“There was a massive economic crisis that I inherited as finance minister in 2003. I said at the time that we needed to cut our tax rates. The economists objected, as did the International Monetary Fund. They said it was a mistake and that it would create a deficit. I said no, and as it turned out I was right and they were wrong.”
Prime Minister Benjamin Netanyahu bragged at a news conference this week that he knows better than all the economists, in Israel and abroad. It’s a fact that in 2003 he went against the economists’ advice and was right. Thus Netanyahu justified his stance that there’s no reason to seek or listen to economic advice regarding the 2020-21 national budget. Netanyahu repeated his insistence that the 2020 budget needs to be passed now, for the next three months alone, and repeated his argument that passing a budget for the next year and a half would be irresponsible.
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The fact that Netanyahu thinks he always knows better than anyone else isn’t new. Netanyahu is convinced he’s the only genius of his generation. The problem is that his megalomania doesn’t jibe with the facts.
Netanyahu’s insistence on managing the coronavirus crisis alone, while undermining all the government’s decision-making processes and refusing to activate its emergency systems, has brought us to the failure of the second wave of the coronavirus. The mere recognition that maybe he’s not such a genius and that he needs to bring in a better, more experienced administrator – the coronavirus czar Prof. Ronni Gamzu – has made it possible to start managing the second wave.
The gap between Netanyahu’s capabilities and his self-image takes extreme expression in the handling of the pandemic-fueled economic crisis. While in 2003 his moves were backed by the Finance Ministry professionals and their research, the Finance Ministry, the Bank of Israel and all leading Israeli economists are staunchly against the three-month budget he is so insistent upon.
Fifteen of the country’s most prominent economists, including Israel Prize laureates, signed a petition this week calling for the rapid passage of a budget through the end of 2021, for reasons that even noneconomists can comprehend: There’s no point in passing a budget for only three months; it’s a total waste of time. Furthermore, given the severe economic crisis, Israel needs economic certainty and a stimulus policy more than anything. Passing a budget that covers the entire period through the end of 2021 would provide relative economic certainty and make it possible to devise a comprehensive economic stimulus program. The alternative is total chaos.
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Netanyahu thinks he’s smarter than everyone else, but the bitter truth is that he isn’t smarter, he’s only crueler and more cynical. There would have been no problem passing a budget for 2020 several months ago, if only Netanyahu had agreed to change the coalition agreement to state that the government could not be dissolved on account of the failure to push through a budget before Alternate Prime Minister Benny Gantz had his turn as prime minister. Because Netanyahu aspires to dissolve the government before that happens, he is exploiting that loophole in the coalition agreement in order to prepare the ground for disbanding the coalition and calling an early election. His considerations are political, petty and cynical, without an ounce of propriety.
It’s obvious that Israel needs a budget through the end of 2021 now, and that without such a budget the country is at the brink of collapse. The economists at the international credit rating agencies understand this well. Israel is at high risk of having its credit rating cut: At 13% of the gross domestic product, our budget deficit rate is the second-highest in the developed world, second only to the United States. Our national debt, at 77% of GDP, is the third highest among countries with an AA credit rating, and our debt has increased the most in the wake of the coronavirus crisis, 17%.
If that weren’t enough, Israel is the only developed country that isn’t managing to handle the coronavirus crisis: We’re failing to handle the health aspect of the second wave of infections, and we’re not even trying to address it economically speaking. There’s no budget, and it’s not even on the horizon.
The international credit rating agencies issued a debt warning for two of the world’s largest economies, Japan and the United States. The reason for the warning was clear and simple: “the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” Fitch Ratings stated.
The U.S. government is going crazy increasing its deficit and its debt, and worse, it’s led by a crazy president who hasn’t lifted a finger to fight the pandemic or halt the economic collapse. The lack of presidential responsibility, and the fact that U.S. President Donald Trump hasn’t initiated a credible plan to reduce the deficit “deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” the aforementioned fiscal consolidation plan “deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” is what more than anything puts the United States at risk of credit downgrades.
Undeserving of an AA rating
This is just as true for Israel. We’re in the midst of our worst economic crisis in decades, and the prime minister is blocking the passage of a budget and is threatening a political crisis and a fourth election. You don’t need to be an economist at a credit rating agency to get the picture: Israel has gone off the rails, and it’s being run like a banana republic. It has a crazy prime minister who is leading it to destruction. Such a country does not deserve an AA credit rating.
There’s no doubt that should Netanyahu drag Israel into a fourth election the price will be an immediate rating cut, the consequences of which could be as extreme as the 2003 financial crisis. The crisis Netanyahu was so proud of handling as finance minister threatens us now because of his mismanagement and malicious intentions as prime minister.
This is the bitter truth: Netanyahu isn’t smarter than all the economists in the world; he’s behaving stupidly in his insistence on making unreasonable and irresponsible decisions. There’s no wisdom behind his actions, just his fight for survival in an attempt to stay out of the courtroom, while destroying Israel along the way. Netanyahu’s policy is “Let me die with the Philistines.” Except the Philistines are us, the people of Israel.