Finance minister pledges help for fictional middle-class ‘Mrs. Cohen’

Israel must not become like Greece or Cyprus, says Yair Lapid, as treasury works to overcome ‘monstrous overdraft’

Finance Minister Yair Lapid (photo credit: Yonatan Sindel/Flash90)
Finance Minister Yair Lapid (photo credit: Yonatan Sindel/Flash90)

Finance Minister Yair Lapid showed that he hasn’t lost any of his writing flair Sunday, offering up his vision for an empowered middle class in a Facebook post reminiscent of his days as a star columnist.

Employing the embracing rhetoric perfected during years of crafting his popular weekly columns in Yedioth Ahronoth, Lapid promised the public — particularly the middle class voters who ushered him into office with a surprising 19 Knesset seats in January’s elections — that despite tough financial times in the immediate future, “the day will come that the people who carry the country on their back discover they are no longer the ATM the state automatically turns to every time it has a problem.”

“I want to talk about Mrs. Cohen,” Lapid recalled telling his senior Finance Ministry staffers, referring to a hypothetical middle class woman who, according to him, “shoulders Israel’s economy by waking up, going to work and paying taxes.”

“‘Riki Cohen, from Hadera,’ I explained, ‘is a 37-year-old high school teacher. Her husband works a mid-level job in a high-tech firm. Together thy make just over NIS 20,000 a month (about $5,500). They have an apartment and vacation abroad once every two years, but have no chance of purchasing an apartment for one of their three children,'” Lapid wrote. “‘We sit here,’ I said, ‘day after day, talking about balancing the budget, but our job is not to balance Excel spreadsheets, but to help Mrs. Cohen. We need to help her,’ I added ‘because she is the one who helps us. It is because of people like Mrs. Cohen that the state exists.'”

Lapid wrote that the “treasury boys” (as Finance Ministry staff members are often derogatively referred to) were enthusiastic about the topic, each one bringing notes full of suggestions from home and each one thinking of their own Mrs. Cohen — be it their mother, sibling, friend, or spouse.

“We talked about the education Mrs. Cohen’s children receive (and about the fact that there is no long school day in the school she works at); we discussed the quality of service she receives when entering a government office; about how her children are not certain they want to remain living in Israel; about the fact that the health system is collapsing around her and that she cannot purchase a multi-pass for public transportation,” Lapid wrote. “We talked about how Mrs. Cohen knows that if her home is broken into, the officer will just fill out an insurance form; about her need for community life and about how there is no sufficient competition in the financial services she receives; about how she feels like a fool because everyone around her evades taxes while she pays everything.”

“As far as I’m concerned, Mrs. Cohen is the reason I came to the Finance Ministry. The Israeli economy — any economy for that matter — is based on the middle class. If you enable them normal living standards and make them feel like the government is behind them, they will flourish and the country will flourish along with them,” Lapid wrote. “True, this is a difficult period and it’s also true that in order to close a NIS 30 billion overdraft (over $8 billion) tough decisions need to be made. I will make those decisions because I refuse to let us turn into Greece or Cyprus on my watch…. but if we don’t protect the middle class, the economy will freeze and the overdraft will grow.”

Lapid concluded by promising that under his leadership, “Mrs. Cohen will discover her country’s gratitude.”

Lapid’s message received mixed results. While many applauded his plans and expressed appreciation for a finance minister who prefers people to spreadsheets, some pointed out that his hypothetical Mrs. Cohen was in fact better off than most of the country.

“Lapid must recognize that for millions of Israel’s poor, NIS 20,000 a month is a wet dream,” said Shas MK Eli Yishai. “The finance minister must ensure the welfare of all of Israel’s citizens and not only that of his constituents.”

Labor MK Isaac Herzog said there were many more Mrs. Cohens who made only NIS 5,000 ($1,400) a month.

In the face of a burgeoning budget deficit that Lapid has dubbed a “monstrous overdraft,” the treasury has been mulling a series of planned cuts and other measures, including raising the mandatory retirement age and increasing the general sales tax.

Building on a plan put into place before the new government was formed on March 18, the Finance Ministry may seek, in the new budget, a phased increase in retirement age, from 67 to 70 for men, and from 62 to 65 for women, to begin in 2020.

The ministry also plans to raise VAT (value-added tax) to 18 percent, a 1% increase from the current 17%; to raise corporate taxes; and to institute measures to improve enforcement of tax collection.

Mandatory IDF service for men may also be reduced from 36 months to 28. Service for women would remain unchanged at 24 months.

In addition to an announced NIS 5 billion cut in the defense budget, the Treasury also plans to cut some NIS 3 billion from public sector wages and NIS 3.5 billion from government child allowances.

Large public works projects will also be put on hold, including the widening of Highway 1 (the main Jerusalem-Tel Aviv route), the construction of the Tel Aviv light rail, the expansion of the national rail system into areas outlying the big cities, and reconstruction work in the wake of the devastating 2010 Mount Carmel fire.

Treasury officials recently said that Israel was facing a larger deficit than originally thought — 4.2 percent instead of 2% — necessitating further tax raises and ministry budget cuts. Lapid warned that painful cuts would be necessary in order to balance Israel’s budget.

The new government has six months to present a national budget and get it approved by the Knesset, a highly contentious issue that was a key factor in the dissolution of the last government and the resulting elections.

Last week, former finance minister Yuval Steinitz defended the state of the economy that he left to his successor, noting that any deep cuts that Lapid would have to implement were the result of spending prompted by protests from the social justice movement.

Steinitz emphasized that there was a difference between the state of the economy and the state of the budget, telling Israel Radio that “the economy is in good condition… compared to the rest of the world; it’s the budget that’s in a bad way… It’s important to not confuse the state of the economy with the budget.”

Steinitz blamed the budgetary woes on the social protest movement that swept through Israel in 2011, demanding affordable housing for a wider section of the populace. The protest, which filled the streets of Tel Aviv with tens of thousands of people in the summer of that year, led to the establishment in August 2011 of the Trajtenberg Committee, which was tasked with finding ways to alleviate socioeconomic problems. The committee’s findings included a range of recommendations covering housing, defense cuts, and state-funded education from the age of three.

Steinitz said that pressure from the social protest drove the committee to make recommendations that, although commendable, required NIS 10 billion ($2.69 billion) cuts to be implemented.

“Those billions need to be balanced,” he said. “It’s true that there are enormous commitments in the budget, which is why the cuts are deeper than usual.”

Gavriel Fiske contributed to this report.

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