Stimulus Package / Even Houdini Couldn't Have Pulled This Off

Even the great magician Houdini couldn't have pulled this one off. Not only did Roni Bar-On present a gargantuan NIS 21.7 billion plan - he did it without increasing the budget by one shekel. Not one. How did he do it? Sleight of hand? Illusion?

First of all, he put together all the brilliant minds at the Budget Department at the Finance Ministry. They labored and slaved for weeks, harnessing their greatest powers of invention in order to sate the lion while leaving the lamb alive and kicking. Meaning, they had to give the politicians demanding that "something be done" their pound of flesh, while on the other hand, they didn't want to increase the government's targeted deficit for the year 2009, which is already large and dangerous enough.

The Budget Department people pulled off the trick with the help of several gambits.

1. That amount, "NIS 21.7 billion," isn't the right amount. Most of the projects in question were already incorporated in the 2009 budget. The actual increase is about NIS 4 billion, maybe NIS 5 billion, which is another (and much more reasonable) story entirely.

2. Part of the amount is merely fleshing out "under-execution" of the 2009 budget, which hasn't passed the Knesset yet, not is it likely to.

3. Another part consists of "permits to charge," which means, carry out works today, pay tomorrow, without any actual expenditure in 2009.

4. Part is based on spending by government companies such as the Airports Authority and Israel Electric Corporation, which isn't in the budget anyway, but Bar-On counted in his economic Stimulus plan.

5. And one more trick: Bar-On is using the NIS 1.5 billion reserve for coalition agreements. That action diminishes the room parties have to extort the government when negotiating to join the coalition.

The bottom line is that the NIS 245 billion budget for 2009 stays NIS 245 billion. No increase in spending even though Bar-On himself said yesterday that his plan is "unprecedented in scope."

Actually, it's a small plan that won't pull the economy out of the big hole. It won't reverse our track from down to up. It doesn't even address the acute problem of the credit crunch weighing on the business sector.

Bar-On's plan is a political one intended to gag critics. That won't happen. But the plan does have two important upsides. One is that it didn't breach the 2009 budget despite populist efforts by Knesset Finance Committee chairman Avishay Braverman and Histadrut labor federation leader Ofer Eini to do that very thing. And it also sustains the important process of tax cuts.

What should have been done, though?

Taxes should have been brought down much more. Corporate tax, today 27%, should have been lowered to 20%, while marginal income tax should have been cut from 47% to 40%, while spreading the tax brackets for the middle class wider. Those would be steps that stimulate economic activity. Those would be steps that prevent job losses. Those would be steps that increase tax revenues. The 2009 budget priorities should have been completely changed, turning it into an emergency budget that supports growth. More should have been allocated to roads, to water and sewage systems, to telecommunications, to research and development, to professional training, and to a platform to grant credit. This should have been financed by slashing the Defense Ministry budget, reducing the Education Ministry's excessive overhead. Allowances and public-sector wages should have been frozen.

But no such great program was presented yesterday. The crisis evidently isn't grave enough. The treasury will now try to push through its little plan, and that will be hard enough in our political jungle, where each is a law unto himself, running alone in the primaries, and happy to gobble up Little Red Riding Hood, Granny and anybody else in his way.