Thou Shalt Balance the Budget

The Finance Minister has an obligation to face Netanyahu and propose a plan to raise corporate taxes, this year, immediately.

"Thou shalt not murder," "Thou shalt not commit adultery," "Thou shalt not steal" and "Thou shalt not covet" are among the Ten Commandments given to the Jewish people at Sinai. The budget division at the Finance Ministry has an eleventh commandment: "Thou shalt not exceed thy budget, neither on the expenditure side nor on the revenue side."

The people at the budget division are not prepared to debate this commandment. It is absolute and like the Ten Commandments unconditional.

steinitz - February 9 2011

The question is whether Finance Minister Yuval Steinitz and budget director Udi Nissan will observe the 11th commandment or thumb their noses at it. They know the punishment for violating any of the Ten Commandments is severe, but they should know that failure to observe the 11th is also harsh: severe damage to the economy and to our national resilience and stability.

On Sunday the cabinet approved budget cuts to fund a set of benefits that it had granted two weeks ago. It had lowered public transportation fares, requiring NIS 300 million cuts elsewhere. The cabinet approved flat, across-the-board spending reductions of NIS 150 million, affecting the budgets of all of the ministries except social welfare, education and defense.

The cuts only affect purchasing, not staffing levels, and they don't eliminate unnecessary government operations. This is a bad sort of budget reduction that will not hold up over time.

British Prime Minister David Cameron recently carried out major austerity cuts in his country's budget, but they were of an altogether different kind: the real kind. He slashed government spending by closing departments, eliminating duplication and laying off 490,000 government employees! Netanyahu and Steinitz don't have the courage to carry out similar steps (even on a much smaller scale ).

The second part of the Israeli government's cuts (the other NIS 150 million ) are coming from reductions to funding for the National Roads Company for the development of interurban highways. It's a cut that will hurt outlying area of the country and therefore also affect future economic growth, but highways don't cry and highway intersections don't plead for help.

And that's nothing compared to the situation on the revenue side. On Saturday evening a battle raged on the subject between the budget division staff and the politicians. The conflict was so fierce that the draft of the cabinet resolution only emerged at the last moment, at 7:30 Sunday morning. The argument was over the revenue side of the 2011 budget.

When they reduced the tax on gasoline two weeks ago, Steinitz and Netanyahu were applauded. They wanted to stop at that, however, and not find funding for the reduction.

"Maybe during the year a miracle will happen and there will be a tax revenue surplus," they thought to themselves. Economics is not built on miracles, however, and their move was also in contradiction to the 11th Commandment. It's as if they were creating something from nothing, because it is impossible to know a thing about what to expect in the course of the year from only the beginning. And the Middle East is also in flames, so who knows how it will affect us.

In the end, it was resolved that in January 2012, the tax brackets for taxpayers earning over NIS 14,000 a month will not be adjusted and that Steinitz would submit a resolution to the cabinet within 10 days on "filling the hole" for 2011 while "maintaining the budget balance in each of the budget years." That means that a decision was put off again.

Many commentators and economists are currently debating all kinds of tricks to increase tax revenues, and everyone is talking about increasing taxes on individuals or corporations. They have forgotten why we have come to this point. They have forgotten about all the great, unprecedented budget riders that Steinitz and Netanyahu passed out to all the government ministries on every possible subject, for every possible purpose, including money for yeshiva students and yeshivas, without differentiating between the wheat and the chaff. Everyone got what they wanted and now they wonder why the need arose to raise taxes.

Steinitz's policy of generosity added the handsome sum of NIS 15 billion to the 2011 budget. If he had sufficed, for example, with the respectable addition of NIS 10 billion, none of this chaos would have ever occurred.

But now the horse is already out of the barn, and the Finance Minister has an obligation to reduce the damage. He should come to his senses and face Netanyahu and propose a plan to raise corporate taxes, this year, immediately. He really has no alternative. He has to obey the 11th commandment.