Finance Minister Lapid: Israel Must Ditch Reaganomics to Help Middle Class

Lapid blasts 'trickle-down economics' at business conference in Eilat. In a surprise move, Economy Minster Naftali Bennett has a cucumber up his sleeve.

Finance Minister Yair Lapid has called for an end to what he called "Reaganite" economic policies, saying it was failing the country's youngest workers.

Thirty-year-olds today are the first generation whose lives are worse than those of their parents. This must change, he told the Israel Democracy Institute's Eli Hurvitz Conference on Economy and Society in Eilat yesterday.

Lapid's call to put the middle class at the center of government policy marks a revival of Lapid's election campaign themes that brought his Yesh Atid party to the forefront of politics.

Since taking over the finance portfolio last March, however, he has directed most of his efforts at closing a massive budget deficit that entailed reducing government services and raising taxes. Last month, he provoked further controversy when he publicly disparaged young Israelis who move to Berlin for financial reasons.

On Thursday, he sought to make amendment by saying it was up to the government to ensure they don't leave the country. Young people won't head over to Berlin and Los Angeles if they know that the country considers them its main asset in building a model society here. We won't lose a generation, he said.

The finance minister told the conference (formerly known as the Caesarea Economic Policy Planning Forum) that, over the past decade, gross domestic product has expanded 26%, while salaries rose just 2.5% - a statistic that keeps him up at night, he said. The people whose work generated the growth did not benefit from it, he added. The rich got richer and the poor became poorer.

Drilling down to policy prescription, Lapid proposed providing increased tax breaks to middle-class families to help pay for education, transportation and housing, and to help lower the cost of living. I'm no socialist, but the time has come for us to understand that the Reaganite idea from the 1980s of trickle-down economics, with money flowing from the wealthy to the poor, has failed in the United States, Great Britain and Israel, said Lapid. We must invest in the middle class ... from there it will trickle down.

The finance minister said Israel has formulated an economic strategy aimed at basing the economy on innovation - not just by high-tech startup companies, but to expand it to areas like clean tech and the suppliers who develop around these industries, he said. He added that it was this kind of innovation that would help the Israeli middle class to improve its quality of life.

Bennett: Can't force innovation

Economy Minister Naftali Bennett told the conference that innovation policy is difficult to implement. It can't be created by force, he said, saying that a positive environment had to be created to foster innovation.

The minister also described innovation in terms of evolution, saying the key was not to over-analyze but to constantly experiment with new ideas and quickly jettison those that don't work.

During his address, the economy minister surprised the audience by taking out a cucumber. He related that, three weeks ago, he had been on a visit to India, where Israeli agricultural companies were training 20,000 farmers in advanced farming techniques. Bennett said an Indian expert he met told him that two years ago, the farmers were producing just one kilogram of cucumbers per square meter of cultivated land; now output had reached 10 kilos.

This is Israel, this is the narrative, said Bennett. When they will say 'Israel,' they will speak of cucumbers. While the minister admitted there was a disparity between the image of Israel as a Startup Nation and the reality in the country, he said the image should be exploited just as it would be by a startup.

There are two competing narratives in Israel: Are we a country of conflict, or a country that is a light unto the nations? he said.

Bennett said his political alliance with Lapid was based on putting aside the debates of the last 45 years centered around the Arab-Israeli conflict and the Palestinians, and focusing on other less popular issues such as drafting ultra-Orthodox Israeli men into the army.

Ofer Vaknin