The Bottom Line / The Legend of the Surplus

It is worth considering what Avishay Braverman, Yuli Tamir, Shelly Yachimovich and Orit Noked were thinking when they voted for the second Lebanon war.

Did they not understand that they were voting for a change in the country's priorities?

Did they not understand that the war would cost billions that would come at the expense of the socioeconomic budget lines?

Braverman easily solves the problem. He talks about surpluses in the 2006 budget, and if this is so, there's no need to cut anything, rather to bend over, pick up the surpluses off the floor and use them.

And indeed, on the eve of the war, July 11, there were surpluses.

Some NIS 8 billion had amassed in the Finance Ministry coffers as a result of speedy growth which brought increased tax revenues. On the other side of the ledger, budget lines were underutilized in kind because the Knesset passed the 2006 budget belatedly.

As a result 2006 was supposed to be an excellent budgetary year, with relative growth of only 1 percent compared to 2005, and no deficit.

But then the war broke out and all the treasury forecasts were turned upside down. Revenue surpluses disappeared because the treasury was forced to pay damages worth NIS 5-6 billion to the North, and tax revenue fell off.

Expenses also made an about-face. Kobi Haber, the director of the treasury's budget division, took the unutilized or underutilized budget lines and turned them into financing sources for the war.

Thus, if 97.5 percent of the 2005 budget was exploited, the level for this year will be 101 percent. Rather than underutilization, there will be excessive utilization.

The bottom line is that the expected budget deficit will be 2 percent of gross domestic product, not 0 percent, and real growth in the 2006 budget will be 13.5 percent over the 2005 budget - a negative record. There are no surpluses, just troubles.

Thus, the cut in the 2006 budget is vital.

It will give the correct signal to the same populist politicians who believe that you can get something from nothing. It will make it clear from them that more difficult cutbacks can be expected in the 2007 budget - for the benefit of the defense budget. Perhaps in this way Knesset members and ministers will understand that the next time they vote to go to war, there will also be a severe socioeconomic price to pay.