Netanyahu’s Sorry Sojourn Into Election Economics

Israel's incumbent prime minister must remain the responsible economic professional he was back when he was finance minister.

Haaretz Editorial
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Benjamin Netanyahu and his wife Sara, exercising their civic duty to vote (in local elections. October 2013)Credit: Amos Ben Gershom
Haaretz Editorial

Recent decisions by Prime Minister Benjamin Netanyahu represent election economics of the worst kind. The torrent of requests this week in the Knesset Finance Committee — especially for the settlements and the ultra-Orthodox community — was the first signal.

The attorney general and Knesset legal adviser had a tough time holding back the glut of money transfers, which came during an election period and without proper explanations. The ultra-Orthodox parties’ support for some of these moves is a sign of a deal being cooked up before an election, and Netanyahu is apparently playing his part.

But the Finance Committee witnessed only the small change. The big money — more than 5 billion shekels ($1.27 billion) — was handed over by Netanyahu as an election bribe to the voters. The method: canceling value-added tax on basic food products.

The prime minister, remember, was once a finance minister, and he carried out major reforms to lower taxes. Back then he strongly opposed canceling VAT on food, knowing that it would do more harm than good.

In 2009, when he became prime minister for the second time, Netanyahu tried to remain a responsible economic professional — by canceling the VAT exemption on fruits and vegetables. Only political opposition prevented him from doing so.

His position throughout the years has been opposition to VAT exemptions, because they help mainly the wealthy and the supermarket chains. Studies all over the world prove this.

And now this same Netanyahu is suddenly changing his spots and proposing a cancellation of VAT on food. He’s doing so even though he knows that, in economic terms, this is unacceptable; in effect, it’s impossible. Amid Israel's current budgetary problems, there’s no chance the state can forgo 5 billion shekels. All the same, the election pressure has caused the prime minister to make his strange proposal.

Netanyahu should therefore regain his composure and go back to managing the Israeli economy responsibly, as he did so well in 2003 and as he is obligated to do as prime minister. His panicky behavior is harming Israelis and not making him any more popular among his electorate.