Steinitz, left, and Netanyahu
Steinitz, left, and Netanyahu. Higher income taxes will help pay for lower gasoline taxes. Photo by Alon Ron
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When Benjamin Netanyahu became prime minister in 1996, he inherited an economy that was boiling over, with inflationary pressures and a large budget deficit. When he looked into the reasons for this, he discovered that in 1994, the Finance Ministry signed a series of extremely generous wage agreements with public-sector workers, giving them raises of dozens of percent.

Netanyahu, shocked by the discovery, declared from the Knesset podium that Avraham Shochat, who served as finance minister in Yitzhak Rabin's government, wasn't even fit to run a corner grocery store. Shochat was offended, but he learned the lesson: During his second term, in Ehud Barak's government, he was an excellent finance minister who guarded the public till.

Now, we are watching a rerun. Netanyahu and Finance Minister Yuval Steinitz are on the front lines in the face of enormous salary demands. The doctors want a 50 percent raise, while the social workers, who received a 25 percent raise, aren't satisfied and opted to continue their strike.

How did this happen? Why is everyone dissatisfied? After all, when inflation is running at 3 percent a year, these increases constitute huge raises in real terms, of the sort private-sector workers can't even dream about.

It happened because over the past year, Netanyahu and Steinitz repeatedly patted themselves on the shoulder while telling us from every possible platform that growth is surging and the economy is in excellent shape. They thereby created high expectations, and now they are reaping the fruits of what they sowed.

The saga of excessive wage agreements actually began under Ehud Olmert's government. In 2007, elementary school teachers obtained a 31 percent raise. But that was in the context of a reform that also required them to work more hours and stay in school longer.

Next came the university lecturers. They went on strike for 90 days, threatening to cause the cancelation of an entire semester. So in January 2008, an agreement was signed that gave them an exceptional 24 percent raise - without their having to give anything in exchange.

In November 2008, a ruling was handed down in a dispute with the doctors that had gone to arbitration. The arbitrators said that if the university lecturers received a 24 percent raise, the doctors ought to get at least that much, "because they didn't strike." What does the lecturers' work have to do with that of the doctors? But in any case, that is how the magic number became sanctified: 24 percent.

Government attorneys saw this and embarked on their own lengthy strike. Netanyahu couldn't handle the pressure and went for the miracle cure: arbitration. I'm already willing to bet that the arbitrator, retired judge Steve Adler, will arrive at the same magic number: 24 percent.

But the record was set this week, by the social workers. After a two-week strike, the treasury offered them a very hefty raise of 25 percent. The chairman of the social workers' union, Itzik Perry, said it was an excellent agreement. Ofer Eini, chairman of the Histadrut labor federation, said that all three of the strikers' goals had been achieved. But they still feel oppressed, because that's the atmosphere Netanyahu and Steinitz have created: an atmosphere of "there are no limits" to what can be obtained.

In October 2008, Steinitz signed a general wage agreement encompassing all public-sector workers. Following some changes that were made recently, this agreement gives public-sector workers an 8 percent raise over the next four years. Even this was too spendthrift and generous. Previously, the norm was to give public-sector workers a raise of 1.5 percent a year; now, that has been increased to 2 percent - which translates into billions of shekels.

In light of the atmosphere that has been created, the doctors decided to go for the whole pot and demand a 50 percent raise. Steinitz says privately that nothing could be less justified than the doctors' demands. They, he says, are certainly not underpaid - and they also have the option of seeing private patients in addition to their public-sector job. Therefore, he will not agree to give them more than what all public-sector workers got (8 percent), unless they agree to start punching a time clock.

But Leonid Eidelman, the chairman of the Israel Medical Association, wasn't born yesterday. He's already preparing public opinion for a strike. For now, he's confining himself to meetings with the treasury and talking about the destruction of public medicine. Next will come sanctions, and finally the strike. But then, at the last minute, he'll be summoned to the prime minister, and a moment before the hospitals are shut down, Netanyahu will sign another arbitration agreement that will ultimately result in a raise of ... 24 percent.

When that happens, everyone will understand that the public coffers are wide open, and new demands will pour in from every side. And when that happens, it will become clear that our prime minister is not merely unfit to manage a corner grocery store. He's not even capable of running a kiosk.