Has Finance Minister Avigdor Lieberman gone soft? Have the barrages of criticism from all sides cracked his armor? Has he forgotten that his job is to be the tough treasurer who won’t release a single cent? Has he decided to be more of a politician and less of an economist?
Last week, Lieberman met with the editorial board of the financial daily Calcalist. He demonstrated command of the material and answered all the questions with no evasions. He said the right things about promoting economic competition, fighting centralization and reducing the cost of living.
Lieberman said we need to double the number of people working in high-tech and that he’d like to see ultra-Orthodox and Arab children entering the field, which was also good. As for housing, he said he doesn’t believe in pyrotechnics like slashing value-added tax to zero or subsidizing prices, but in increasing the supply and reducing bureaucracy. And he’s right.
But Lieberman also said some troubling things. He said he’s in favor of increasing the defense budget and raising teachers’ salaries – things he shouldn’t say. The moment a finance minister announces that he’s in favor of giving the Israel Defense Forces more money, the argument with the defense establishment becomes one about the size of the increase, whereas it ought to be about how much money the army will devote to building up its forces from its own resources, through efficiency measures and cost-cutting.
In a budget debate, every actor has to play his own part. Defense Minister Benny Gantz has to demand an increase, but Lieberman ought to say, “I don’t have it, climb down from the roof. The war in Ukraine is making everything more expensive and we’ll have to fund 50,000 new immigrants; I have to protect my reserves.”
Gantz would then produce a PowerPoint presentation showing that the threats to Israel have “gone up a level.” And in the end, they would agree on a streamlining plan for the Israel Defense Forces as well as a small budget increase, and everyone would be happy. They would have achieved both economic stability and a strong IDF.
Lieberman is also wrong about the teachers. Here, too, he shouldn’t say in advance that he favors increases. Granted, he spoke about raises for new teachers only, but the teachers’ unions heard “teachers,” which is enough for them to demand large raises for both early career and veteran teachers. After all, the unions are composed mainly of veteran teachers.
Lieberman said a new teacher earns just 7,000 shekels ($2,140) a month, whereas new employees in the banking and insurance industries earn 14,000 shekels a month. But that’s simply not true. Banking and insurance employees earn much less than that.
He also erred by considering only the salary and not the benefits. After all, teachers have a secure path for professional advancement, an annual seniority bonus, tenure, long vacations, sabbaticals and flexible work hours. It’s worth remembering that not one teacher was fired during the coronavirus years, whereas people in the banking and insurance industries can be fired easily.
But above all, Lieberman is neither the education minister nor a professional educator. The moment he talks about raises, what will the education minister say? Lieberman has left her no choice but to demand twice as much, and then the teachers’ unions will demand three times as much and the budget ceiling will be shattered.
Talking about raises creates an atmosphere of “I’ve got money to hand out,” and that sparks salary demands from all the other public-sector professions. Lieberman also has to remember that every shekel given to the public sector must be taken from the private sector, which is already groaning under the weight of taxes.
And since we’re already talking about taxes, Lieberman said at that meeting that he won’t raise them, which is good. But he also said he wouldn’t cut them, which is surprising. Every finance minister should seek to lower taxes, since this encourages growth and employment.
Toward the end of the meeting, Lieberman said the next budget will be a two-year one, for 2023 and 2024. He also said it would pass the Knesset by September 21, not December 31. Moving up the budget debate is meant to create certainty about the government’s continued existence, which would also ensure that Yair Lapid replaces Naftali Bennett as prime minister next summer. Nevertheless, a two-year budget is economically problematic.
It’s far more important for Lieberman to come to his senses and resume being a “bad” finance minister – in the good sense of the word.
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