It’s been nothing less than a hebdomas horribilis for Netanyahu these last few days.
What with the ignominious defeat of his cameras-in-polling places law, the humiliating sight of "Mr. Security” being hustled off stage during a campaign rally interrupted by Hamas rockets and Likud patriarch Benny Begin saying he won’t vote Likud, what else could go wrong?
At least the economy is giving Netanyahu no trouble. But with friends like that, who needs enemies? After 15 years of virtually non-stop growth, Israelis take the good times for granted and it’s not a vote-getter. No one appreciates Bibi for record low unemployment or the high-tech boom any more than they do for the sun rising in the morning. It’s there and it will always be there, or at least be there for the foreseeable future. It seems voters are moved either by hatred of Bibi or fear of Arabs.
You can only pity the poor minority who want to vote their wallet. The Likud hasn’t taken the trouble to present an economic platform at all -- its message is “Netanyahu” and Netanyahu hasn’t taken much interest in the economy in recent years. Kahlon Lavan’s platform consists of platitudes and proposals no one could ever disagree with, unless you think Israel should not develop its high-tech sector more or build more roads and rail networks. Labor has a detailed plan for taxing and spending our way out of the problem of income inequality, but it has little bearing on economic reality.
And just what is that economic reality?
It’s not quite as cheery as Israelis think. Labor may have big spending plans but the next government faces a growing budget deficit that can’t be contained without tax increases and spending cuts. We’ve gotten used to the idea that outsized budget deficits are a thing of the past and that the finance minister’s job these days is about deciding what taxes to cut and what popular new programs to spend money on. That era is coming to a close.
The global outlook: Dim
It’s not as if the deficit is out of control yet, but it’s getting bigger at a time when the economy and tax revenues are growing. That’s a worrying development because when growth slows, or even worse, the economy falls into a recession, the deficit will quickly get out of hand and the government won’t have the money to spend to offset the impact of a slumping private sector.
The odds are growing that a slowdown is approaching. Thanks to Netanyahu’s friend in the White House and his trade war with China, the world economy’s outlook appears increasingly dim. It’s hard to see how little Israel will be able to ride out a downturn if it comes. We did during the Great Recession of 2008-09, but it beggars the imagination that we can do it a second time if the three great economic engines of the world -- the United States, China and Europe -- are all in a funk.
Besides getting a handle on the deficit, what Israel really needs is a government with a long-term vision and the wherewith to follow through on it. The vision part is easy (just read the Kahol Lavan platform); the wherewithal is something else because it demands the kind of patience elected leaders don’t have much of and involves difficult political choices.
The first challenge is the schools, which remarkable after a decade of growing spending, remain as dismal as ever. Priorities are distorted, spending is unequal, teaching is subpar and getting worse, and, of course, student performance by international standards is abysmal. It’s remarkable that voter-parents haven't demanded better, since the poor state of Israeli schools will have a direct effect on the ability of their children to enjoy a higher standard of living.
The second challenge is the ultra-Orthodox and Israeli Arabs. Between them, they account for close to 30% of Israel’s population, yet the government has only addressed the problems of their poverty and poor education in fits and starts. In the case of the Haredim, Bibi’s infatuation with the ultra-Orthodox parties has caused the government to backtrack in bringing more Haredim into the workforce and the army; in the case of Israeli-Arabs, it’s the Arabs themselves that have been leading the way in education and employment while Netanyahu abuses them politically.
Finally, there’s infrastructure. It’s not just remarkable that the average Israeli puts up with the country’s sorry schools, but also with traffic-jammed roads, poor public transportation, slow internet and crowded hospitals. But the fact is that this is not just an inconvenience, but has a direct impact on economic growth no less than education.
The only silver lining to the Israel public’s indifference to economic issues is that it leaves the solutions in the hands of the experts.
At the risk of sounding cynical, in countries where economics are at the heart of election campaigns, are taken up as causes by interest groups and are subject to media attention, the results are rarely good. You get the simplistic extremes of Brexit in Britain, the Green New Deal and the Tea Party in the U.S., and zero VAT in Israel, that ignore the difficult trade-offs that real economics demands and cater to people’s dreams or fears.
What we should hope for is that whoever forms the next government appoints a finance minister who has the political skills to get things done but has no particular ideas of what those things should be. Better that he or she should take cues from the treasury staff. A national unity government not beholden to the Haredim or labor unions would be a good start.
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