Opinion & Comment
Economic Prospects for the New Government

At the ceremony marking the change in ministers at the Finance Ministry, the incoming minister Binyamin Netanyahu was all business. He said that the main immediate task is to bring the Israeli economy to a safe harbor, and that Israel can still expect rough sailing in the immediate future. He noted that the entire government, including the prime minister, must pitch in to get out of the mess and then ended simply: "Chevra, let's get to work."

No one knows for sure if Sharon offered Netanyahu the Finance Ministry thinking that he would refuse it or if he genuinely wanted him as Finance Minister, but it is clear that Netanyahu is the strongest character who could have been chosen for the job that is the most critical for the incoming government. Sharon does not like economics and probably does not understand it particularly well. Netanyahu has university training in economics.

The government spending figures for February were just released and they were terrible -- much worse than expected. There was a deficit of NIS 2.8 billion ($580 million) caused mainly by a severe shortfall in tax revenues. Customs revenue, income tax revenue, sales tax revenue, construction fees -- all are coming in much lower than originally budgeted. Another, much smaller, factor was accelerated spending in preparation for the war on Iraq.

Altogether, the combined deficit for the first two months of the year was the amount originally budgeted for the first four months of the year. In order to hold things down to near the levels budgeted, the new government has to find about NIS 12 billion somewhere. This is after already cutting about the same amount over the past year.

Everyone agrees that taxes cannot be raised. But no one sees how that much money can be cut from the already lean budget. Whatever is done, it will cause financial pain in many areas.

Given the secular government, there is little doubt that Torah institutions will suffer sharp cuts. The truth is that they would certainly be cut back, given the overall situation, no matter who is in charge even though the discretionary part does not add up to all that much -- maybe a total of no more than NIS 500 million. Even if it is all cut out, it will not provide much relief for a country that has to cut twenty times that amount. Still, in such a situation any government would be forced to cut support of Torah as the perennial scapegoat, and we know that from the current government we can expect no mercy.

A very important component of the modern economy is the confidence that the business community has in itself, in the future and in the government. On this score, Netanyahu is off to a good start: the stock market and shekel both rose after he agreed to become Finance Minister. It means that the economy will probably be receptive if he presents a believable plan.

Many commentators say that no economic recovery is possible without progress in the peace process. This seems to be a mixture of political conviction and wishful thinking: the belief that the Oslo peace process is the best path for Israel and the hope that it will be renewed. Other observers think that there is little connection between the two, and that it is definitely possible for the economy to grow even without Palestinian agreement.

It is for us to remember that "parnossoh shickt der Ribono Shel Olom" and that our main job is to keep the Torah world on track. Our needs are not that great and Hakodosh Boruch Hu has a lot of resources.

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