Lewis Rosen

Israel’s New Center-Right Government – A Sea Change?

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The emergence of Israel’s center-right government is a development that might mark a transition into a new era in Israel’s political history.  However, instead of emphasizing this dramatic possibility, most of Israel’s media commentators and editorial writers have reacted to the new government in Israel by stressing the negative: the shameful display of excessive egotism and sense of entitlement by so many Likud MKs demanding to be made minister, and Prime Minister Benjamin Netanyahu’s wasteful ploy of establishing several phony new ministries to that end, a step particularly offensive when so many Israelis face dire economic circumstances due to the coronavirus. Some writers have bemoaned Netanyahu’s success in remaining prime minister, despite having failed to secure his preferred right-religious majority in three successive elections and despite having been indicted on charges of  bribery, fraud, and breach of trust, to be judged by the Jerusalem District Court.

All are valid points, but they miss the true significance of the new government: This center-right government represents a huge change from the “most right-wing government in Israel’s history,” which was formed following the March, 2015 election.  That government was comprised of the Likud, Kulanu, Bayit Yehudi, Shas, United Torah Judaism and Yisrael Beteinu. It was widely criticized for giving undue influence and budgetary support to two relatively small segments of the population, the Ultra-Orthodox and the settlers in the West Bank/Judea and Samaria, at the expense of the interests of the broader Israeli population.

The present government brings much new talent into the cabinet and the security cabinet, which is very welcome.  Most important, however, Blue and White’s bloc, led by Benny Gantz, will have parity on most future decisions with the Netanyahu-led Likud-Ultra Orthodox bloc.  This parity is an enormous political accomplishment by Gantz, one which creates real hope for more balanced decisions.

How might Blue and White use its parity and associated veto power to push the government towards policies that will meet the needs of the broad Israeli population?  In addition to using its veto to protect the legal establishment and the High Court of Justice from extreme encroachments, there are a number of positive initiatives that it can popularly advance.

Highlights of a suggested economic plan

Notably, Blue and White campaigned before the coronavirus crisis for strengthening the health system. In comparison with other OECD countries, Israel has glaring weaknesses in the low number of acute care beds, the low number of nurses, and the high rate of deaths from infectious diseases, all relative to population size. Also, the public share of total healthcare spending is lower in Israel than in many other OECD countries. The pressure on Israel’s hospitals during the worst of the first wave of the coronavirus drew renewed attention to these serious weaknesses.   Because these deficiencies cannot be corrected in one year, Blue and White should push for a multi-year budget commitment to increase the number of hospital beds, the number of nurses, and the number of nursing students.  The new Likud Minister of Health should have no cause to oppose this effort.

Israel’s recent enormous rise in unemployment to about a quarter of the labor force in April urgently requires an even larger budget commitment than already made to help the unemployed, the self-employed, and the many small businesses that have suffered from the sharp slowdown. More broadly, an expanded “social safety net” is needed.

Other policy areas that Blue and White might champion include higher infrastructure investments in the periphery and investments that would reduce traffic congestion.

To partially fund these generous budgets outlays, Blue and White can propose selective progressive tax increases.  It can point out that Israel has moved from having a tax burden that was slightly above the OECD average in 2000 to one that is consistently below the OECD average in recent years.  Only 11 of the 36 members of the OECD had a lower overall tax burden than Israel in 2018.  This reality makes a strong case for raising both corporate and personal income tax rates to help fund the increased government spending required now and in the years ahead.

If successfully presented to the public, these steps will be broadly popular because they meet clear and present needs. Even if current expenditures for the Ultra-Orthodox and the settlements are not curtailed, which may be politically difficult although warranted, the above steps would work to increase the share of the national budget  that benefits the Israeli population as a whole.

Would the Likud use its veto power to oppose these steps?  They might, regarding taxes,  because Netanyahu was a principal architect of the sustained move to lower tax rates.  However, opposing these initiatives might endanger the Likud’s popularity among its supporters. At most, there would probably be some negotiations between the blocs to modify some of the proposals.

Longer term possibilities

Over time, Benny Gantz’s performance as minister of defense and as prime minister, and the leadership he demonstrates in shaping the government’s agenda, might result in a substantial decline in support for the Likud and the emergence of Blue and White as the largest political party in the next election.  If that happens, the present government will be seen in retrospect as an historic transitional one, ending a 40+ year period of almost continual Likud dominance.

Is this a long shot?   Perhaps.  Those of a skeptical mind —and their number is large—expect Netanyahu to “run rings around” Gantz and to neutralize him, as he has done with so many other politicians that he perceived as a political threat.  Nevertheless, Gantz has already demonstrated more than a little political adeptness in reaching his current position. He may, indeed, shine in handling his new responsibilities, broaden the support for his political party and, as a result, truly surprise those skeptics by engineering a major political realignment in years to come.

About the Author
Lewis Rosen is a retired economist who has lived in Jerusalem for 40 years. Born and educated in the US, he worked for the Office of Economic Opportunity for two years in Washington D.C. and was on the economics faculty of York University in Toronto, Canada for 13 years. In Israel he was involved in a wide range of business planning and economic analysis projects.
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