It is difficult not to agree on one thing - Prime Minister Benjamin Netanyahu knows how to make a speech. He knows how to tell a story, weave a fable, and take old ideas, refurbish them, give them a fresh coat of paint and sell them as new.
He did this well this week at TheMarker's "100 Most Influential People in Business" conference, presenting a thought-out economic policy. "You have to produce more than you consume," he said. "Otherwise you will quickly have a bloated deficit, a collapse or bankruptcy." Forthright words.
He likewise explained that the most important thing in economics is growth, because this creates sufficient resources to provide security, education, health and welfare. He stated that the private sector is responsible for growth, which is why the public sector must be slimmed down. "The competition between the world's economies is similar to a race run by partners. The ("lean") private sector runs with the ("fat") public sector on its back. Therefore, it is not enough that the public sector become thinner, the private sector must become stronger," Netanyahu said. Therefore, taxes must be lowered, the budgetary policy must be responsible, the budget must be restrained and the deficit must be low - like in 2003.
Like in 2003? Which country is he talking about? Is this the same Netanyahu?
This person who spoke about a diet for the "fat" sector set up the largest and most wasteful government in the history of the state. Thirty ministers and nine deputy ministers - the exact opposite of the 18-person government during his first term. This person signed, merely half a year ago, irresponsible coalition agreements with the Shas and Labor parties that cost NIS 3 billion. This person who spoke about a social revolution agreed to increase child allowances, even though this affects the desire to work and will only make the poor families larger and poorer.
Netanyahu also caved in and relinquished the plan to impose Value Added Tax on fruit and vegetables even though he knew this was the right economic step, and he also increased the budget by 3 percent. This is in complete contrast to his move in 2003, when he increased the budget by just 1 percent. Netanyahu even violated the "physics of economics" and presented a biannual budget with tremendous deficits - in other words, more consumption than production.
The package deal he signed with Histadrut head Ofer Eini (which should rather be called a "damage deal") does not freeze public-sector wages, and thus the fat sector is growing fatter and the lean sector is getting weaker. Netanyahu also agreed to 12 labor laws that change long-established arrangements and harm the private sector. He even relinquished the essential defense budget cut.
And then, when the budget expenditures started to swell, he also raised taxes. This is exactly the opposite of what happened in 2003. He raised the tax on labor, in the name of populism, in order to "take something from the rich" as his economic adviser Uri Yogev now says. He also increased employees' National Insurance payments, raised VAT and imposed indirect taxes on fuel, water, cigarettes and alcoholic beverages. Is it surprising therefore that growth is now 1 percent and not 5?
Netanyahu also spoke about the importance of reforms, but concentrated only on his "agrarian revolution." A marketing genius, as we said? He spoke about bringing the periphery closer to the center by building a network of roads and railways, privatizing 4 percent of the Israel Lands Administration's lands, and shortening the building permit process. That is the right direction. But what about the economy's other bottlenecks - the seaports, the airports, the Israel Electric Corporation, Mekorot Water Co., local councils? After all, the treasury handed the government a thick volume of needed reforms, none of which were passed.
Netanyahu's strategic change stems from the fact that he believes his failure in the 2006 elections (12 seats for Likud) stemmed from his cuts and "decrees" in 2003. But he is mistaken. His failure was political - the split in the Likud and Ariel Sharon's new Kadima party, which gave hope for peace in the Middle East. It was particularly in economics that Netanyahu built an image of success, as someone who led the sagging economy to growth. His public credo comes from saving the economy in 2003.
But Netanyahu thinks otherwise. That is why he cancelled every treasury "decree" so demonstratively; that is why he has embraced Ofer Eini; that is why he expanded the budget; that is why he is not talking about significant reforms that could annoy large unions. In short, the opposite of 2003.
With deep regret, it has to be stated that the revolutionary Netanyahu of 2003 no longer exists. Now we have a new Netanyahu. The 2009 model is looking for consensus, wants to be pleasant and sociable, and does not dare to annoy a soul. His aim is to survive. His dream is to finally win the public's love.
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