Netanyahu’s up-and-coming COVID-19 benefits plan: Will it save Israel?

As the Prime Minister vows to ‘get the wheels of economy moving again’ his critics warn that the brunt of his policy will be carried by generations to come

Prime Minister Benjamin Netanyahu speaks on July 15, 2020 (photo credit: KOBI GIDEON/GPO)
Prime Minister Benjamin Netanyahu speaks on July 15, 2020
(photo credit: KOBI GIDEON/GPO)
Prime Minister Benjamin Netanyahu means to present to the Knesset on Sunday his "Check for All" program, meant to offer benefits to almost all Israelis.
When the Finance Ministry’s head of the Budget Department Shaul Meridor warned Netanyahu is “turning us into Venezuela,” Meridor was blamed for “sabotaging” the government’s efforts.
The NIS 6 billion plan was modified to offer more benefits to Holocaust survivors and those disabled during their army service. Despite previous reports that extra aid will be offered to families with more than three children, the plan currently presented by the Finance Ministry does not. The Ultra-Orthodox community, already reeling from the Wednesday approval of the anti LGBT conversion therapy bill, might resent this.
Hebrew University of Jerusalem Professor of Economics Naomi Feldman, to whom Netanyahu credited his new attitude, told The Jerusalem Post that “there is no way to solve the financial crisis until we solve the health crisis.”
She explained that a few months ago, decision makers might have hoped for a cure and a return to normalcy, but “COVID-19 could be with us until next summer.”
In addition to the “Check for All” plan, Finance Minister Israel Katz, who said he will not allow any changes in collective work agreements, agreed to pass the funds needed to hire 2,000 additional nurses after a limited strike. The union of social workers resumed working after a 17-day-long strike, when Katz agreed to offer them a NIS 200 million pay increase and an individual COVID-19 benefit of up to NIS 11,000 per worker in 2021. Netanyahu decided to provide the IDF NIS 3.3 billion, in addition to the defense budget. Where is all this money meant to come from?
“In the short-term, countries can borrow money or print it,” explained Prof. Feldman, “the first option is likely, printing money is off the table for Israel.”
When countries borrow money, they are basically selling their debt to domestic investors or other countries which still have money to invest.
Feldman makes it clear that these are unusual times, which is why her advice was to “hit it now with all we’ve got to keep people afloat and offer some measure of security to avoid an even worse recession down the road.” She adds that, should things improve, the policies could be changed. “You want the economy to be working again,” she explained, “this is a tool we can use for that purpose.”
The uncertainty concerning the upcoming state budget, if it will be a one-year budget or two, led some to report Netanyahu is seeking to prevent a budget from being passed, triggering elections in November. Netanyahu denies this.
“It would be a catastrophe if Israel does not have a budget,” Israel Democracy Institute (IDI) Center for Governance and the Economy director Daphna Aviram told the Post, “I have no words to describe just how fiscally irresponsible it is to hold elections during this massive crisis.”
As immense sums are being presented to the public, gym owners and restaurant operators hold protests against the health measures taken by Netanyahu’s administration, which cripple their businesses. The confusion over why measures are taken, and requests the government reveals its figures concerning how many were infected in the now-closed places, led Health Minister Yuli Edelstein to speak against “the childish demand to reveal exact figures” on Tuesday.
Netanyahu said that “there’s no reason to fear taking loans,” as Israel’s economy is allegedly doing very well. In April, Israel reported securing $5 billion (NIS 17 b) in a series of loans for a decade ($2 b.), 30 years ($2 b.) and a century ($1 b.). This is the first time Israel took out loans for 100 years. “This is showing confidence,” Aviram explained, “that this economy will be around in a century [to pay back the loan]. This is not an obvious thing.”
She pointed out that other than loans, the state’s income is based on taxes. While it is unlikely anyone will suggest raising taxes at a time like this “the next generations will pay the cost of the current crisis,” she told the Post, seeing as loans need to be repaid, which means less money is available for services, which usually means the state will need to raise taxes.
“This is why you need to be very precise in whom you are giving to,” she said, “because if you give to someone who has money, he’ll just put the money aside.”
Aviram claims that the money should be used to build the nation’s infrastructure, to help it move into green energy and to and train out-of-work people for future jobs.
“It’s not too late to change direction,” she told the Post, “right now we are in the midst of a second wave of COVID-19 and workers are being sent on unpaid leave.
“In our current system those who take vocational training over unemployment benefits are punished with a benefit cut of 30%,” she said. “Imagine that they are not punished for seeking to work and, in addition, are given NIS 500 for completing the course.”
With the EU adopting the Green Deal, meaning the goal of using 100% renewable energy, she warns that Israel must make the change as well, or it will not be able to trade with the EU once the new regulations are in.
While Katz said some ideas “are beyond discussion”, such as lowering minimum wage to encourage employers to hire, or one-sidedly increasing the retirement age for women, it is not impossible that such measures are also on the table.