An ancient parable tells of a young man named Jacques, whose window was broken and he was forced to order a glazier. He takes comfort in the fact that he has at least provided him with a livelihood, and city officials and politicians even see a broken window as a "contribution to the economy" because it helps the glazier's livelihood. But in practice, the money that went to the glazier was supposed to go to buying shoes.
Jacques did fix his window, but he remained barefoot. If the window hadn't broken, Jacques would have both a window and shoes, but because of the breaking, he only has one.
Politicians are artists at showing what you see (the new window) and artists at hiding what you don't see (the lack of shoes). Politicians are artists at presenting programs that benefit the public and artists at hiding their enormous cost.
The best recent example is rising interest rates. MK David Bitan, chairman of the Economy Committee, spoke out against the Bank of Israel and wants to spend government money to "fight" the high interest rates of mortgage borrowers.
Bitan doesn't understand the importance of interest. Interest rates are not an evil plot by the governor – they are essential chemotherapy in the fight against the cancer that is inflation. Yes, it has severe side effects, but the alternative is across-the-board price increases of tens of percent. Bitan refuses to see the importance of the interest rate, he only cares about criticizing and displaying the price.
Even if you look beyond his desire to treat chemotherapy rather than cancer, his proposals to "help" young couples who took out mortgages by tax points are harmful and delusional.
First, because tax benefits do not help the weaker sectors that do not reach the tax threshold, and second, because the tax benefit will have to be paid from some source. This source is young working couples who bear the main burden in the Israeli economy. In other words, in order to treat the cure and harm the war on inflation, Bitan proposes transferring money from one pocket to the other of citizens – a move that makes no economic sense. But above all, mortgage assistance is a reward for contractors and sellers, because they can ask for higher prices thanks to mortgage subsidies. David Bitan does not see the benefit of interest or the enormous price that the public will pay for his offer – he sees only the alleged benefits. In doing so, it will effectively increase the burden on the public.
His proposal to reduce VAT on food is also utter folly. While the consumer will see lower prices taken into account, the difference in taxes will have to be taken from somewhere. Reduced VAT on food means more taxes have to be taken from other places. That means more real estate taxes, more fuel taxes, more income taxes and more VAT on what is not food. Here, too, if it were not for the laws of economics, we could treat folly as a transfer from one pocket of the consumer to the other, but the laws of economics teach us that a change in taxes is divided between buyers and sellers – that is, the biggest beneficiaries will be food producers and retail companies.
The parable of the broken window was told by the French economist Frédéric in his essay "What You See and What You Can't See" back in the 19th century. Everyone will see the reduction of VAT on food, but few will see the need for across-the-board tax increases and the excess profitability that will be added to food manufacturers, importers and retailers. Everyone will be able to see "credit points" on a mortgage, but few will link it to an increase in tax brackets and a further increase in real estate and rental prices.
Of course, politicians can be accused of presenting us with magic solutions without costs, but the blame must also fall on us, because we do not demand that politicians reveal the true and high price of their benefits.
We must demand from them not only the good and visible part, but also present us with the precious and invisible parts of these plans.
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