The Bottom Line Bibi's Three-step

1. The heir. Just like in the 1996 elections, yet again Benjamin Netanyahu is following the three-step method. This is how it works:

First you lunge to the right, to win the adulation of the right-wing extremists. Then you go halfway to the right, to win the Likud primaries. Then, finally, you break to the center, to win the election. It worked in 1996, so why not do it again?

He kicked off his third phase with an interview this week to The New York Times, in which he presented himself as Ariel Sharon's heir, a champion of Sharon's heritage. He explained that he had not opposed withdrawing from Gaza in principle.

Is there no limit to duplicity? Who fought with all his might against the disengagement plan? Who tried to trip up Sharon, to get him thrown out? Who brought forward the primaries?

Clearly, Netanyahu has nothing but contempt for the public and the collective memory. He is convinced that his three-phase attack will work again.

2. The deficit. The government has set itself a deficit target of 3 percent of gross domestic product for 2006. That was what Netanyahu decided, back when he figured that he would still be finance minister during the election year. But the deficit ran at only 1.94 percent of GDP in 2005, so a 3 percent deficit target means an expansionary policy, which is bad. That is the opposite of what we need right now.

The private sector is starting to grow fast, which is just the time to reduce government intervention in the economy. Reducing the deficit would also enable the Bank of Israel to lower interest rates. The ratio between the national debt and GDP would improve, and so would Israel's sovereign credit rating.

In other words, Ehud Olmert has to make substantial changes in the 2006 budget (which has yet to make it through the Knesset). He should slash the deficit target to 1.5 percent of GDP, preferably by slashing defense costs.

3. The revolution. With all its problems, South America was always a breeding ground for socialist revolutionaries, and indeed, several of its countries have been taken over by socialist regimes. Venezuela has been ruled by Hugo Chavez for almost eight years. Chavez is a true socialist. He believes that the government should control production and guide the economy from above. No free market for him.

Recently, the president decided to raise the price of the raw coffee beans that farmers sell to the rich coffee companies. To prevent the public from suffering, Chavez decided not to let coffee companies raise their prices to consumers.

The result was that the coffee companies stopped marketing and coffee disappeared from the stores.

Chavez fought back. He sent police to seize the raw coffee from the belligerent companies: "We shall sell the coffee at the price we set," he declared. And if that did not work, he threatened to nationalize the coffee industry.

Meanwhile, sugar, milk powder and corn also ran out, for exactly the same reasons. The president clapped price controls on them as well, and manufacturers are not willing to sell at a loss.

Thus the Venezuelan people find themselves spending hours trying to find a grocery with some coffee and sugar. The black market is flourishing. You can get anything there - at hefty prices that most people cannot afford.

That is how economies are brought to their knees. That is how productivity is ruined. That is how people stop working and spend their time trying to beat the system, to survive. That is how the poor become poorer. That is what happened in the communist bloc that collapsed 16 years ago.

From time to time, when Amir Peretz speaks to the people, he speaks longingly of the socialist revolutions in South America. Please, do not take away our coffee and sugar.