The Bottom Line / When Inflation Isn't Everything

Every year, Ha'aretz conducts a survey among leading figures in the economy with regard to their expectations for the next year's inflation rate.

Every year, Ha'aretz conducts a survey among leading figures in the economy with regard to their expectations for the next year's inflation rate. The survey has been going for 12 years now and has become a tried means of gauging the business sector's forecasts for inflation.

The survey from just over a year ago revealed an average forecast of a 2.3 percent inflation rate for 2001; in practice, however, the consumer price index rose only 1.4 percent. From the 90 businessmen who took part in the survey, only two thought inflation in 2001 would amount to 1.4 percent; and they were Danny Biran, president of Koor, and Doron Kochavi, a partner in the accounting firm of Kost, Forer and Gabbay (Ernst & Young) - this year's winners.

An interesting point to note is that over the past three years, the average forecast coming out of the Ha'aretz survey has been higher than the actual rate of inflation recorded in the specific year because the public has taken time to digest the fact that inflation has truly been eradicated. Furthermore, the difference between the forecast and the actual rate gets smaller each year, as the public's faith in low inflation grows and grows. In any event, we can declare today that inflation is dead.

But inflation is not everything. The benefit of a low inflation rate should be enjoyed together with rapid growth and falling unemployment; today, however, we are in caught up in one of the worst periods, with 250,000 individuals or some 10 percent of the workforce out of a job, and zero growth.

The problem is that 2002 doesn't appear to hold much promise either.

Despite all the undertakings of Prime Minister Ariel Sharon, the Negev Law was passed, giving all residents of the area, including the rich and well-established, tax breaks at the expense of the taxpayer - benefits that will cost the state NIS 500 million a year.

The Large Families Law is no longer facing the ax either. This law will result in the transfer of a further NIS 400 million to the ultra-Orthodox sector, to encourage more children, so that there will be more poor, so that we will have to give them more money each year.

And for dessert, Sharon and Finance Minister Silvan Shalom are raising taxes, despite their promises not to. When George Bush senior said he wouldn't raise taxes ("Read my lips"), he paid with his own job, when he did. But here anything goes - no punishment to fit the crime, not yet anyway.

And if that wasn't enough, United Torah Judaism received promises from Sharon and Shalom that the faction's "special funding" would become a fixed clause in the national budget - a move that every other finance minister had opposed. This promise will cost a sum of NIS 200 million, which will grow each year, as the government has no control over the numbers of "reported students" that learn at yeshivas.

So while more money goes on more political payoffs, allowances, the ultra-Orthodox and the settlements, there is not enough in the kitty for the important things - for infrastructure or battling unemployment. So is it any wonder that unemployment reached a quarter of a million, or that the public rushed to buy dollars, because these are natural reactions to insecurity and the public's loss of faith in the prime minister and his finance minister.