Netanyahu Sees His Economic 'Progress' Through a Rose-colored Mirror

There has been some reduction in poverty and inequality, but we still top the West’s very dishonorable poverty rankings.

Nehemia Shtrasler
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PM Benjamin Netanyahu in Tel Aviv, Jan. 5, 2014.Credit: Dudu Bachar
Nehemia Shtrasler

A week ago I was privileged to appear on the prime minister’s Facebook page. Prime Minister Benjamin Netanyahu chose to quote an article I’d written (“The blossoming of the Big (Economic) Lie,” January 20), that contained numerous statistics showing that the state of the economy is not as bad as certain politicians are trying to make it out to be. “We did a lot and we will do a lot more in the coming years,” Netanyahu wrote in his post – and managed to confuse me.

“We did a lot?” Who exactly did a lot? After all, Netanyahu was always scrupulous about saying it wasn’t his affair; that he had given the reins to former Finance Minister Yair Lapid, and that’s why he isn’t responsible for the many failures. Why did that suddenly turn into “We did a lot?” Because he wants to take credit for achievements that aren’t his? Yuval Steinitz, who doesn’t contradict Netanyahu, argues that the economy is in difficult straits, that Lapid has failed, and that he ought to go back to television and leave the nation’s economy and security to serious people. So then who “did a lot?” Lapid or Netanyahu?

But if the prime minister wants to take credit for the accomplishments, I will respect that, on one condition – that he also takes responsibility for the problems and failures, and posts them on Facebook, too. That’s only fair, no?

Israel’s growth rate is indeed 3.2 percent, as I wrote last week, and that’s not a recession. But at the same time, it’s clear that this growth rate is insufficient. Our growth potential is 5 percent a year, and whoever didn’t get the economy to fulfill its potential has failed. There are two reasons for this underperformance – an excessive budget deficit and a lack of economic reform.

The Netanyahu government is leaving the next finance minister a 3.4 percent deficit in 2015, which is too high. That’s a real problem. It forces the government to raise huge sums on the capital market, which undermines fundraising and development by the private sector. Thirty-eight billion shekels ($9.5 billion) is an excessive deficit that deviates from approved government plans and doesn’t allow reducing the debt relative to GDP, which means that Israel’s credit ratings won’t rise and we will pay excessive interest, which will again undermine growth and employment. How did Lapid put it in an address to young people? “The deficit is a loan that my generation takes from your generation, without having any idea how to pay it back.”

It should also be noted that in his last term, 2009-2013, Netanyahu agreed to raise the pace of increased government spending to 3-4 percent annually, which was a fatal mistake that led to a large deficit for 2013 and essentially forced new elections.

When it comes to reform, Netanyahu doesn’t have much to be proud of, either. He keeps saying he’s in favor of reforms, but they aren’t happening. The reform in the electricity market hasn’t been implemented; the proposal to raise the retirement age for women was rejected; reform in the civil service that would allow more management flexibility was pushed off; cancelling the VAT exemption for fruits and vegetables was abandoned; the reform to lower prices by reducing the import tariffs on milk products, meat, chicken, fish, fruits, vegetables, honey and olive oil never got off the ground, and there has been no reform in the Israel Lands Authority. That’s why growth is only 3.2 percent, and not the 5 percent it should be.

It’s true that there has been some reduction in socioeconomic gaps and poverty rates, but even after that improvement we are at the top of the Western world’s very dishonorable poverty rankings. The number of families living under the poverty line (18.6 percent) is too high, and there’s a lot that must be done to reduce inequality – in education, core curricula, professional training, subsidized childcare and transportation to work, building industrial areas in Arab villages, and more. None of this has been pursued with the requisite determination.

Moreover, Netanyahu’s relentless pressure to increase the defense budget, partially due to his unwillingness to reach any diplomatic solution, means that only the defense budget grows significantly, and that’s at the expense of social, welfare and infrastructure budgets.

Let’s see whether this column appears on Netanyahu’s Facebook page as well.