The Bottom Line / Union Head Declares War on Planned Cuts

War. Adi Eldar, chair of the Union of Local Authorities, declared a "world war" Thursday against the Finance Ministry in protest against planned cutbacks in the local authorities' budgets. Histadrut labor federation chairman MK Amir Peretz tried to go one better and declared a "battle for democracy." But Dr. Yoram Blashar, head of the Israel Medical Association, easily triumphed in the war to frighten the public: He went straight for the jugular, declaring that "people will be sacrificing their lives on the altar of not updating the health basket."

But not one of these three said one word about the main reason for this economic-social crisis, or about the cause of the cruel, unavoidable and harsh cutbacks in social spending. Not one of them mentioned the war of attrition against the Palestinians, the NIS 2 billion increase for the Israel Defense Forces, the continued investment in the settlements and territories, and the refusal of the Israeli government to enter serious negotiations, which would give hope and renew growth.

Taxes. In the new economic plan there is a promise of lower income taxes. But in the meantime, they are going up. Finance Minister Benjamin Netanyahu argued that raising municipal property taxes (arnona) by 5 percent was in order to "correct a three-year-old distortion that stemmed from erosion in the taxes due to the inflation rate." Well, that is simply wrong. The municipal taxes have risen by more than inflation in each of the years mentioned, so there was no justification for raising them. Interior Minister Avraham Poraz agreed with this - before he was made minister. The government finally agreed to raise the taxes by 3 percent, an added slap in the face of the downtrodden citizen. And the treasury plans to put the boot in further by raising contributions to pensions by 2 percent for workers and 1 percent for the employer. This is the easy way out to solve the pension funds' deficit problem. The more correct way is to replace the funds' managers, to take the Histadrut to court to get it to repay the monies it siphoned off over the years - and improve efficiency.

Deficit. Apparently, Netanyahu has not internalized the crisis of June 2002. Back then the dollar almost passed the NIS 5 mark. Prime Minister Ariel Sharon balked, summoned the governor of the bank of Israel, David Klein, and then finance minister Silvan Shalom, and pushed Klein to raise the interest rate and Shalom to cut the budget further - in order to get the budget deficit down to 3 percent of the GDP.

But Netanyahu doesn't want to learn from others. He says that he doesn't know what the size of the deficit will be this year: "However much it is, that's what it is." Somewhere else he said: "The government controls the expenditure side, but does not control the income." Well, I have news for the finance minister. He is solely responsible for the growth in the deficit. He must build a real budget that will meet the target of 3 percent GDP deficit, otherwise we will meet a worse financial crisis than we saw in June 2002. On this, the minister has this to say: "There is a limit to how much you can harm living standards and security; there is no more that can be cut." But he will learn that there is always somewhere else you can cut and that living standards can fall even further - for as long as there is no coherent economic policy.