Taking Stock / Every Dog Has His Day

Finance Minister Benjamin Netanyahu has been discovering what most seasoned politicians already knew - it's easier to package and sell political material than economic stuff. In Israeli terms, it's easier to send tanks into the West Bank than to cut public sector wages.

With his consummate public relations and marketing skills, Netanyahu quickly won the trust of the financial markets, the business chiefs and the economists, too. But he failed to win the faith of the social echelons that have traditionally lent him their support. Netanyahu, a master at marketing the war on terrorism, has failed to find formulas to push his war on economic terrorism.

The biggest mistake Netanyahu and his men at the treasury made was to assume that Israel's economic tribulations, and fear of financial crisis, would allow them to pass their entire economic program in one sweep.

But after the Americans breezed through Iraq and Washington announced that Israel would get its $9 billion in loan guarantees, the sense of urgency evaporated. Bibi and his people found themselves forced to explain what had been taken for granted so shortly before - that the economic program was unreservedly necessary.

Meanwhile, Amir Peretz and his "socially conscious" cronies didn't shut down the nation last year, when Finance Minister Silvan Shalom slashed NIS 7 billion from National Insurance Institute allowances and hacked at unemployment and income supplement benefits.

Yet just six months ago, Peretz ran a series of ads in the papers trumpeting his achievements for workers in obtaining cost of living raises. But what about the allowances for the aged and income supplements that were so brutally savaged? Somehow, he didn't mention those.

Why now?

So what has changed? Why did Peretz & Co. decide to paralyze the nation this time? It's elementary: it's because the treasury's economic program includes 20 percent wage cuts for public sector servants earning between NIS 20,000 and NIS 70,000 a month. This time the treasury's waving its ax at the most powerful people in the marketplace, who also finance much of the Histadrut's own budget.

This group has been riding high on the backs of hundreds of thousands of public sector workers earning peanuts - less than the average wage. These are the people who will pay the price of the economic crisis, who Peretz is supposed to be looking after; these are the only people for whom protests should be called - but, ultimately, these are the people for whom Peretz never ever called a strike.

The steep cut the treasury plans in government expenditure is unarguably crucial. Continuing to run tremendous deficits, increasing public debt and raising taxes will inevitably trigger a financial crisis, or in the least-grim scenario, lead to tens of thousands of job cuts.

Yes, the economic program is flawed. One of its most egregious ills is capitulation to the powerful public sector forces. The treasury officials know well that it should withdraw its decrees regarding allowances for the aged and wage cuts for the lowest earners.

The reversal could be financed by expanding defense budget cuts. The government should not touch wages and allowances for the weakest segments of society, while the defense establishment, and other government incubators, continue to ignore Israel's economic situation.

The treasury would also do well to rethink its tactics of obtaining approval for its economic program. The battle should be fought on two fronts: the top-level public sector wage cuts should be separated from all the rest. That is the only way to rip off the masks of all those "socially conscious" leaders whose only real concern is their seats and bloated salaries.

Netanyahu fell victim to his own success: he lost ground in his battle with Peretz after developing events - the end of the Iraqi war, the loan guarantees, the surge on the stock market - dampened the sense of urgency he had managed to instill.

But the same will happen to Peretz.

The longer the strike persists, the more mangled the economic program becomes, the more expectations grow that the government deficit will slither beyond 5 percent of GDP, the more the post-Iraq euphoria will evaporate as the economic crumbles, and the more the pool of unemployed deepens.

The only question is when the public will grasp, if it ever does, the correlation between irresponsible economic leadership as urged by Amir Peretz and the continual contraction of Israel's economic activity, which is the key source of poverty today.