Three times the Knesset Finance Committee postponed a vote on
a NIS 2 billion budget cut requested by the current
government to finance the war in Lebanon. Even though the
government supposedly controls this vital Knesset committee,
it would have been defeated had the vote been taken since two
of the government's representatives on the Committee —
Labor MKs Yachimovitch and Braverman — announced that
they would vote against the cuts despite the position of
their party.
The Finance Ministry announced that budget cuts are necessary
to finance the war, and they want to make an across-the-board
cut that will in fact harm the weaker sectors — the
sick, the elderly and of course the chareidim — the
most.
The Finance Ministry announcement, made by supposedly policy-
neutral, pencil-pushing bureaucrats, is in fact an attempt to
continue the social engineering that those faceless
bureaucrats have carried on for the past half-a-decade.
In fact, as the Labor MKs have noted, the government is
bursting with money all over in various reserve accounts, and
it could easily pay for the war without making any further
cuts.
Moreover, no one has really noted that there was a cut to the
VAT on July 1, only 12 days before the fighting started,
which reduced the yearly amount collected through VAT by
almost NIS 3 billion a year. All or part of this cut could be
postponed, thus avoiding further cuts in the social welfare
budget.
Financially speaking, the direct impact of the war on the
budget and on the economy as a whole need not be that great,
and a lot ultimately depends on how the government chooses to
finance it. Bank of Israel Governor Stanley Fischer estimated
that the ultimate cost could be as much as one percent of the
GDP, but that it may be considerably less. It was clear that
the international community saw that the fighting need not
cause a severe hit to the economy, since the shekel and
Israeli financial markets were reasonably steady throughout
the fighting. In the first half of the secular year, the
Israeli economy grew at a rate of six percent, a very high
rate of growth.
In fact, within a few days of the cease-fire, financial
markets had recovered or exceeded their prewar levels.
Foreign investors put money into Israel even during July, at
the height of the fighting. (For the year so far, investment
is running 40 percent higher than in 2000, the previous
record year.) Deals continued, including major purchases of
Israeli companies, and Israel's credit rating was actually
raised by one agency just after the cease-fire.
The most serious cost of the war was the human suffering on
all sides. About a million people were forced from their
homes on both sides of the border. Hundreds were killed and
thousands were wounded. For those who were hit and their
families, the suffering is not ended with the cease-fire.
Even if Hizbullah claimed victory, they certainly did not
defeat Israel. The scale of human and financial losses in
Lebanon are large enough that they will not seek further
"victories" of this kind in the near future. The Hizbullah
leader made this clear in an interview over the weekend, in
which he said that they never even considered that Israel
would respond so strongly to their attack, that he would not
have attacked had they known the consequences and,
consequently, they will not attack again — at least in
the near future.
Israel must certainly prepare for the next round. Whether it
takes place, chas vesholom, next month or next year or
a decade from now or even never, lessons must be learned and
preparations must certainly be made, to defend against
Hizbullah weapons and tactics. Preparation is deterrence, for
the enemy has lower expectations of true victory.
All of this costs money, no doubt. However the bill should
not have to be paid by those least able to afford it, and the
real decisions on guns or butter should be taken in the open
with the consent of those affected, and not made by faceless
bureaucrats pushing social agendas under cover of prudent
accounting.
