How did Lapid do as finance minister?
Analysis: Fired by Netanyahu and unlikely to be the same position of power after the next elections, we take a look at the Yesh Atid leader's performance at the helm of one of the most important government ministries in his freshman year in politics.
The budgetary and economic differences between the prime minister and finance minister were fabricated, marginal and mostly preposterous. There is no ideological dispute between the two over the future image of Israel's economy; the country would be more or less privatized in any event.
The obstacles to mutual understanding could have been easily removed, especially after the finance minister hinted Tuesday at his willingness to compromise - even on his flagship legislation of zero- VAT on new apartments.
Hence, the decision to dismantle the government and embark on the subsequent electoral process was down to the whim, if not capriciousness, of one man - Prime Minister Benjamin Netanyahu. Actually, the Netanyahu family and its close allies in Israel and abroad.
Israeli elections, it should be noted, are very cheap, thanks to public funding for the parties running, severe restrictions on fundraising and the efficient work of the election commissions. There is no basis for the claim that a lost work day on Election Day will lead to a loss of billion or two in gross domestic product. The actual economic impact of one such day is negligible and soon passes.
So what balance of achievements and failures does Yair Lapid leave behind? Well, it's a very short list - his stint in the treasury was not long enough to allow for a serious examination his suitability for the job. From his predecessor Yuval Steinitz, Lapid inherited a budget prepared for 2013, with difficult decisions on cuts and taxes that had been postponed because of the elections. He dealt with most of them, carefully and wisely, and managed to finish the year in far better budgetary situation than the gloomy predictions had foretold.
But Lapid was effectively finance minister only for part of the year, and had only begun to orient his way through the maze of Israel's economy. 2014 should have been "his" year, the year of Lapid, but it was twice disrupted – firstly by the most prolonged military operation in Israel's history, the 50-day Protective Edge, and now again by the storm of early elections. These two dramatic external events have a huge impact on the performance of the economy.
Another difficulty in providing an objective assessment of Lapid as finance minister is the fact that so little time has passed since the legislation he initiated was enacted. One clear example of this is the Law on Equality in Sharing the Burden, whose effectiveness will only be assessed in a few years.
And thus we have a brief, partial, subjective and not at all exhaustive look at the balance of Lapid's term in office as finance minister. On the minus side, there is first and foremost a severe slowdown in economic growth, down to half of the growth rate of 2010 and 2011. Added to that is a steep decline in productive investment and the continuing climb in housing prices.
Also in the minus column are the increase in VAT, a regressive tax that mostly affects the weak, and the ongoing downturn in the high-tech industry. In this column too is the disturbing decision not to implement most of the recommendations of the Committee to Fight Poverty, and the crisis with economists over the zero-VAT on new apartments.
Nor can one ignore the redundant and immature insistence on half-baked ideas at the start of his term, born out of lack of knowledge and lack of experience. And at the end of his term, Lapid fell into the political trap laid for him by Netanyahu and the political - not economic – rise in the dollar exchange rate.
On the plus side, one must first register the further unexpected decline in unemployment. This was followed by the relatively comfortable budgetary outcome for 2013 and 2014 and he did not oversee a rise in the ratio between the gross national product and the state deficit, as so many had predicted. Also worthy of note are the limits he placed on remuneration for executives in finance companies, and the additions and exemptions given to Holocaust survivors. The Law on Equality in Sharing the Burden and the avoidance of further tax hikes, despite professional pressure from the governor of Bank of Israel, also earn ticks in his plus column.
Lapid also gets points for newly effected changes in food imports and his apparent willingness to raise the minimum wage, not to mention his reconciliation with the treasury's upper echelons, as a parting act of love. Nor should one forget his signature, along with the local authorities, on plans for massive construction of subsidized residences.
The recently departed finance minister also established and accepted the recommendations of the second Sheshinski Committee on state royalties from natural resources and quickly and effectively handled the issue of compensation for residents near Gaza during and after Protective Edge. Also notable were his honest words and messages, with a strong emphasis on a horizon of hope rather than one of despair – something that carries great weight these days.
The bottom line? Please call it as you see it. But it sure sounds like a lot more than will be achieved in the months until the Knesset elections – and the months afterward too.
