PM Netanyahu with Prof. Manuel Trajtenberg 311 (R).
(photo credit: Marc Israel Sellem)
Manuel Trajtenberg, the economics professor drafted by Prime Minister Binyamin
Netanyahu to craft a response to last summer’s social protests, said in an
interview published in this week’s Jerusalem Report that Israel faces a stark
choice between defense spending and social reform.
He also said that the
time might be near when the government would have to raise more taxes,
particularly for the super-rich.
In August 2011, Trajtenberg was
appointed the chairman of the Committee for Socioeconomic Change. Its 14 members
produced a major 267- page policy-reform document in just 50 days.
months later, Trajtenberg said that most of the committee’s recommendations have
already been adopted, but there is still much to do to reassure the public that
took to the streets in such large numbers last summer.
“I think that the
basic trade-off Israel faces is between defense and social services. Any
attempt to look at it differently is deceiving the public,” he
Trajtenberg, a former economics professor at Tel Aviv University,
was the chairman of the National Council for Economics in the Prime Minister’s
Office, where in 2007 he convened the Brodet Committee that studied flaws in the
military budgeting process and recommended large cuts in defense
“I’m not blind to the military threats to the country. I know
them very well. I know the defense-budget difficulties because I was a member of
the Brodet Committee; I set up that committee. I still believe that that is the
trade-off. Essentially, if one internalizes that the trade-off has
consequences for lots of other things, including your attitude towards the
strategic alliance with the US and our attitude toward the Palestinian
conflict. It is not just 2 billion here and there,” he said.
of Trajtenberg’s recommendations on taxation went into effect in
These include partial cancellation of a planned excise tax on
fuel, increases in corporate taxes, an increase in the top income tax bracket
from 44% to 48%, and extra tax allowances for children under three
In addition, dairy and egg products will soon come under tighter
Tenders will be published for new public transportation
companies in order to increase competition and reduce travel costs. The cement
industry, one of the strongest monopolies in the country, will be opened to
The Antitrust Authority has been granted expanded
One huge change inspired by Trajtenberg’s committee is the
extension of free education to all children from age three, adding a quarter of
a million students to the state-supported education system and subsidized
after-school programs next autumn.
Overall, Trajtenberg said he was
satisfied with the speed of reform and believes it will help to answer the main
socioeconomic difficulties that the committee identified, including declining
investment in government services, economic concentration and a widespread
feeling of estrangement from government institutions.
“Of the chapters of
recommendations that have been brought to the government, depending on how you
weight it, I would say that between two-thirds to three-quarters of the chapters
have been adopted,” Trajtenberg said.
He said he stood by the budget rule
of restricting public expenditure to less than the growth in the economy, but
more money could be made available if the government agreed to raise
“I still suggest raising income taxes significantly,” he
said. “That can help reduce the deficit and the debt, and can also create
a pool of resources.
But, for that, the government must show that it does
not play the game dictated by the super-rich.”
The full interview can be
found in the current issue of The Jerusalem Report
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