifa and one in Ashdod) competing against each other and lowering prices, we will continue to endure a clumsy, inefficient monopoly that raises fuel prices - as noted by a professional committee headed by Prof. Reuven Grunau, which recommended splitting and privatizing the refineries.

So perhaps Olmert should nevertheless leave us a strong Finance Ministry that will stick to the budget and enact reforms - because we also want a strong economy.