Over time, every state accumulates laws and regulations that serve the interests of certain groups and not the public in its entirety. Politicians often neglect taking them on, as they don’t have sufficient time or energy to deal with powerful interest groups. However, in times of emergency and crisis, matters are different: there is public legitimacy for reforms intended to bring great advantage to the public as a whole in the long run, even if they come at a painful cost to certain sectors in the short term. Every great crisis creates opportunity.

Israel is no stranger to taking advantage of such situations. In 1985, a big stabilization program was carried out, preventing an economic catastrophe and creating the infrastructure for longstanding economic growth. In 2003, when Israel suffered through the global dot-com bubble crisis and the second Intifada, then Minister of Finance Benjamin Netanyahu led massive cutbacks in government expenses, including child allowances and assured income; carried out important reforms in retirement age and pension funds management; and returned the market to a path of rapid growth.

Today too, our country is in desperate need of reforms to generate economic momentum:

1. Flexibility in Education – Only one month ago, significant drops in Israel’s international rankings in science and mathematics reminded us of the poor state of our education system. Legislative changes can reduce the excessive power of workers’ organizations, particularly the teachers’ unions, and enable the promotion of important reforms to center the education system’s purpose on students’ benefit and the improvement of their achievements, rather than on the benefit of teachers’ organizations.
2. Haredi Education Funding – As of today, the State subsidizes education for a growing community of people who will not be able to finance the next generation in their turn. Budgets can be denied to any institution that does not teach subjects such as math and science, thus both enlarging the state budget and incentivizing the type of curriculum that grants Haredi boys the tools to integrate successfully into the modern labor force.
3. Decreasing the Number of Ministries and Ministers– The large number of cabinet ministries is not only a waste of money but also engenders degraded public service due to the multiplicity of interfaces citizens deal with, and increases the amount of issues that fall between two stools and projects that never get off the ground. Moreover, the quality of deliberation and decision-making in a 19-member government surpasses that of a 38-member one.
4. Equalizing budgetary and accumulative pension payments – Those with budgetary pensions receive a guaranteed allowance worth a lot of money, but they set aside only 2% of their salary. Equalizing contribution terms would increase both the state treasury and tax burden equality.
5. Enlarging the tax base -The Israeli tax system is full of loopholes that reward groups who have, at some point in time, gained excessive political power. Eliminating these exemptions and replacing them, where necessary to assist those in need, with allowances, can increase government revenue, encourage employment and entrepreneurship, and reduce unjust discrimination between different groups.
6. Shutting down housing benefits programs– programs like the ‘Buyer Fixed Plan’ (Mechir Lemishtaken) and ‘Apartment at a Discount’ (Dira BaHanacha) cost the public tens of billions of shekels; failed to increase the amount of initiations of construction projects; and encouraged many people to move to locations and apartments less suited to their needs, all while subsidizing randomly selected couples over others.
7. Transition to direct support for agriculture – Israel currently supports its farmers through indirect and inefficient means: through import and competition barriers that lead to increased foodstuff prices and sporadic food shortages. The framework for a reform replacing such measures with direct support was already finalized with the previous Minister of Agriculture but has yet to be advanced.

These are only several examples; many other reforms are possible. However, instead of incorporating any of them, the state budget being promoted is focused on measures that will harm future growth, such as raising the VAT, raising income tax and social security, taxing undistributed profit and taking only moderate steps to trim spending such as a slight reduction in public sector salaries and lateral cuts. Even the few reforms that made it into the draft (canceling the VAT exemption on incoming tourism, eliminating the capital gains tax exemption for Keren Hishtalmut investment funds, and a moderate reduction in the inequality between recipients of budgetary and cumulative pensions), fell by the wayside as the bill progressed to the Knesset, due to pressure from interest groups. There is no creative source, no growth-oriented reform, no treatment of the root causes of problems that were politically difficult to address before the war.

This is a shame. We are in difficult times, and the people are giving their all. They deserve better than this. The Prime Minister and the Minister of Finance still have the ability to correct course and lead the economy toward economic and social prosperity, if they so choose.

(First published in Hebrew on N12)