Don't mention the budget

Today's hotchpotch of measures is far from being a coherent economic policy.

How do you put together an "economic plan"? Take the Bank of Israel's main proposals on expanding credit, add a few measures that Treasury and officials and the minister of finance discussed in the previous administration, and spice it up with some of the prime minister's ideology. That, more or less, describes the new plan's "block and boom."

That doesn't mean that all the measures presented by Prime Minister Benjamin Netanyahu and Minister of finance Yuval Steinitz today are wrong. There is a great deal of sense in the proposals on credit, including non-bank credit, that we heard today. They were conceived and developed at the Bank of Israel and by the Accountant General's department, and it is to be hoped that they bring about the desired result. The additional export credit guarantees are also a first step towards helping Israel's exporters.

In order that no-one should ask questions about the plan's paternity, a few "personal" elements were introduced into it, such as "reform in electricity, the ports, and the Israel Land Administration." When someone hears Histadrut chairman Ofer Einin expressing consent to the government's proposals in these areas, we'll know they are serious, and they can be judged on their merits. Until that time, they should be thought of as decoration in honor of Netanyahu and Steinitz.

The influence of Eini and his collaborator, Manufacturers Association president Shraga Brosh, is fairly prominent. The measures on professional training, aid to enterprises in distress, and negative income tax, originate in the dialogue these two men have been conducting for some time. For that reason, and because of the sense that this part of the plan is lip-service on Netanyahu's part, we will have to wait and see whether the proposals are implemented.

It is also important not t forget what was not talked about at the prime minister and minister of finance's press conference: the budget and its consequences. For anyone who has forgotten, the State of Israel is undergoing a period of crisis, with a worsening economic situation, without an approved budget. But Netanyahu and Steinitz took care not to mention unpleasant subjects that don't match the backdrop of "block and boom".

For that reason there is no possibility other than to rely on the reports of a NIS 20 billion cut in budget spending, half of it in the form of an across-the-board cut, together with a freeze of cut in public sector salaries. If these measures are accompanied by the tax cut announced by Netanyahu today, they mean a redistribution of incomes in Israel, with a deliberate blow to the middle class, and an increase high earners' share.

Is that necessary? Certainly not. In fact, the middle class the world over has lately displayed sensitivity and rising opposition to a series of benefits and privileges for the well to do among them. But this is Benjamin Netanyahu, and he cannot be expected to change his values, or forget his principles of faith. Perhaps his political sense told him to keep quiet about the budget, but the result is that instead of a clear, orderly presentation of government economic policy, the public is forced to make do with a hotchpotch of measures from various sources that might help and might not. No-one has yet heard about the government's intentions on the main areas of the budget, its social policy, and how the burden of the crisis will be shared.

Published by Globes [online], Israel business news - www.globes.co.il - on April 23, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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