Outgoing Finance Minister Moshe Kahlon sits down with Israel Hayom to discuss the ups and downs of his time at the Treasury, especially the economic aspects of the coronavirus epidemic, which has left over a million Israelis out of work.
Yehuda Shlezinger, ISRAEL HAYOM<
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Q: Was there anything you did during the crisis that you could have done differently?
“We should have pressed to free up the economy a little earlier. Of course, it’s easier to talk in hindsight – at the time of the outbreak no one in the world knew where it was going. We needed to make decisions in a time of uncertainty.
“Still, we prevented massive economic damage. If we had done everything the health officials wanted, we would have 3 million unemployed right now. On the Saturday we were all called in ahead of the decision on a nationwide shut-down, the widely held opinion was that we needed to allow only vital employees to work, which would have meant cutting back from 4 million workers to 600,000-700,000.
“At a meeting of ministry director generals, the opinion was that this was an act of God and there was no alternative. My ministry director general, Shai Babad, called me and said, ‘It’s not going well. They’re living in a fantasy – they want to shut down the economy and send Israel back to the Middle Ages. We’ll find ourselves with damage Israel has never seen and will take years to repair.’ I told him, ‘Don’t worry, it will be fine.’
“Before that meeting, we starting taking steps. We closed down flights, we closed event venues, and all cultural and leisure venues. We knew we were on stormy seas, but that was a moment when you realized a tsunami was about to arrive and wash everything away.
“You see that people are losing a sense of proportion compared to what was happening, but everyone is trying to scare you, showing you nightmare scenarios, and you don’t have any answer to give. They say, ‘Look at the pictures from Italy, Spain, the US, how bodies are starting to pile up. Look at the number of coffins.’ What do you say? That they’re wrong? That it won’t happen? I told Shai, ‘Stay calm, everything will be fine.’
Q: They showed you pictures of coffins, and you said, ‘Stay calm’?
“A person at the top of the pyramid has to project calm and confidence.”
Q: But weren’t you afraid?
“No. Fear is not a work plan. Yes, I was careful. I’m a cautious person, not a coward. But if you’re afraid, you freeze. If you’re cautious, you’re alert.”
Q: Did the people at the Health Ministry go too far?
“They didn’t know what would happen. Everyone looked at the data and told himself that there would certainly be a state committee of inquiry, and he didn’t want to have to explain why there were thousands of dead Israelis. So from the start there was the idea that we must not let the healthcare system reach the point where there were more patients in need of ventilators than ventilators.”
Q: You’re saying that people acted out of fear of facing a committee of inquiry.
“There’s no doubt that was there inside. Some people were afraid that the day after it was over, they would be held accountable, and decided to take the safest route of ‘I was being cautious’ and ‘I did all I could.’
“One Friday at 11 p.m. Barsi [Moshe Bar Siman Tov, director of the Health Ministry] brought up the most overblown proposal. He was sitting with GOC Home Front Command Maj. Gen. Tamir Yadai and they were planning how the Home Front Command would direct a total lockdown of the country. It reached me and I said, ‘This won’t happen.’
“I spoke with the prime minister and we came up with the term ‘closure with breathing room.’ We took care that manufacturing would continue almost at full scale. We operated reasonably and wisely. We didn’t cooperate with everyone. We gave permits to continue working. Anyone who needed to manufacture and could operate a factory under the ‘Purple Tag’ conditions – what does this event have to do with him? And if there is an outbreak among the elderly, why should I get stressed and stop 30-35-year-olds from working?”
Q: So you issued permits and acted against the directives the government issued?
“I didn’t take the law into my hands, but we exercised our judgment in the economic part of the event. We felt that the Health Ministry didn’t understand the extent of the economic damage. I don’t want to say they were ignoring it, but they didn’t realize what was happening in the Treasury.
Q: Where was the prime minister is all this? There are claims Bar Siman-Tov had his ear and didn’t let him hear anyone else.
“The prime minister has the general responsibility. He listened to both sides. The moment we saw that the Health Ministry wasn’t counting the economic cost, we got to work. There were 20-30 emergency directives they issued, and not a single one was implemented in its original form. We made changes to everything.
“At one stage I brought in all the ministers to show them the situation, and then things started moving toward easing restrictions. Two and a half weeks ago there was already a discussion about whether or not to open up retail shops. Barsi was whispering to the prime minister that it mustn’t even be discussed. He brought in epidemiologists who said that with over 10 new cases a day, it would be a catastrophe. I stood up and said, ‘This won’t happen.’
“At the end of the meeting a decision was made to try out reopening shops. Three days later we said, why some shops and not others, and opened more. We pushed to reopen schools and nursery schools, and for them to operate as normal.”
Q: Was there a way of preventing the economic crisis?
“I say, we’re in the smallest crisis of a huge story. We minimized the damage as much as possible.”
Q: Every day stories come out about business owners who are losing their businesses.
“We are one of the countries that are most generous to the self-employed. The US gave $1,500 per family. We gave out sums of 15,000-16,000 thousand shekels ($4,200-$4,500) in three disbursements.”
Q: Where did you find 80 billion shekels to pump into the economy?
“We went into the crisis with a surplus of 31 billion shekels, and we made a ‘box budget’ – a budget for a specific purpose. You allocate it, and at the end of crisis they’ll need to decide how to reduce the debt. The next finance minister will be the one who decides.
Q: How much damage will it do going forward?
“We’ll have to cut back. I assume steps will be taken, but not in the near future. I talked with Netanyahu about what would come next. I told him that first of all, the event needs to end. Then he can form an economic plan and decide about reducing the deficit in the space of a year, two years, or five years.”
Q: What do we do about a million unemployed?
“Hundreds of thousands are already back at work. We still don’t have accurate numbers, we’ll know them after they get their first paychecks and National Insurance is taken out. The more we open the economy, more people will go back to work. We also announced an additional grant that will incentivize employers to bring people back to work.
“The term ‘a million unemployed’ is incorrect. There is temporary unemployment. People are between jobs and waiting, or are on furlough. According to our projections, unemployment should automatically drop from 26% to 10%, without us doing anything. People are going back to work. By the end of the year, 80 to 85% will be back at work.
“There will also be some who will have to get used to a new reality. The job market is changing, and there will be people who will have to be retrained. We’re allocating money for that, too.”
Q: So how much has corona cost us?
“About 140 million shekels ($39.5 billion), both directly and indirectly. I hope that will be it, that there won’t be another wave.”
Q: And if there is?
“Then we’ll have to learn to live with it. We can’t lock down the economy. It’s dangerous.”
Q: Why are the health officials getting praised, and you in the Treasury are constantly being criticized?
“The Health Ministry tells people to sit at home, and I’m the one who needs to deal with the unemployed. He [Bar Siman Tov] send me ‘customers,’ stops the economy, and I’m the one who has to cope with it … What happened in the Health Ministry? They said there would be a million cases and tens of thousands dead, and ‘Look at what happened in Italy.’ In the end there were only 250 dead – each one representing an entire world, and the heart breaks over each of them, but these aren’t the numbers they were talking about.
“So when their predictions didn’t come true, it was seen as a success. But the economy isn’t like that. It doesn’t matter how much compensation I award the public – I won’t be able to compensate for the harm done. Israel’s business sector GDP is 180 billion shekels ($50.7 billion) a month, there’s no way of making up for [the loss of] that.”
Q: You’ve seen the protests by the self-employed, seen people’s pain.
“I understand them. A person builds a business with their own hands, whether he’s selling falafel or is an accountant or a real estate agent. He makes a nice living for 30 years, and one day, he loses his life’s work.”
Q: Understanding is great, but what are you doing to help?
“From the first day we were providing billions. The first 10 billion shekels went to health care, and then billions more to people who signed on for unemployment and furlough benefits. These are people who got money deposited into their bank accounts. Then we transferred money to the self-employed in more disbursements. We gave everything we could.
“The self-employed need additional services. Their problem is more extensive, even before corona. We need to regulate their rights, like unemployment benefits, the paid grief leave they don’t get, and more.”
Q: What grade would you give yourself for your term as finance minister?
“I did what I believed, and I believed in what I did. Kulanu is the only party that lived up to everything in its party platform. That is thanks to the political power I arrived with, 10 seats. That’s important, especially in the Finance Ministry.
“Everything I committed to doing – like the Mehir Lemishtaken [subsidized housing for first-time home buyers], putting a stop to land profiteering, salaries for soldiers, non-bank-operated credit cards, family benefits, reducing social discrepancies – I did.
“Unfortunately, Israel Katz will receive the results of corona, but before that, he’ll get a strong economy with good numbers and the potential for a huge economy with 3.4% unemployment and amazing growth.”
Q: Israel’s poor haven’t disappeared.
“Of course there are poor people. Poverty is numbers and measurements. In a country like ours, with socioeconomic discrepancies, we need to talk about the extent of poverty. A person who earns 2,500 shekels a month is poor, and so is someone who earns 1,500. In my term the number who earn 1,500 dropped and the number who earn more increased.
“In general, we need to battle poverty through education. That’s what the country needs to do. The more educated you are, the more possibilities you have.”
Q: What do you most regret?
“That the discrepancies weren’t reduced enough.”
Q: Housing prices are still very high.
“The insane rise in prices we saw here this past decade has been checked. We made the dream of 80,000 couples [to own a home] come true through Mehir Lemishtaken.”
Q: Still, a young couple can’t buy an apartment.
“I agree. A home is the biggest purchase a person makes in his life … But today it’s a lot easier to buy a home than it was four years ago. No doubt.”
Q: The Coronavirus showed us that Israeli healthcare system is in bad shape.
“When I was finance minister, the health budget increased by 60%. The ‘basket’ of subsidized medications rose from 300 million shekels to 500 million shekels. There has never been such an influx of funds into the health care system like there’s been in the past five years … There is also a plan to add at least 2,000 more hospital beds. The health care system will add what is lacking.”
Q: You were No. 2 on the Likud list. Maybe you could have been prime minister.
“I never wanted to.”
Q: Do you still have the same opinion of the Likud as you did when you founded Kulanu?
“No. The Likud is different from what it was five years ago. It’s a lot more pragmatic. Look at the first 10 on its list – these are people who represent the views I am familiar with in the Likud.”
Q: In the April 2019 campaign, Kulanu tried to portray the image of “a clean Right.” You talked about Begin, about defending the High Court of Justice. Maybe that didn’t work with right-wing voters?
“There was a lot of criticism from my collages on the Right about our talk of defending the Supreme Court. There were a lot of cowards on the Right who used me because they were afraid to defend the court. I’m not sorry about what I said. The Supreme Court is the last stronghold for the weak. Even when I was disappointed by some of its decisions, I still think we need to uphold the rule of law.”
An article in today’s Sun, UK, says that researchers at two British medical schools have conducted surveys that indicate that the UK’s current rate of CV-2 infections, and deaths, is below the level of an ‘epidemic.” One estimted that the total number of deaths in the UK from CV-2 is .025%, of the total number of infected people. The other study concluded that the death rate among the infected was even lower 0037%. They included in their study people who had not got sick or had only mild symptoms, but who did test positive when tested, or who had antibodies for the virus when tested, indicating that their system had fought off the infection.
Makes it seem like the British government should end the lockdown sooner than they intend doing.
Kahlon as Finance Minister showed he did not understand the basic laws of supply demand. He tried to solve the housing problem with gimmicks instead of simply making lots of land available for building and allowing the builders to build were they want to and thereby sorting out the housing situation.
Barkat has such a plan that Bibi also endorsed. However, now Bibi is short of portfolios to hand out so Katz not Kahlon is going to be the Finance Minister. Which is too bad for Israel.
The secondary real estate market will now have many more units available for sale in short order. The rental market already has much more favorable pricing. Since due to Corona-Virus there is no tourism, people who have been renting short term to tourists via Airbnb have switched to renting to Israelis for lower prices for longer terms. This will likely accelerate. Some renting at lower prices will need to sell. Also some who have lost there jobs may have to sell their apartments.
There will opportunities for some of the New Olim (new immigrants) to buy apartments at lower prices in the near term and next year or two.
Kahlon is 100% wrong about the court. His comments about the economy and the lockdown are very illuminating. Most Israelis think he was an excellent finance minister. Apparently one reason that israel did on the whole very well in preventing many deaths from the contageon was that the healthcare system had been strenghened over the past several years by more budget allocations. But obviously, a lot more work needs to be done in that area.
Apparently, Kahlon was helpful in preventing the total lockdown of Israel’s economy that would have destroyed the country completely and would have forced the entire middle class to emigrate. THe healthcare bureaucrats and even the military chiefs were awful panic-mongers, just as they were and are everywhere else.
However, his “It will be OK” line was stupid. Israelis seem extremely fond of this useless reassuring line. OK, maybe, for a mother trying to comfort a frightened child. But for a senior official talking to other senior officials, it is a false reassurance.