Israel Matzav

Huh? Lapid slashing spending on Haredim but increasing deficit?

You thought that there was so much spending on Haredim that if it was cut to zero, Israel's budget problems would magically be solved and our taxes could be cut. Here's the ultimate proof that Yair Lapid's pounding the Haredim is populist hooey. Lapid, now our finance minister who doesn't understand anything about economics, is actually increasing the deficit substantially while ensuring that anyone who remains Haredi will be living in poverty.

Finance Minister Yair Lapid submitted a proposal to the government to raise the 2013 deficit target to 4.9% from 3% of GDP, adding an additional NIS 19b. to the annual deficit. Lapid hopes to pass the proposal, which leaked late Wednesday night, at Sunday’s cabinet meeting.
  
In addition to increasing deficit targets, Lapid’s plan also ups the limit on how much the government can increase spending from one year to the next, allowing him to spend 2.2% more in 2013 than the previous year. That would give him room to spend NIS 6.5b. more than in 2012, according to figures cited in the proposal [Note: calculations using Treasury figures put the spending increase closer to NIS 6.3b.]. If the plan were approved, the 2013 budget would hover at around NIS 293b.

In 2014, Lapid would return the deficit limit to 3%, which is also higher than the current 2.75% target for that year. That change would swell the 2014 deficit an additional NIS 2.6b.

The move is likely to meet with disapproval from Bank of Israel Governor Stanley Fischer, who has argued that raising the deficit beyond its set levels is harmful to the economy’s long-term stability. Specifically, Fischer has said that higher deficits reduce faith in the government’s ability to keep its finances in order, raise future debt payments, which are higher for Israel than other similar countries, and rob the nation of tools for stimulating the economy should it come upon hard times in the future. Fischer has conceded, however, that the deficit was likely to overshoot its target this year.

But what about all that money Lapid was going to save by forcing the Haredim into poverty? There are two possible answers. Either the Haredim weren't getting all that much money in the first place, or Lapid is planning on drastically increasing handouts to the secular population.

What could go wrong?

Labels: Haredim, Israeli economy, Yair Lapid

posted by Carl in Jerusalem @ 1:21 AM