It started on Sunday when Ofer Eini, the Head of the Histradrut, threatened a general strike over rising gas prices, specifically in regards to a new 23 agurot per liter tax. This complaint was then tied to the growing unrest in connection to the rising price of water, public transportation, and bread to create a general narrative that the middle class can no longer make ends meet (far less people seemed to care when it was only the poor complaining).
Within days a national poll declared that due to the increased cost of living 40% of Likud voters would not note for them again and if elections were held today, Kadima would beat Likud by three seats. Soon, prominent Likud MKs including Yisrael Katz and Danny Danon, and Likud mayors were yelling at Netanyahu to do something or face immediate political disaster.
Netanyahu (or Mister Economy as he used to be known) seemed generally surprised at first. He never misses an opportunity to talk about how well the Israeli Economy is doing, how we handled the world financial crisis better than any other western country, or how well the GDP is doing. With all his self accolades, he apparently forgot to notice that most of the country felt like they were being left horribly behind. So, he mulled it over for a couple of days (on the one hand I believe in a non-interventionist government, on the other hand it seems like the country might eat me), met with Eini, and came out with a plan:
During a government press conference in Tel Aviv, Netanyahu announced that the minimum wage will increase by NIS 450 per month, gasoline prices will decrease by 23 agorot, the water usage quota will decrease by 20% and public transportation prices will decrease by 10%.All of this will be paid for by a 2% across the board budget cut. This seemed good enough for Likud, but not for anyone else, and that is where we stand today.
All in all, it seems great for Bibi. He gets some quick points for slightly easing the load, and gets to cut the size of government which stands squarely within his economic worldview.
It sucks for everyone who will not be getting a wage increase, and everyone who drives less than a couple of thousand kilometers. They are going to get through this with very few gains, and less governmental services (education, police, welfare, roads, everything).
What's also strange is the amount of people who think the whole issue is either a matter of increasing world commodity prices that the government didn't address fast enough, or a couple of bad decisions by the Prime Minister. Even Haaretz seems to think that the problem is Netanyahu wasting money by giving in to demands from every coalition partner, and thus needing to raise taxes to cover the costs, and then faced the wrath of the public.
The real issue is actually the overall understanding of Bibi and Likud that what's most important is a rising GDP, and any goverment intervention is bad and any possible privatization is good. This will always lead to huge income gaps and a diminishing middle class, just like we see in Israel today.
What's strange is that these people who are struggling are the same people who vote for Likud. Perhaps they've finally realized that's not such a good idea.
Here are some ideas of things that would work better and cost less:
The real issue is actually the overall understanding of Bibi and Likud that what's most important is a rising GDP, and any goverment intervention is bad and any possible privatization is good. This will always lead to huge income gaps and a diminishing middle class, just like we see in Israel today.
What's strange is that these people who are struggling are the same people who vote for Likud. Perhaps they've finally realized that's not such a good idea.
Here are some ideas of things that would work better and cost less:
- sending every poor family 5,000 shekels;
- significant further subsidies for public transportation;
- improvement of public transportation infrastructure;
- increasing the amount of government-subsidized foodstuffs to include all bulk food (this will also encourage cooking with appliances other than microwaves, which is nice);
- changing labor laws to encourage local labor at decent conditions rather than importing, exploiting, and deporting foreign workers;
- appointing the author of this blog to the head of the finance ministry.