Israeli News: A Daily Analysis Meetings in Cairo and Damascus

A Daily Analysis

May7, 2009-New Israeli Budget Causes Controversy

The Israeli Treasury released the new budget today. It was met with universal condemnation by the whole spectrum of Israeli politicians. The budget proposal and the accompanying bill called "Chok Ha-s'darim", which literally translates as the "law of arrangements" has shone a light on a budget process that is so bad, it makes the process of electing an Israeli Prime Minister sane by comparison.

Israel's State budget is written by the workers of the Finance Ministry, with little or no input from any of the ministries impacted. In the current process, the workers of the Finance Ministry decide all levels of the budget of each of the ministries, including all of their staffing. Thus, employees of the Finance Ministry make all the key decisions for the positions that will be funded in each and every ministry; as well as what will be spent funding all programs. The employees making these decisions have no real knowledge in the field for which they are making those decisions. Finance Ministry employees are primarily men (and very few woman) in their late 20’s and early 30’s who have received degrees in economics or in some cases, an MBA. Many began their careers at the Ministry of Finance and have no experience beyond their field. What makes this situation even worse, is that after the budget is presented, the government then has a short time to discuss the proposal (usually one marathon session, after cabinet ministers have read a 300-page document that even economic experts say would be impossible for them to comprehend in such a short time span). To make this process almost laughable, one of the first acts of the new government was to approve the concept of a two year budget. This action was taken to increase the stability of the government. Since, if a budget is not passed the government falls. Now, the new ministers, who have been in office for only a few weeks, find themselves having to approve a budget for which they have little or no input; a budget they will be committed to for a two year period.

Furthermore, once the budget goes to the Knesset, the Knesset has no independent method to review the budget. There is no Israeli equivilant to the Congressional Budget Office, nor is there the equivalent of the Library or Congess or large Congressional staffs with expertise in different areas. Knesset members each have three aids, all are young and inexperienced. To make matters even worse, together with the budget is the "law of arrangements", first passed in the mid-eighties during Israel’s economic crisis. The "law of arrangements" was used for what was supposed to be a one-time method of passing all of the needed economic reforms, as part of one package. Now, it is used as a method of bringing about all types of “reform” the workers of the Finance Ministry wish to bring about. An example of one of these "arranged" items is the decision to force Israeli elementary schools to compete with one and other for students. This might possibly be a very good idea, but there will be no hearings in the Education Committee of the Knesset on this topic, and there will not even be meetings in the Education Ministry to discuss the impact of this decision. It will merely be part of an omnibus bill that needs to be passed with the budget.

These bills are the work of the employees of the Finance Ministry. The Prime Minister and the unqualified Finance Minister singed off on the measures in the bill. They reflect many of their priorities.

The new budget calls for a number of changes: decreasing the period of unemployment insurance, decreasing child allowance, child leave and requiring a co-pay for hospital visit are among the surprises included in the bill. Also, included was the dropping of the earned income credit promised just two weeks ago by Netanyahu (as he unveiled his new economic plans that included tax cuts.) The budget plans, which to some degree were necessitated by the need to cut 42 Billion Shekel from Israel budget, were received with almost hysterical condemnation. The head of Bituach Leumi (Israel’s social insurance agency) called the proposed plan the end of the social net in Israel, as we know it. The Deputy Minister for Health from Yahudut Hatorah called it "shtuyot" (hogwash), mockingly suggesting that after asking patients to pay 50 shekels a day for hospitalization, regardless of their economic circumstances, they should ask students for 10 shekels a day for school and ask people to pay 50 agorot each time they cross at a crosswalk. Even Likud ministers decried the plan and stated that to pass buget like this was "not the reason we came back to power." By night time tonight in Israel, the Prime Minister had already asked the Finance Ministry to go back and change their plans.

There can be no question that Israel is going to have to make hard choices when it comes to the budget. The deficit has ballooned due to falling tax revenue. Israel is not the United States and cannot run a deficit that becomes too big. This method, however, does not seem to be the most effective, nor the most democratic way of going about it.