A budget paved with good intentions

There is perhaps no more apt example of the strange state of Israeli politics than the fight to pass Israel’s 2015 state budget. Now stuck in a fierce game of “chicken” between Finance Minister Yair Lapid and lawmakers, the battle for control of the budget has all the dramatic makings of a “West Wing” episode: a showdown between the naïve and the cynical, between the needs of narrow political interests and broader national policy.

The three bills that together make up the budget passed their first of three votes in the Knesset plenum on Monday night, and like all bills are now supposed to go to the appropriate Knesset committees for careful reading and amending. But Lapid and Coalition Chair MK Ze’ev Elkin (the Israeli equivalent of America’s majority whip) can’t agree on which committees it should go to.

Lapid wants the entire multi-thousand-page budget to go to the Finance Committee, where he’ll have an easier time controlling and limiting any changes to the document.

Elkin, meanwhile, wants the budget split into more manageable categories — defense, education, health, etc. — and for each section to go to the relevant committee. That way lawmakers will be better able to carefully read and debate the bills in the coming weeks.

Lapid’s budget is the most transparent, readable and succinct the Israeli parliament has seen in decades

It doesn’t help Lapid’s case that, as many MKs complained this week, the budget arrived in lawmakers’ offices over a week late, at 9:04 a.m. Monday in digital form and only around 4 p.m. in print, instead of on November 2 as required by law. MKs had just a few short hours to review thousands of pages of budget lines before the evening vote.

“There is no chance whatsoever that even one of the Knesset members and ministers will know, as they raise their hand today in the [plenum] vote, what it is they are voting on,” MK Shelly Yachimovich (Labor) complained on Monday.

Does that mean Yair Lapid, who campaigned for a “new politics” of efficiency and transparency, now wants a rubber-stamp legislature to pass his budget sight unseen?

Not quite.

A cursory look at the budget bill suggests that this image is too simple, because Lapid’s budget is also the most transparent, readable and succinct the Israeli parliament has seen in decades, if not ever.

MK Zee’v Elkin (Likud). (photo credit: Flash 90)

In the past, the state budget consisted of two bills, the budget itself and the infamous Arrangements Bill, a long, indecipherable collection of articles that no MK could really understand, but which coalition discipline demanded be passed. Through sheer density and incomprehensibility, the Arrangements Bill allowed the executive branch to pass anything it wanted on almost any subject without meaningful oversight.

Like the budget bill, this year’s Arrangements Bill overturns that tradition. It is shorter, more readable, and is divided clearly into sections and subjects to allow MKs to quickly locate relevant line items. And for the first time, the bill has been split in two – one bill with all the stipulations that have financial repercussions, and the second with those that implement structural or other reforms but do not affect the budget’s bottom line.

One example of the remarkable efforts put into making the new bill more transparent: in a first, budget items are marked by gender equality. Lapid appointed a professional committee, headed by Treasury’s Yael Mevorach, to examine how each category of spending, from public transportation discounts and scientific research grants to spending on sports or welfare, is accessible to both men and women. The committee’s conclusions were written into the budget bill itself.

It is true that the budget arrived in the Knesset late, but would a single week make a difference for most lawmakers? By law, if the budget fails to pass, the coalition government automatically falls, so when MKs vote on the budget bill, as they did when it passed 58-46 on Monday night, they vote along the coalition-opposition divide, not on the merits of the budget.

Labor MK Shelly Yachimovich (Photo credit: Miriam Alster/Flash90)

Since the budget must pass in the plenum, the real debate is in committee, where MKs can influence its contents. That’s why the budget passed in its entirety on Monday, but is now stuck on the more significant question of how it will be divided up for debate and amendment in the Knesset’s various committees. It is there that Lapid is fighting the real fight to prevent MKs from having too much influence.

Yet even here, there is more happening than meets the eye. Lapid is afraid of the Knesset’s input not because he is protecting a bloated or opaque budget, but because he has made the political mistake of presenting parliament with an unusually transparent and efficient one.

Over the years, the Finance Ministry has perfected the art of presenting the Knesset with a budget that allowed MKs to tinker without fundamentally changing government policy. This meant adding in billions in expenditures that MKs could cut, and leaving out obvious expenditures that MKs could add in — allowing lawmakers to then take credit for either saving the public’s money or rescuing their constituency from the threatened cuts. It is a game as old as the Knesset itself.

This year’s budget bills are thus a refreshing surprise. They largely avoid these games, instead offering a readable budget that tracks closely with actual government policy.

The ‘new politics’ trap

But Finance Minister Lapid has a problem. He has promised too much to too many. He vows not to raise taxes on the middle class and faces strident opposition to raising the deficit. Yet he has promised increases in spending across the board — billions more to defense and police, NIS 3.2 billion (some $865 million) more to education, NIS 2 billion ($540 million) to welfare, and more. Yesh Atid, Lapid’s political party, controls all the key domestic-policy ministries — finance, education, health and welfare — and Lapid is committed to showing meaningful improvements on these issues in the short lifespan of a single government.

He has also pushed expensive reforms intended to lower the high cost-of-living that drove his political rise. His “0% VAT bill,” a plan to cut the 18% value-added tax on young couples purchasing their first homes, passed the Finance Committee Wednesday. If it passes in its final vote in the plenum in the coming weeks, it is expected to cost the Treasury billions more.

A picture emerges of a finance minister who has given himself little room to maneuver

Lapid plans to fund these expenses, which he knows are essential for his political survival, partly through a “measured, proportionate and reasonable” rise in the deficit, but mostly through sweeping reforms across government agencies.

He is pushing for greater government oversight of the Jewish National Fund, which will include new tax income from the organization, one of Israel’s largest landowners. He promises “to force the government bureaucracy to become more efficient and cost-effective.” He supports increasing the public stake in the profits taken in by companies drilling in Israel’s natural gas fields. And, in a bill presented this week alongside the budget, he is pushing a long-planned reform of the privatization process for government-owned companies through lucrative public offerings on the Tel Aviv Stock Exchange.

Put all these together, and a picture emerges of a finance minister who has given himself little room to maneuver. He is overspending by too much to allow lawmakers any leeway to further inflate the budget. And his complicated plans for making up the deficit are critical for his ability to spend it — so he literally cannot afford to let lawmakers water down those initiatives.

The Tamar Lease natural gas rig, located 90 kilometers west of the city of Haifa, northern Israel. (photo credit: AP/Albatross Aerial Perspective)

The result is an interesting paradox: even as he has presented the most transparent and policy-driven budget in memory, the budget’s very efficiency in implementing government policy has forced Lapid to try to rob Knesset members of their most important function as overseers of the state budget.

This isn’t a small matter. Israeli society is a profoundly fractured one, with ethnic, economic and religious divisions that are reflected in the makeup of the Knesset. The rules of the “old politics” were often cynical, and the old Arrangements Bill was so opaque it was arguably antidemocratic. But the political maneuvering that characterized the budget process in past years had a huge advantage: it enabled a divided society to apportion resources in ways that took into account the country’s demographic realities.

In a society such as Israel’s, the race to centralization and efficiency in national finances could come at the cost of exclusion. If the executive branch alone sets the budget, what becomes of the Arab or haredi communities, of causes or expenditures favored by the out-of-power left, or of anyone else who may not be represented in any particular year’s governing coalition?

The current standoff — as of Wednesday, the state budget was still committee-less — is thus about something more than Lapid’s habit of over-promising, or MKs’ demand to be heard. It is a tug-of-war over how Israel’s tumultuous, divided political class governs a tumultuous, divided society.

The new budget is indeed a sign of a new politics. What isn’t yet clear, including perhaps to Lapid himself, is whether the new politics are preferable to the old.