Finance Minister Yisrael Katz last week presented the outline of the budget he plans to give to the cabinet and Knesset for approval based on his ideas for how to keep the economy afloat during the continued coronavirus crisis.
But just three days later Prime Minister Benjamin Netanyahu announced in a broadcast that he had directed the Finance Ministry to prepare an entirely different program designed to help people who have lost their jobs and businesses that have been forced to close due to the pandemic.
Immediately afterward, Katz hurried to say he was holding the first round of discussions with the treasury staff about a wide-ranging program to help wage earners and the self-employed through the first half of 2021. “As it appears right now, in contrast to previous expectations, the coronavirus crisis won’t end before a vaccine is discovered in about another year’s time. So, we have to plan for how the economy will function in the meantime,” the announcement said.
Whether Katz was party to Netanyahu’s announcement or he heard about it like everyone else from the prime minister’s news conference, there is one thing no one can argue about: The budget outline that the Finance Ministry presented just last week completely ignores the actual state of the economy and the fact that the coronavirus is here to stay at least until a vaccine is found.
In Katz’s budget outline, there is nothing proposed for the most beleaguered sectors of the economy that have been shut down for months. No one relates to the workers and business owners in sectors that won’t be reopening anytime soon nor offers them any kind of help. That’s the case even though no one disputes that sectors such as tourism, aviation and live entertainment are not going to be revived so long as the coronavirus continues to spread.
No one has offered any solutions to the hundreds of thousands of Israelis who are still unemployed or the small and medium-sized businesses struggling to survive. The jobs program is based on the 2030 Committee recommendations, which were written before the pandemic struck when Israel enjoyed full employment. Its focus was on bringing more ultra-Orthodox men and Arab women into the workforce and raising the pension age. But today, the issue is how to avoid chronic unemployment among the young and how to help those over 55 who have lost their jobs.
This response characterized by irrelevancy wasn’t born last week. It has been present throughout the crisis in the treasury’s tight-fisted policies. On paper, billions of shekels are being offered, but in practice, disbursements are being allocated too late or in some cases not at all.
The extension of unemployment benefits was made at the last minute, just as some 262,000 Israelis were due to go off the rolls and be left with no income. Grants to small and medium-sized businesses were made only due to public pressure and are being awarded at a drip-drip pace by a slow-acting bureaucracy. Aid to businesses in the sectors that have been shut down by the coronavirus arrived only after a long period of uncertainty. The 6 billion shekels ($1.75 billion) planned for encouraging employment is widely expected to go to the businesses that need it the least.
The bureaucracy has not only made it difficult for businesses but has undermined the work of the ministries themselves. Take for instance the extra 1.35-billion-shekel allocation approved at the beginning of June for encouraging employment and upgrading Israel’s human capital. The extra money means nothing because the original 800 million shekels for the program approved months ago hasn’t been allocated.
Netanyahu and Katz promise to spend billions of shekels, but the bureaucracy continues to operate on the principle that there’s no budget, which formally speaking there isn’t because the Knesset never passed a 2020 budget. All the extra spending has to get special approvals from the Finance Ministry’s accountant general. The result: Even when the money has been allocated, it hasn’t been spent.
At the bottom of all the irrelevancy characterizing government policy is the inescapable conclusion that the Finance Ministry still operates on the assumption that when the economy reopens everything will be okay. Its top officials have yet to internalize the new reality – that the coronavirus isn’t going anywhere and that Israel has to create a new normal rather than wait for the old normal to return. It won’t.
The treasury isn’t alone in failing to see what is happening around it. The Health Ministry has failed to create a plan that would enable Israel to cope with the pandemic while enabling people to earn a living The Education Ministry didn’t use the weeks that the schools were closed to devise new ways of continuing to teach. Principles and teachers were left to their own devices.
The proposals that have been made for addressing the new reality have been neglected. The National Economic Council, for example, directed the ministries to draw up strategic plans for an assortment of crisis scenarios. But only a few ministry directors general went ahead and did that; most said they preferred to wait until the current crisis is over and things return to normal. In many cases, the staff of ministry strategic units were deemed “nonessential” and sent home during the lockdown.
Dealing with strategy is regarded as a luxury, something unnecessary. Thus even though the working assumption was that the second coronavirus wave would arrive only in September, no preparations were made for it. When it came earlier than expected, there was no plan officials could pull out of a drawer.
Throughout it all, Netanyahu has insisted that his personal affairs, namely his court fight over corruption charges, won’t prevent him from managing the affairs of state. But that doesn’t seem to be the case. He takes a break from dealing with his personal affairs only when everything in the country has collapsed. Then he returns to the affairs of state and declares that will take the steps that should have been taken months ago.
If policymakers had internalized that what had been is no longer, if they had engaged in systematic and long-term measures and if ministers and ministries had worked together, they could have assembled a forward-looking program back in March and April. It would have removed the cloud of uncertainty, built confidence in the government and avoided a horrific waste of money. But for that to have happened it would have been necessary to put aside petty politics for the good of the country.