Economic reforms won’t be served on silver platter
Liberman’s plans are well-meant, but those paying for them aren’t going to accept it without a fight
The deluge of government announcements about economic reforms in recent days is cause for significant optimism among Israelis, but also for cynicism and disbelief.
Ever since Finance Minister Avigdor Liberman (Yisrael Beytenu) presented his outline for the Economic Arrangements Law, which lays the framework for the policies put forth in the state budget, Israelis have been treated to almost-daily briefings about wide-reaching reforms being set in motion.
All of the measures proposed would be positive steps for the economy, and most are long overdue. But many of them will face serious opposition from different interest groups within Israel. And with so many big changes being rolled out so quickly, it is reasonable to wonder how much of this will actually happen.
Liberman has said his sole concern as finance minister is to do what is right for Israel’s economy, even if it means being the bad guy. The projects he has taken on would help Israel fix many of the economy’s oldest and largest problems. But his path is not going to be easy.
The first major opening shot came two weeks ago when Liberman revoked the eligibility of fathers studying full-time in yeshiva to receive childcare subsidies, ruling that both parents would need to be working or studying in an academic (non-religious) institution for at least 24 hours a week. The dearth of haredi (ultra-Orthodox) men in the workforce is widely seen as one of Israel’s most significant economic challenges.
However, the way Liberman issued the decree, just weeks after he started in his new position, outraged the haredi world and sent it into disarray. Liberman and Economy Minister Orna Barbivay (Yesh Atid) have since delayed the cuts until the beginning of November to allow haredi households more time to prepare. But much more opposition is to be expected before this decree, which would significantly impact the haredi lifestyle, takes effect.
Religious Services Minister Matan Kahana (Yamina) also took a shot at religious leaders this week with a far-reaching set of reforms to the kashrut market. The plan would effectively end the Chief Rabbinate’s long-held monopoly over the kashrut-supervision industry. Manufacturers and restaurateurs have dreamed of such a change for years, but the rabbinate says introducing competition to the market would “destroy kashrut in Israel.”
On
Wednesday, Liberman and Agriculture and
Rural Development Minister Oded Forer (Yisrael Beytenu) announced a plan to lower the prices of fruits, vegetables and eggs, promoting imports to boost competition and increase the range of products available to the Israeli consumer.
The plan could save Israelis some NIS 2.7 billion a year, or NIS 840 per household, once implemented, the ministries said. While that is good news for most Israelis, thousands of local growers fear that the plan will destroy their livelihoods, and they plan to strike in protest.
Fixing Israel’s real-estate market is also one of the new government’s top priorities, but the path forward is unclear. Apartment prices are sky-high due mainly to a lack of available housing options.
Liberman has said he would like to see the Israel Lands Authority release much more land for building and for building permits to be issued quicker. But these are not necessarily under his control.
A creative plan to convert tens of millions of square meters of unused office space into residences to create new housing options still has plenty of unanswered questions to confront. The government says it wants to build 300,000 new apartments in the coming years, but nothing is currently in motion to make that a realistic goal.
A government plan to significantly reduce excess regulation and bureaucracy in government offices would save the economy NIS 7b.-NIS 8b. a year, Liberman announced two weeks ago. However, the idea of creating another government regulatory authority to cut down on regulation has been mocked, and the process of laying off hundreds of government workers deemed redundant won’t be easy.
Fixing Israel’s transportation woes will require massive infrastructure investments, including NIS 150b. for the gigantic metro project in the center of the country. Improving public transportation and steering buyers of new cars toward electric vehicles would go a long way to help ease congestion on some of the most crowded roads in the world.
But can Israel pay for everything without raising taxes, as Liberman has promised? He has already backtracked on a proposal to charge a “congestion tax” on all cars entering Tel Aviv after Transportation Minister Merav Michaeli (Labor) nixed it.
A new plan to tax disposable plasticware and utensils to reduce their environmental damage may be well-intended, but manufacturers and consumers aren’t going to accept that without a fight.
A plan to gradually raise the retirement age for women from 62 to 65 is considered necessary by OECD economic experts, but not all women are excited to work an extra three years. There are no plans to change the retirement age for men from 67.
Making the banking system more open, transparent and competitive sounds great, but how will the banks respond?
Promoting Israel’s medical-cannabis industry may be a smart economic move, but will that turn Israel into a drug haven?
The government is eager to present itself as the answer to years of what it sees as economic mismanagement under former prime minister Benjamin Netanyahu. Success in even half of the programs on this list would represent serious progress for Israel’s economy and society as a whole, but nothing is going to be presented to Liberman or the governing coalition on a silver platter.
The government’s first challenge will be passing the budget with these priorities by November. Then we’ll see what happens next.