It could be the economy, don't be stupid
Opinion: This week's government cuts are not enough to stop the growing budget deficit - what is needed is an immediate tax hike to repair the damage; failing to heed the governor of the Bank of Israel on this could cost Netanyahu the next elections
Governor of the Bank of Israel Amir Yaron has warned the government that the growing budget deficit will endanger the stability of the economic market.
“The projected deficit is of over 4.5% of GDP, and this is assuming that the economy continues to grow without any setbacks. This is a very large budget loss even on an international level,” said Amir.
The solution, according to Yaron, is to raise taxes to fund the public need for transportation, healthcare and the education system.
Karnit Flug, Yaron's predecessor, repeatedly warned against tax cuts and even recommended an immediate tax hike to offset the deficit she anticipated - and was “punished” for it.
Flug was right, but the government run by Benjamin Netanyahu ignored her warnings and those of other economists.
Even today the government refuses to face the harsh reality, claiming that nothing can be done until a freshly elected government is in place.
A spurious excuse: when the budget derails, the government, even a transitional one, must take decisive action to avoid any further damage.
The budget cuts approved this week are not the correct response to the looming crisis. If anything, they are a tiny Band-Aid on a massive open wound.
Yaron describes these cuts as “modest steps in relation to the budget deficit problem.” The main challenge is the execution of the inevitable decisions on cuts to programs and ministries that Netanyahu and Finance Minister Moshe Kahlon are leaving for the next government.
But Israelis are listening to the Bank of Israel and worrying. They fear a hit to their quality of life, making it entirely possible that, unlike in the first election of 2019, the economy will play an important role in the second one.
Maybe it will even have a deciding role – if the opposition steps up and manages to convince voters that those who broke the economy really cannot be expected to fix it.
