It’s pretty much evident now that the path the present government of Israel is taking is not leading us to better pastures, neither in the economic and social realm nor in the diplomatic and security realm. Total cognitive stagnation is the trademark of this government’s approach to problem solving.

The previous government increased the budget deficit through mismanagement and lack of oversight while racking up the fifth largest income differentials and highest poverty figures in the developed world. Then, after half a million citizens hit the street in 2011, it tried to make amends and correct these developments by implementing at least some of the recommendations of the Trachtenberg commission which was formed ad-hoc to deal with the reasons for the public protests. Now that the costs of implementing those recommendations have jacked-up the budget deficit even more, the new government is on its way to increase income gaps once again by adopting austerity measures the likes of which have put Europe into a recession worse than the 2008-2009 almost-depression and have done no good wherever else they have been applied. When citizen’s income is cut and the government reduces expenses substantially, there just is not going to be an increase in economic growth in the country, even if we pray hard for it.

The previous government also made cursory efforts at pretending that we really do want a peace agreement with the Palestinans, efforts that in view of the insincerity of its conduct have come to naught. This government has written the peace process off completely and it is nowhere to be found on its real agenda, Tsippy Livni’s protestations to the contrary.

Having painted the country into a corner both economically/socially and diplomatically as well, this government is like the comics character roadrunner in the air, beyond the cliff, just before looking down.

So what can be done, no, has to be done ? The government must realize that in the end the economic well-being of the nation is inexorably tied to an active political process, or the lack thereof. No matter what anybody will tell you, even if it is our Prime Minister, the flow of foreign investment, the public mood, the private mood,  the international delegitimization campaign and international public opinion, export opportunities and markets, financial ratings, Israel’s legal tangles with the International Criminal Court if it’s over the Mavi Marmara incident or over our dealings with the Palestinians, all connect to one crucial issue: Do we respond to the Arab Peace Initiative in a reasonable way to move towards negotiations at this time or do we continue to drag our feet while changing the political and demographic landscape in the territories beyond repair ?

If we act responsibly we have a fair chance of getting our economy on decent footing again without permanently harming the middle class and the many citizens who have already dropped out of it. When I say permanently I mean that people who have alternatives may actively pursue emigration even more than they do already.

The way to help our economy recover is to keep the deficit within the 4-5% range through 2014 ( and not reduce it to 3% as presently planned)  put substantially more money into national infrastructure projects which can be financed either privately or through long term government bonds, reduce the defence budget to a more reasonable 45 million Shekels and create jobs, many jobs. If at all, VAT should be increased but only differentially to ease the burden on those who spend all their money on food and living expenses. Corporate tax rates can also be hiked to 28% (and not only to 26.5% as proposed) without causing companies to run away and a minimum effective tax rate must be assured so companies do not milk the state for subsidies while raking in large profits, as some do know. And, of course, captive/retained profits of these companies must be taxed as well.  And what about an inheritance tax ? Any particular reason that Israel remains one of the few countries in the developed world without an inheritance tax ? Is the proliferation of tycoon families really in the interest of the state ? And why shouldn’t rental income be taxed from the first Shekel ? And the training funds which predominantly serve the stronger working populations ? If they are used as regular income as they frequently are (and not to pay for tuition) their taxation should be considered and that would be a reasonable compromise. And the salary excesses that exist in a very few places in the public service like the ports, the Electric Company and one or two other authorities that are in control of critical services should be addressed resolutely.  And the prime minister must lead through personal example by living a reasonably modest existence and not the life of a Middle Eastern potentate that he has become accustomed to.

The only way that jobs will be created in Israel is by changing the dynamics of the present political malaise and initiate a spirit of change to get us out of the stagnation we have been in for many years.

Yair Lapid is relatively young, nevertheless it didn’t take him much time to start acting like his older bro, PM Netanyahu. Lapid would be well advised to travel a different road, seek out a path of budgetary easing, not one of austerity and encourage an active peace process instead of staying mum on the issue. If he doesn’t he will not only do terrible harm to the nation’s social fabric but also pay a heavy price next time elections come around. That may be sooner than he thinks.