To Benjamin Netanyahu, it’s all clear: Naftali Bennett is to blame for inflation. He knows that this has become the hottest topic, so he shifted his attack on the government to focus on the cost of living.
He delivers all kinds of variations on the theme that the skyrocketing prices are the fault of the prime minister, “who is raising the cost of living.” He assures us that it's Bennett’s fault that “every Israeli is now paying more for rent, food and gas; this is the fault of the Bennett-Lapid-Abbas government.”
The truth is quite different, of course. Netanyahu is the one responsible for the soaring housing prices and rents. During his 12 years in power, he didn't increase the number of housing starts fast enough. Nor did he force the Israel Land Authority to free up much more land, leading to a huge discrepancy between demand and supply – the main reason for the rising prices.
Bibi also didn't accelerate the work of the local and district planning and building committees, so it still takes years to obtain a construction permit in Israel, when this can be accomplished in around two months in the United States and Britain. As a result of these failures, housing prices during Netanyahu's tenure rose by a staggering 150 percent and are still rising. It's hard to close such a gap in building starts.
Bibi and his last finance minister, Yisrael Katz, are responsible for the current inflation from yet another angle. They showered the economy with billions of shekels during the pandemic to curry favor with voters. This led to a massive 9.9-percent budget deficit in 2020, a high one in 2021 and a sharp increase in cash coursing through the economy, a strong inflationary factor. Now the deficit has been virtually eliminated – precisely the opposite of what happened under Bibi.
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It's also ludicrous to blame the Bennett government for the rising food and fuel prices. Food and other consumer items have gotten more expensive due to external factors. In 2021, the coronavirus caused major logjams at ports, with the cost of marine shipping soaring eight times. Also, lockdowns across the globe crimped production and supply, leading to price increases.
In 2022, as the world emerged from the pandemic, high demand ensued for raw materials like iron, aluminum, paper, plastic, oil and rice, with commodity prices surging across the board. If that weren’t enough, four months ago Russia invaded Ukraine, sending the prices of wheat, corn, barley, petroleum and gasoline spiking, too. But in Bibi’s book, Bennett is also to blame for the war in Ukraine.
Given all these false accusations, another major failure by Bibi deserves mention. Israeli food prices are 25 percent higher than in Western countries, but in his 12 years as prime minister, Netanyahu didn't lift a finger against the high tariffs on fruits and vegetables, dairy products, meat, chicken, eggs, fish, olive oil, honey, nuts and canned goods. Nor did he try to tackle the bureaucratic barriers put up by the Standards Institute of Israel.
The economy he left behind was one replete with monopolies, cartels and exclusive importers. The result: higher prices than in the West.
Unlike him, Finance Minister Avigdor Lieberman and Bennett have begun to address these sensitive issues. They've lowered tariffs on fruits and vegetables, instituted a reform in the egg industry, dealt with the Standards Institute, opened up imports and reduced bureaucracy.
Around two weeks from now, the Bank of Israel will raise interest rates once again, and companies’ profits will suffer as their interest expenses rise. Meanwhile, consumption will decline as people save more and buy less, and housing purchases will drop as mortgages become more expensive. In general, we'll see a slowdown in economic growth.
A slowdown is bad, but that's the price that must be paid to stop inflation, the worst social disease – it hurts the weak, pensioners, people dependent on government assistance and the middle class stung by eroding wages. But Bibi couldn't care less about any of these people. He wants to weaponize high inflation in his campaign of lies and return to power.