Economics & the campaign

Voters must realize that neither Likud, Kadima nor Labor advocates doctrinaire economic philosophies.

By JERUSALEM POST STAFF
money 88 (photo credit: Courtesy)
money 88
(photo credit: Courtesy)
We are at the precipice of one of the worst and most inscrutable financial crises to have gripped the world in living memory. Israel cannot escape the consequences of the ongoing turmoil - and yet the global depression is hardly being discussed in the election campaign. Perhaps economics got elbowed out by Operation Cast Lead, which interrupted the campaign, setting overt politicking aside. Security continues to dominate the public discourse and eclipse other issues. Yet the failure to focus on the economy doesn't make it any less crucial an issue. The world is in the throes of a severe and seemingly intractable credit crunch. If the economy is not transfused with cash, the slowdown could deepen into an absolute recession and cause widespread layoffs and hardship. What the contending Knesset lists say about economics needs to be better understood. MOST party platforms include economic planks, but few have made the economy central to their campaign, certainly not from the start. The Likud is an exception. It boasts that during Binyamin Netanyahu's stint as finance minister (2001-2005) he saved the economy from potential disaster and hence possesses a formidable resume to oversee the management of the economy. The Likud's approach can be described as a blend of free-market economics coupled with social sensitivity - compassionate capitalism. It calls for tax-cuts to funnel urgently needed funds into the parched economy and thereby generate growth. It would limit VAT charges, which are regarded as regressively and disproportionately punishing to society's weakest strata, and overhaul the Israel Lands Authority to stimulate construction and infrastructure projects now rendered inordinately expensive and bound by red-tape. Labor brought its economic proposals to the forefront only this week. In contrast to the Likud, the party favors considerable state intervention in the economy, describing itself as "social-democratic while advocating free-market private enterprise with effective regulation, particularly of the financial marketplace." Placing its accent on social justice, Labor supports a greater state role in education, health and welfare. It speaks of annual plans to reduce joblessness, of cooperation between the Histadrut Labor Federation and employers, and of spurring employment and shrinking socioeconomic gaps. Kadima, the incumbent party, promises long-term strategies to extricate Israel from the global downturn by "concentrating on Israel's relative advantages and investment in infrastructure." It further pledges that the benefits of forecast growth will trickle down to "all social strata, and not only to some." Kadima also takes credit for the negative income tax and Wisconsin plans initiated during Netanyahu's tenure. It claims to have successfully made Israel's geographic periphery - the Negev and Galilee - its focal point and to have reduced the number of foreign workers. Yisrael Beiteinu, which is rising in the polls, is Likud-compatible, but places greater stress on aiding small businesses. Meretz has positioned itself as more vocally pro-worker than Labor. There has been minimal reaction to the parties' economic pitches except in the case of the Likud, whose agenda has drawn whatever little economic sparks this campaign generated. This may mirror the polls, which forecast that Likud will be forming the next government. Opponents of Netanyahu's tax-cut plan argue that cutting taxes will bring no direct gain to those who pay no or little taxes. But that is not Netanyahu's intention. Tax-cuts aren't welfare grants but tools to put more resources back into circulation as a means of raising demand and encouraging growth. Under Netanyahu's plan, over the course of four years, income tax for individuals would be lowered while corporate taxes would be gradually reduced to 18 percent. The issues aren't black and white. Bank of Israel Governor Stanley Fischer, for instance, warns that additional tax cuts now, intended to boost the economy, might be unrealistic given the drop in tax revenues and a growing budget deficit. While praising Fischer, Netanyahu adamantly argues that "Cutting taxes is the crucial component in reversing the trend and the best engine of growth." AS VOTERS cast their ballots, they need to realize that neither Likud, Kadima nor Labor advocates doctrinaire economic philosophies. None genuinely supports either "piggish capitalism" or "a return to socialism." All understand - or so we hope - that the key to prosperity for all Israelis is growing the economy.