The Fat Man Will Get Fatter and the Thin Man Will Collapse

The serious crises now plaguing Iceland, Greece, Spain and Portugal stem from governments that wanted to be good guys. All they wanted was to increase spending a little, to be good to the people, to be "average." Until the crisis came. Is Israel in store for the same?

The finance minister has seen the light. After a year on the job, he has reached the conclusion that everything done before him in the area of economics is no longer appropriate for our times. That's why we have to change direction and stop these petty discussions about cutting the budget, streamlining the ministries, reducing expenses and reforming the government. From now on, the motto is: Government expenditures must be increased, because "fat" is beautiful.

The finance minister thinks this is bad enough, but Budget Director Udi Nissan is of exactly the same opinion. He has completely forgotten that his real job is to be the bad-guy treasurer, the one who doesn't give a cent and doesn't distribute a single drop. Suddenly, even Nissan has become the good guy who wants to increase spending in order to solve problems. He even knows exactly where to increase the budget and by how much - which is the diametric opposite of his job.

Nissan and Finance Minister Yuval Steinitz are calling this entire dangerous change a "revolution." But the truth is that it isn't a "revolution" at all. It's simply a populist increase in spending. It's not even new. Years ago, there were also politicians and economists in the public sector who pushed to increase budget expenditures.

The Bank of Israel's research department is a good example. There are economists in that department who know how to say only one thing: give, give and give again. Because anyone who receives an exorbitant and infuriating salary cannot demand cuts of anyone else.

Ministers and MKs also want more. They want to have something to distribute.

But always, ever since 1985, the treasury's budget division stood firm as a rock in the face of all these pressures and managed to subdue those who wanted to harm the economy. Until now. Because now, even Nissan has jumped on the bandwagon. He, too, wants to increase government spending.

For the past 25 years, we had a courageous budget division that waged a tough battle to reduce the government's share of the economy. That is how we managed to get the "fat man" (the public sector) to go on a strict diet that improved its health. But let there be no mistake: It is still seriously overweight.

That is also how the "thin man" (the private sector) was able to grow and develop. That is how the Israeli economy grew stronger and succeeded in surviving serious crises while at the same time raising Israelis' standard of living. That is how we survived the most recent global crisis with a minimum amount of pain.

But now, the skies are darkening. Everything learned in the past 25 years has been thrown into the trash bin. Now Steinitz and Nissan are trying to rewrite the economics textbooks, with nobody to stand up to them and shout: The emperor has no clothes!

Prime Minister Benjamin Netanyahu himself was the one who set the rule (in the 2004 budget) that the budget should grow by no more than 1 percent. After him came prime minister Ehud Olmert, who raised the rate to 1.7 percent annually. But that was still reasonable, because it matched the rate of population growth.

But this does not satisfy Steinitz and Nissan. They want another NIS 2.5 billion to waste, and for that purpose they have invented a truly absurd "professional" formula, whose only aim is to increase the growth in spending from 1.7 percent to 2.6 percent, in order to achieve the goal: another NIS 2.5 billion.

It's quite sad to hear Nissan say that we have arrived at our destination, because public expenditure is now down to 42 percent of total spending, and is supposed to drop to 40 percent (which is the "Western average") within three years. But since when do we want to be "average"? Does Nissan want our pilots to be "average"? Does he want our high-tech to be "average"? Why doesn't he aspire to have the economy be excellent rather than "average"?

Nissan and Steinitz claim that without increasing spending, the quality of public service will suffer. They apparently think we are total idiots. After all, they themselves talk about the egregious waste in the defense budget, the superfluous administrative levels in the Education Ministry, the money being wasted on the new railway plan, the corrupt salaries in the Bank of Israel, the surplus of manpower in government ministries, and so on and so forth. If they know that the government is wasteful, that means the problem is not a shortage of money but poor use of it. So why throw out more billions?

Nissan does not deny that there are large islands of inefficiency in the government. He even says that he spends 90 percent of his time dealing with these islands. So why isn't he shouting all day long about this one issue, instead of talking about additions to the budget?

It's also sad to see the political naivete of Steinitz and Nissan. They think that Defense Minister Ehud Barak, Interior Minister Eli Yishai and all the other good guys will now applaud and say: That is how things should be done. But in reality, it's clear that the NIS 2.5 billion will now become the new minimum, and the battle for another increase will begin from there.

The serious crises now plaguing Iceland, Greece, Spain and Portugal stem from governments that wanted to be good guys. All they wanted was to increase spending a little, to be good to the people, to be "average." Until the crisis came.

Doesn't Greece's fate frighten Nissan, Steinitz and Netanyahu?