1. Headlines, as usual, often have a tendency to get carried away, there is a tendency to over-dramatize, especially economic headlines. I do not underestimate what happens to the average citizen: indeed, many feel it in their pockets. Inflation erodes wages, price increases are hitting every sector, and the government has not taken advantage of the tens of billions in tax collection surpluses to lower taxes, on the contrary: it has raised taxes. The political crisis does not bode well, and global trends point to a slowdown. It will take many months for decisions to be made, if any.
However, it is very important to see the overall economic picture of the world and not get carried away by blacks – it is never advisable to do so. I have decided to bring here the words of the economist Michael Tavor, who is occasionally quoted in Tori, who explains in a fluent, equal to every soul, what forces are now operating in the economy. I also occasionally added my own comments.
“Anyone who still reads newspapers or browses the news sites is familiar with the exaggerated headlines in any field whose main purpose is to attract attention.
“I will try to present from the bird’s eye view the main trends in the global economy in a slightly calmer way. By the end of 2021 there was talk of insane high-tech prices. In the style of the year 2000 (the correction did come, but not a collapse in the style of the year 2000. The Nasdaq index has lost about 30% since the beginning of the year, and there is a decrease in the flow of money to Israeli venture capital from abroad, but there is still a nice flow of money – 9.6 $ 1 billion since the beginning of 2022 compared to about $ 26.4 billion in all of 2021 – at present).
“It should be remembered that by 2021, especially in the storm, the world felt that the corona crisis was quite far behind, but the consequences of the crisis are still evident in queues at ports, where loaded ships are waiting to unload after the crisis of 2020 and soaring sea freight prices.
“The effect of transport prices is starting to put pressure on prices, although the concern is not very great and everyone is sure that this matter will be resolved gradually within a year (agricultural commodity prices and maritime transport prices have started to fall, and this is very good news. Etc.).
“Then came Putin and the war in Ukraine. In any case, the results of the war are large cuts in crops, from wheat to other grains, legumes and other agricultural products, along with cuts in minerals, steel to rare materials for the electronics industry, and of course cuts in gas and oil imports.
This shortage created pressure on prices, and we got inflation called ‘cost inflation’, as opposed to ‘demand inflation’. There is never any difficulty in replacing Ukraine and Russia with food supplies, minerals and fuels. It is only a matter of organizing and a willingness to deviate, even temporarily, from regulations, laws and regulations by some Western countries.
“For example, the United States has been able to produce oil from oil shale that has been sufficient for all its needs and even for export. When Biden was elected president, he surrendered to the left wing of his party, and oil production was reduced. The same is true of the production of rare metals. The US has paid its farmers subsidies in the billions, so that they will not grow crops because large surpluses have been created. Therefore, the US, Canada and Australia can easily provide a replacement for Russia and Ukraine.
“It is not clear to anyone how the Russia-Ukraine war will end and when, but when it comes to the shortage of chips, food and fuel, it is quite clear that in 2023 it will come very close to an end and price levels will start to fall.
“In the meantime, we expect about two years of higher prices, which in some cases will lead to a reduction in consumption and layoffs, ie a halt in global GDP growth and perhaps even a slight decline alongside price increases. Such a phenomenon is called ‘stagflation’. “In almost every scenario of the Russia-Ukraine war, the world will recover and in 2024 it will grow again, unless a new dangerous conflict develops, such as between China and the United States, for example. Prices will then go down, especially energy prices, and GDP will go up.
“In Israel, GDP in 2021 rose abnormally to the world following a combination of three factors, two of which are registered in Netanyahu’s name: the gas and vaccines outline. The third is the momentum that high-tech received this year as part of the same bubble we mentioned, “.
Benjamin Netanyahu (Photo: Mark Israel Salem)In 2022, another serious political crisis developed and a split was created between two groups that did not allow anyone to run. Therefore, there are two problems that are getting worse – it is doubtful whether a solution will be found: the first is the problem of traffic jams and the difficulty of managing and transporting people and goods; And the second is housing prices that generate potential for a social crisis, which will hamper any future economic growth. “We can only hope to find a way out of the political tangle, and the country’s leaders will begin to do what is needed in an emergency format: accelerate the metro and increase the supply of apartments while reducing bureaucratic barriers. Without all this, “Whatever it is.”
And I commented in conclusion: In Israel, our situation is relatively good, not that it comforts any of the citizens. According to Bank Hapoalim, while in the world the economic data are beginning to justify the fear of a recession, in Israel it has not yet been expressed. Credit card sales, for example, grew at an annual rate of 6.1% in March-May, and services purchases increased twice as much. Data from the manufacturing sector are also good: industrial production rose in February-April at an annual rate of about 15%, and working hours rose at a high rate of 6.3%, which indicates a shortage of working hands.
Israel is probably not immune to the slowdown that is now appearing in the world, but there are several factors that are moderating and delaying the negative effects from the world. First, inflation here is lower because of relative stability in electricity prices (and these are about to rise). Second, the construction industry is in peak activity with more than 70,000 construction starts expected this year. Even if we see a slowdown in the purchase of new apartments later this year, these are projects that have already been implemented.
The bottom and most important line: we must and need a functioning government, a government that will do what is required of itself – lower taxes.
2. On Thursday, when the economic newspapers are already preparing for Shabbat and there is no practical possibility of inserting news, the Ministry of Finance chose to publish the government’s financial statements. The report devotes, as usual, a key chapter to the issue of budgetary pensions. Every year another detail is added, every year the numbers continue to swell, and all this illustrates how much the budgetary pension problem is in terms of “the dogs are barking and the caravan is passing”.
As every year, I let the numbers speak for themselves from the financial statements. Unfortunately, this government, like its predecessors and its successor, did not dare to touch this bomb. It is a pity, because this bomb draws tens of billions from the state coffers every year, and will continue to pump increasing amounts in the coming decades.
NIS 1,022 trillion – For the first time, the state’s commitment to budgetary pensions has crossed the NIS 1 trillion threshold. Wait, wait, that’s not really everything. While this is the official number that appears in the government’s financial report for a budgetary pension commitment for both retirees and active workers, the official number does not really reflect the full picture.
First, the number does not include entities that can be called “supported entities”, ie municipalities, universities, government companies and more, which contribute a significant addition to the already huge commitment. All of these bodies are indirectly budgeted through the state budget, so they are not counted in the official report.
Second, the financial statements mention that this huge cost does not yet include the mediation pension in the military and other things. The “bridging pension” is basically a budgetary pension in disguise. Instead of paying the military retirees the “regular” budget pension, after it was abolished, they invented a new patent – “mediation pension” named after him. This pension is paid from the date of early retirement until the official retirement age, ie for an average of 20 years. Only then does the regular pension fund move to pay the pension.
What happened is another example of time wasted in the Israeli bureaucracy: Six years have passed since the agreement between the Ministry of Finance and the Ministry of Defense, which set new rules for calculating the bridging pension, and data on the bridging pension are not available. This pension. And the amazing thing about this whole story is that throughout the years that the “mediation pension” was introduced, no one thought of putting the amount into the government’s commitments.
Bottom line: in a conservative estimate, the total commitment of the budgetary pension in Israel with the supported entities and with the bridging pension amounts to NIS 1.2-3.1 trillion. It is a blown number, but it must be said that it is spread over the next 50 years, and every year part of it is “swallowed up” in the state budget. But this part is growing and is quite substantial, especially in light of the increase in taxes for citizens in the last year.
NIS 26 billion – this is the cost that the state budget will bear on a budgetary pension in 2021 (an increase of about NIS 2 billion from the previous year). This amount will increase over time and, according to the Knesset, reach NIS 46 billion by 2040. This is, of course, a weight that weighs heavily on the state budget, which means one thing: the younger generation, especially the middle class, which pays most direct taxes in Israel, subsidizes And will subsidize the ever-increasing budgetary pensions of the older generation in the public service, referring mainly to the pensions of senior civil servants who have long since passed every threshold of logic.
Who is the budgetary pensioner? The peak of the budget pension is Dayan with about NIS 92,000 gross per month. Judges star in the list of the best, both among retirees of the judiciary and among retirees of the police and IPS, and the average budgetary pension benefit among judges is about NIS 44,000 per month. If a judge has served no more than five years, he enjoys 7% per annum; if he has served more than five years but not more than eight years, 50% of the salary determines; and if he has served more than eight years, 50% of the salary determines another 3% For each year of office he has served for more than eight years, the total amount of benefits for a retiring judge, say, towards the age of 70, is at least NIS 10 million.
Of course, these conditions are not relevant to young judges, so it creates a dramatic gap between young and old and causes frustration within the system.
The list also stars members of the defense establishment, with a peak pension of about NIS 71,000 gross per month (most likely a former chief of staff or one of the former heads of the Mossad).
It is important to note that the average retirement age in the military is very low compared to judges, which is why pensions are lower than those in the judiciary, although not significantly so. The distribution of benefits in the army is as follows: 25% of retirees receive a budgetary pension of up to NIS 8,800; 50% of retirees receive a budgetary pension of more than NIS 12,800; While the other 25% receive a budget pension of more than NIS 17,700,000 gross. Again, as mentioned, these are benefits provided at a relatively young age, very far from the official retirement age (67).
Note the average benefits paid in 2021 and the average retirement age: in the IDF, the average benefit this year is about NIS 16,900, and the average retirement age is about 45; police officers and guards – about NIS 16,100, and the average retirement age is about 55; Security without the IDF – about NIS 19,800 per month, and the average retirement age is about 58; And elected officials – MKs, ministers and deputy ministers – about NIS 23,200, and the average retirement age is 70. For judges and judges, the average pension in 2020 was about NIS 44 gross per month, while the average retirement age was 65.
Moreover, every military or police officer who rejoins the civil service receives two coupons – both a budgetary pension and a current salary – whether he serves as a Member of Knesset, as a minister, as a deputy minister or in another position in the civil service. This means that Bnei Gantz, Orna Barbibai, Miki Levy, Yair Golan, Yoav Saglovitch, Elazar Stern, Avi Dichter, Miri Regev and many others receive two coupons each month (before tax coordination) – both a budget pension slip and a slip for their job. There is no offset, just as there is no offset to former Attorney General, retired General Avichai Mandelblit.
Orna Barbibai (Photo: Noam Rabkin Fenton, Flash 90)And who is left behind? Teaching staff with an average benefit of about NIS 8,400. It just shows the unreasonable gap between teachers and teachers and judges and military personnel. Unfortunately, we will continue to live with the distortions of the budgetary pension (and its funding) even after this budget, which is passed on for generations to come.