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March 29th, 2024

Reality check

Why Netanyahu's loss is surprisingly well within the realm of possibility

Binyamin Rose

By Binyamin Rose

Published March 16, 2015

Why Netanyahu's loss is surprisingly  well within the realm of possibility
If Binyamin Netanyahu does not win reelection to his fourth (nonconsecutive) term as Israel's prime minister, it will not be due to anything he said, or didn't say, in "The Speech" in Washington.

It also won't be due to the slew of political rivals who heap blame on him for not being tough enough on Hamas, for offering secret and unprecedented concessions to the Palestinian Authority, for spending healthy scoops of the taxpayer's money on ice cream, or for spending precious little time solving Israel's chronic housing shortage.

To explain a possible defeat, some pundits contend Israelis have contracted a syndrome called "Netanyahu Fatigue," but polls still show Bibi is far more trusted than his nearest competitor, Isaac Herzog.

While the latest polls at press time are slightly more encouraging for Netanyahu and the Likud, the race is still too close to call. If Israeli voters do turn Netanyahu out of power in tomorrow's election, the main reason will be the growing and pervasive perception of economic inequality propelling the country toward a social explosion the people fear more than any rocket Iran can launch.

And Netanyahu will only have himself to blame for paying more attention to what scares him than to what worries the people, and for unwisely choosing the wrong coalition partners. Should he prevail, he will have to rectify these shortcomings — and quickly.

Netanyahu stresses Iran, or perhaps it's Iran that stresses Netanyahu, and for good reason.

Iran clearly poses a military threat to Israel, and it's not limited to the nuclear weapons it is trying to build. Iran has tightened its grip on Israel's neighbors — Lebanon and Syria — and is working furiously to establish a strategic foothold on the Golan Heights.

As prime minister, Netanyahu surely knows more about the Iranian peril than he is able to let on.

But to the average Israeli, Iran is a vague threat, lurking somewhere in the undefined future. Since 2005, Israelis have been told that Iran is only "a year or two away from the bomb." It hasn't happened yet. What is happening is that every day, Israelis work 10% more hours than the OECD average, while earning barely more than the average worker in Slovakia, and are increasingly frustrated that the system is stacked against them. Israel's Start- Up Nation is indeed an economic miracle — if you happen to work in high-tech, or be suited for it.

But according to the Bank of Israel, some 25% of Israeli households with only one wage earner, and 11% of families where both spouses work, fall beneath the poverty line, as measured by international standards.

Young Israelis — a growing demographic — hop on cheap flights to Berlin, thanks to the Open Skies agreements, and find apartments and automobiles for sale at half the price of comparable apartments and cars in Israel. As to why an Israeli would prefer Berlin to Tel Aviv: They're young, secular, and just starting out in life. They are also well-educated and can be excused for wondering why the same Volkswagen that costs the equivalent of 85,000 shekels in Germany costs 140,000 shekels in Israel once all the taxes and excessive profits are added to the sticker price.

Is Netanyahu to blame? Would Isaac Herzog make life more affordable? Not necessarily, but Netanyahu is not blameless, nor is Herzog necessarily hopeless.

Netanyahu exhibited mastery over the economy during his stint as finance minister from 2003 to 2005. He engineered a multiyear income tax cut that resulted in a 20%-30% rise in take-home pay for the average Israeli worker. He privatized government-owned corporations, a move that many criticize as merely exchanging crony socialism for crony capitalism, but it ushered in an era of sharply rising foreign investment that continues to this day.

The Bachar Commission reform of the banking industry under Netanyahu's watch did not come a moment too soon.

In 2008, when American financial firms were going bust overnight, having gambled their own capital on risky securities, Israeli banks were immunized because the Bachar reforms had forced them to isolate their safer banking units from their riskier ventures.

As prime minister, Netanyahu can't also be the finance or defense minister, but he is responsible for setting the tone, and this is where Netanyahu went astray.

Before his 2013 reelection as prime minister, Netanyahu teamed with Avigdor Lieberman. They hoped together to garner more than 40 Knesset seats, and lay down tough rules for coalition partners. Instead they won only 31 seats. The Lieberman merger also came with one quid pro quo that hampered Netanyahu: No chareidim (ultra-Orthodox).

It was Lieberman's way of settling scores with the Sephardic party, Shas, and Netanyahu's misguided way of passing deeper budget cuts and heeding the cacophonous calls for equality in bearing the social burden.

Yair Lapid forced Netanyahu's hand, capturing 19 seats to become the Knesset's second-largest faction. Bibi had no choice but to offer Lapid a major cabinet post.

Lapid may have Israeli street smarts but he's not Harvard- and MIT-educated like Bibi. As finance minister, Lapid did little or nothing for the economy. His promise to make Tel Aviv's real estate market as attractive as Berlin's went as flat as a glass of beer left in the summer sun. His plan to cut value-added tax (VAT) on apartments from 18% to 0% for first-time purchasers brought the housing market to a screeching halt for months as contractors and buyers awaited a Knesset vote on a plan that never came to fruition because few, other than Lapid, thought it was a good idea.

Now it's a day before the election and Netanyahu faces voters with few new accomplishments on the economic front.

The tent protests, begun in the summer of 2011, have been revived in Tel Aviv. Ironically, the man Netanyahu appointed to head a panel to meet the protestors halfway — Manuel Trajtenberg — is running against the Likud under Isaac Herzog's banner and is promising action.

Many of the Trajtenberg Commission's recommendations — including a slight rise in corporate and capital gains taxes to raise more money for social spending — were implemented by the Netanyahu government, but in a recent interview with Mishpacha magazine, Trajtenberg says only a new government can complete the long-overdue economic overhaul.

"What's needed is to change the basic tenets of government that will a different conception of the policies needed to implement these reforms," says Trajtenberg. "My basic platform is that the government should retake responsibility over the key social services that have been neglected in the past few years."

Trajtenberg calls for urgent action on housing, education, and health. "First, Israel has no coherent housing policy and hasn't for years. The housing crisis we've witnessed today [soaring prices and low housing starts] is the compounded effect of bureaucratic neglect and inertia.

"Second is education and health, and I put them together because both are public services from which the government has gradually retreated."

The economic figures bear out Trajtenberg's contentions. While Israel may have a reputation as a socialist country, a recent Bank of Israel report shows only 15% of Israel's government bud-get is spent on social-welfare programs.

In that respect, Israel lags far behind the OECD average of about 24% and even the US average, which approaches 20%. "What that implies is an increasing inequality and an increased burden on the lower classes," Trajtenberg says. "Life expectancy in peripheral areas is significantly lower than in the center of Israel, and in education, more parents have to spend extra for schooling, and that's becoming a burden on families."

Wednesday morning, we will know better if Israelis have decided to extend the life expectancy of the Netanyahu government, but even if they do, to enjoy that longevity, Netanyahu will have to begin paying as much attention to the cost of living in Israel as to the cost of dying due to Iran.

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Binyamin Rose is News & Current Affairs Editor at Mishpacha Magazine, where this first appeared.

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