Draft Budget for 1985 Fiscal Year Runs into Barrage of Criticism

Finance Minister Yitzhak Modai presented his Cabinet colleagues with a draft budget for the 1985 fiscal year yesterday and ran into a barrage of criticism for not cutting enough.

The proposed budget amounts to $22.9 billion, about $59 million below the budget for fiscal 1984. Minister of Science and Development Gideon Patt called it “an exact copy” of the 1984 budget at a time when severe slashes in government expenditures are needed. Modai insisted his budget represented a substantial cut inasmuch as the government overspent last year’s budget by about $1.8 billion.

Israel’s request for major increases in U.S. economic aid has been put on “hold” by the Reagan Administration pending evidence that Israel has a detailed economic program of retrenchment.

Secretary of State George Shultz made clear to Premier Shimon Peres in a letter last month that the Administration would not consider Israel’s request for an additional $800 million in economic aid until the Israelis instituted large budget cuts.

Modai’s draft budget does call for steep cuts in government price subsidies for basic goods, smaller public expenditures and the elimination of about 4,000 jobs in the public sector. It also prognosticates continued government deficits and reduced living standards.

But none of the ministers had a good word to say for Modai’s efforts yesterday. Defense Minister Yitzhak Rabin, who has conceded that cuts in the defense budget are needed, was furious that cuts were made in the draft budget without prior coordination with his ministry. He called that “irresponsible.”

Patt asserted that Modai’s budget showed a lack of economic policy. He said the proposal covered almost 95 percent of Israel’s gross national product (GNP). According to Patt, the government will be spending practically everything that is manufactured, bought and sold in the Israeli economy. The budget debate will be continued later this week.