It is clear that strong measures had to be taken for the
Israeli economy. The economic slowdown caused reduced
revenues from taxes for the government, at the same time as
security needs to counter the awful terrorism forced
increased spending for defense. Increased volatility in
international politics, including American military
activities and threats of military action against Israel's
enemies, require continued spending on broader, strategic
defense goals at the same time as the American technology
stock market bust was shrinking Israeli resources. The result
is that the Israeli government's income is falling just when
it cannot cut back on expenses and must even increase
them.
No one knows any way to increase the government's income --
so the only possibility is to decrease outgo. Hence the "New
Economic Plan" designed to reduce overall government spending
by some NIS 12 billion. Since the budget passed only a few
short months ago was already based on a firm awareness of
economic distress, there were no easy cuts left to make.
A large part of the savings comes from across-the-board
measures like raising the value added tax (VAT) by a
percentage point and making a universal cut of four percent
in all government departments. Yet one big chunk (over 20
percent) was achieved by reducing the child support payments
made by Bituach Leumi (the National Insurance Institute).
Politically, socially and economically, the move makes no
sense.
In political terms, the child support payments were
introduced as a fairer way to compensate parents with many
children. In the U.S., every child entitles the parent to a
big exemption and deduction in taxes. In Israel, the tax
savings from children is relatively small; it has absolutely
no effect on the father's income tax, and only a small effect
on the mother's income tax. Instead of tax savings, Israeli
parents are supposed to be given Bituach Leumi payments. This
was considered more equitable since everyone gets the same
thing; tax savings are more valuable to those making more
money anyway.
Socially, those with big families -- who will be losing the
most from the reductions in child support -- are the ones
least able to afford the loss. The head of Bituach Leumi
estimated that 20,000 families (with 100,000 children) will
fall below the poverty line as a result of the cutbacks. That
means that even before the reductions they are barely getting
by. Is it socially just to save the entire Israeli economy at
their expense?
Economically, it is a well-established principle that money
given to the poorest sectors has the biggest effect for the
whole economy. When planners want to stimulate an economy,
they know that it is important to put money in the hands of
the lowest economic rungs, since they will spend it fastest.
It certainly makes no sense to take money away from the
poorest people now that the economy needs all the stimulus
that it can get.
The only motive that remains is "ideological": that someone
in the Finance Ministry wants to harm the chareidim, who make
up a good part of the large families and who are identified
with large families in the public mind. Such motives are
improper, to say the least, in a public servant, and are
certainly unjust when all the other arguments so strongly
oppose such a move.
At the moment, implementation of the cuts are pending a court
decision in a suit brought against them by Arab families and
their allies.
