Smells Like Electionomics

With so many government officials relinquishing such powerful positions, it makes us wonder whether they know something we do not.

Do they know something that we do not? Do they detect an incipient crisis? How can it be that they are relinquishing such powerful positions?

Eyal Gabbai, for example: He is stepping down as director general of the Prime Minister's Office, perhaps the most influential public service position, after just two years in the post and on short notice. And Udi Nissan, director of budgets in the Finance Ministry, perhaps the most important job in the country when it comes to the economy. He is also leaving after only two years. This week the name of Bank of Israel Governor Stanley Fischer was added to the list, just one year after his term was extended by five years, when he applied for the top job at the International Monetary Fund. He, too, wants to go.

Gabbai is resigning over a deep disappointment with Prime Minister Benjamin Netanyahu. He had hoped that this Netanyahu would be the same Netanyahu from his incarnation as finance minister: the Netanyahu of reform, revolution and wrangling with the state monopolies. But what he found was a new-version Netanyahu, the kind that eschews risk, does not aspire to meaningful reform and who instead of battling the unions seeks to ally with his former arch-enemy, Histadrut labor federation chairman Ofer Eini. As a result the planned reforms in the electricity sector, the seaports and the Israel Airports Authority are in stasis.

Netanyahu recently imposed on Finance Minister Yuval Steinitz a historic decision that is the essence of submission, giving the task of building and operating the new airport near Mitzpeh Ramon to the IAI monopoly instead of to a private operator and in so doing missing a one-time opportunity to break the ability of the agency's union to shut down Israeli airspace.

A month ago Netanyahu appointed former Justice Ministry attorney Moshe Dayan as civil service commissioner, over the objection of Gabbai. The job is several sizes too big for Dayan. The Civil Service Commission needs an experienced human resources management professional, someone who can shake up the public service and bring about the service and quality revolutions it so sorely needs. But Netanyahu preferred calm.

Today Gabbai admits that the greatest economic error of the past two years was the introduction of the two-year state budget and the new formula for its expansion. Before Netanyahu became prime minister the budget could only be increased by 1.7 percent. When his bloated cabinet was created, Nissan and Fischer "invented" a new formula for enlarging the budget that effectively increased budgetary spending by 2.7 percent, and beyond that in the years to come.

That was a mistake. That was bad. It leads to wasteful management practices and to increasing the tax burden, which constrains economic growth. Most of all, it leads Israel into the dangerous territory of high public debt, because big spending leads to a big budget deficit.

Given Israel's economic-foreign relations circumstances, we should have been following a diametrically opposite strategy of rapidly bringing down public debt to the range of 30 percent to 40 percent of GNP. The new budget formula precludes that.

What Gabbai and Nissan have in common is that they both watched the budgetary discipline dissolve before their eyes as election fervor began to seize the political debate. Despite the fact that the official election date is far down the road, the cabinet ministers are already putting forth new ideas and projects designed to gloss their public image in the event of early elections. The problem is that the 2012 state budget is already closed, so the funding for these items cannot come from it. It was created a year ago. But the pressure is on, and increased allocations are being approved without the concomitant cut on the other side - as in, for example, the new housing purchase benefits. The danger is exceeding the budget and slipping into fiscal crisis.

It's a danger that Gabbai and Nissan understand full well. They know that the next two years will be very political, with interminable pressure to increase spending, hand out subsidies and allowances and to knuckle under to the Haredim and the big trade unions. They will not be two years of reforms and necessary structural changes. If so, why stick around, to eat their hearts out and tarnish the professional image they built for themselves?

They gave their two years. Now they will take care of themselves, and we will be left with the gray clouds on the horizon.