Netanyahu Budget Supports Coalition But May Risk His Economic Legacy
For decades, Benjamin Netanyahu, the Prime Minister of Israel, has championed the free market economic doctrine. As Finance Minister 20 years ago, Mr. Netanyahu was lauded by Milton Friedman, the godfather of neoliberal economics, as he slashed benefits, slashed government spending, accelerated privatization and promoted the country’s celebrated tech industry.
In his autobiography last year, Mr. Netanyahu three chapters explaining how his tenure in the treasury had rescued the economy from an “outdated semi-socialist quagmire,” in part by cutting alms to ultra-conservative Jewish Israelis, who often eschew the job market for religious study, and more of them get to work.
Mr Netanyahu’s new national budget, passed early Wednesday by the Israeli parliament, threatens to turn that legacy on its head.
Bowing to the demands of his ultra-Orthodox partners in a shaky coalition government, Mr. Netanyahu massively cuts government funding for private ultra-Orthodox schools, seminaries and other religious and social projects, as well as ministries run by Israeli settlers in the occupied West Bank.
Mr Netanyahu said the increases were necessary to ensure equality between religious and secular school systems. But critics said his move would hurt Israel’s economy in the long run, as it supports an ultra-Orthodox school system that largely fails to teach math, science and English, leaving children unprepared for the modern workplace.
Mr Netanyahu’s stance on the issue has created a storm in Israel, heightening tensions between ultra-conservative believers, who want to maintain their autonomous lifestyle, and their secular neighbors, who argue that their taxes are increasingly being spent on a portion of the economy. the population that provides little in return and largely avoids military service.
The debate led a secular television host to describe the ultra-Orthodox as “bloodsuckers,” while religious leaders said their communities’ volunteer work for charities and medical aid groups was not appreciated.
And the budget shake-up has also undermined Mr. Netanyahu’s free-market credentials amid accusations that he makes economic decisions based on political expediency.
“It seems that the Netanyahu of 20 years ago and the Netanyahu of today have opposing economic values and agendas,” said Prof. Karnit Flug, a former governor of the Bank of Israel who is now vice president of the Israel Democracy Institute. a research group in Jerusalem.
Ultra-Orthodox Jews, or Haredim, are the fastest-growing segment of Israel’s population, currently making up about 13 percent of its citizens, a proportion expected to triple within four decades. Economists say this increase will cost Israel trillions of dollars — unless the largely autonomous ultra-Orthodox school system better prepares Haredi children for the world of work, and more Haredi adults are encouraged to work rather than study in seminaries.
Israel’s new budget does the opposite. It increases annual government funding for seminaries, or yeshivas, and student stipends in those institutions by at least 50 percent, or more than $160 million, according to a research by analysts at the Berl Katznelson Center, a political research group. And it more than triples annual government funding for Haredi schools, an increase of more than $400 million, according to the same analysts.
Asked for comment on this article, the Prime Minister’s office said the increases would encourage, not hinder, Haredi labor market participation, and ensure parity between state funding for Haredi schools and secular schools.
“Religious children should have the same opportunities as secular children,” the Prime Minister’s Office wrote in a statement. “This is an important step towards social cohesion and inclusiveness.”
The statement added that the budget was “in line with Prime Minister Netanyahu’s free-market principles that launched Israel’s economy two decades ago and turned it into an innovative and economic force. Prime Minister Netanyahu remains committed to these principles.”
But economists are unconvinced, even within both the Treasury Department and a right-wing research group that otherwise broadly supports Mr. Netanyahu.
Israeli governments, including previous governments led by Mr. Netanyahu, funded Haredi education as well as secular schools and colleges for many years. But such a large increase in that funding has raised alarm.
In an internal assessment of the government published in the Israeli news media, a senior finance ministry economist warned that, even before the new budget was passed, sluggish employment rates under Haredim could cost the Israeli economy nearly $2 trillion over the next four decades. cost. Israelis in the workforce would face a 16 percent income tax increase to maintain current levels of government services, the assessment said.
That report even raised concerns among the Kohelet Forum, a right-wing research group that has strongly supported the government’s other flagship project, the judicial overhaul. Kohelet’s chief economist Michael Sarel released a statement supporting the Haredim’s right to live “according to their preferences” but criticized the government for creating “deeply wrong economic incentives for ultra-Orthodox families.”
Three hundred economists from across the political spectrum then issued a joint call for the government to “come to its senses,” warning that the budget would “in the long term transform Israel from a progressive and prosperous country into a backward country where much of the population lacks basic skills for life in the 21st century.”
The full budget will cover all government expenditures, including the military, transportation and infrastructure, and will provide ministries with approximately $270 billion over two years. Among other measures, it has increased resources for the Ministry of National Security, led by Itamar Ben-Gvir, a far-right former activist, and launched a new food stamp program.
The government also said the budget would help lower the cost of living, a claim disputed by the opposition.
In his memoirs last year, Mr. Netanyahu said he had been willing to cut subsidies and maintain fiscal discipline in the 2000s because “I was willing to risk my political future for it.”
Now political commentators say that is no longer the case. Mr Netanyahu’s four-seat majority in parliament depends on two ultra-Orthodox political parties. Had they voted against the budget, as some of their leaders threatened, the government would have automatically fallen, paving the way for new elections.
“Survival – that’s the summary,” said Anshel Pfeffer, a biographer of Mr. Netanyahu.
“Netanyahu’s belief in the absolute necessity of being Israel’s leader goes much deeper than his belief in fiscal conservatism,” Pfeffer said. To retain power, “he is willing to pay the price in the form of a budget that betrays all the economic principles in which he believes.”
Gabby Sobelman contributed reporting from Rehovot, Israel, and Myra Noveck from Jerusalem.