Responsible Economic Policy
Does anyone remember when Shimon Peres was Prime Minister and Yitzchak Modai z?l was his Finance Minister? Modai was an outstanding Finance Minister, astute and extremely professional. He was the architect and executor of the brilliant plan that saved the Israeli economy from the hyperinflation of the mid-eighties.
Despite his outstanding successes, he was forced to resign--actually, he was fired--by then Prime Minister Shimon Peres. He was obliged to leave the implementation of his plan to others. The intended scheme was to stop inflation, and not much thought was put into long term planning. The cost of living then was totally out of control, topping 400% a year. This was counterproductive to developing the economy. Every month, workers received immense price hikes which lost their value mere days later. Many speculants became wealthy from that insane period.
The price of reducing inflation involved drastically cutting government spending, freezing wages, decreasing exports and reducing taxation on imports?and in addition to that interest rates soared. The price we have paid was camouflaged, like a disease that has been concealed in the host?s body without being detected. The disease is the ever-widening gap between the different levels of income in Israel.
Powerful Groups Extort Benefits
During the hyperinflation, the workers unions became powerful. Among these groups are the employees at The Israeli Electric Corporation, Bezeq, etc.
They continuously jacked up their demands on the public purse, exerting pressure through strikes, eventually getting everything they sought while callously wreaking economical damage. This is the source of the current huge income gap between rich and poor.
When Baiga Shochat was first appointed finance minister in 1992, he sold out the country -- giving in to all the demands of public employees. He gave away astronomical sums--billions of dollars of public funds to kibbutzim and moshavim, to save them from the tremendous debt they accumulated from dabbling in the stock market. The salaries of public sector workers rose phenomenally. No economy could absorb such expenditures without disaster. It was necessary to drastically curb the budget to cover the huge deficit Mr. Shochat left at the end of his first term.
Closing the economic gap
Israelis have now been presented with a national unity government. There is no doubt that the new Finance Minister Silvan Shalom is a man of substance who will understand the importance of the crossroads at which the economy is standing. It?s not enough to elevate the income of the higher and middle classes. Neither of these groups should receive even one extra shekel without twice that amount going to the lower classes. If a salary of 15,000 shekels a month would gain 200 shekels as a result of the tax reform, a worker who does not pay taxes as a result of his low income, should gain 400 shekels extra in his paycheck. There is no other way! Hopefully, when the new government is formed, it will be possible to amend Ben- Bassat?s recommendations to include the 2 million salaried workers who were previously ignored.
The new heads of state should strive to make the income gap their first priority. Just as Bibi Netanyahu and his professional finance ministers, such as Yaakov Neeman, were able to cover the huge deficit left behind by Beiga Shochat, Ariel Sharon?s officials should be able to diminish the gulf dividing Israeli society.
Does anyone remember when Shimon Peres was Prime Minister and Yitzchak Modai z?l was his Finance Minister? Modai was an outstanding Finance Minister, astute and extremely professional. He was the architect and executor of the brilliant plan that saved the Israeli economy from the hyperinflation of the mid-eighties.
Despite his outstanding successes, he was forced to resign--actually, he was fired--by then Prime Minister Shimon Peres. He was obliged to leave the implementation of his plan to others. The intended scheme was to stop inflation, and not much thought was put into long term planning. The cost of living then was totally out of control, topping 400% a year. This was counterproductive to developing the economy. Every month, workers received immense price hikes which lost their value mere days later. Many speculants became wealthy from that insane period.
The price of reducing inflation involved drastically cutting government spending, freezing wages, decreasing exports and reducing taxation on imports?and in addition to that interest rates soared. The price we have paid was camouflaged, like a disease that has been concealed in the host?s body without being detected. The disease is the ever-widening gap between the different levels of income in Israel.
Powerful Groups Extort Benefits
During the hyperinflation, the workers unions became powerful. Among these groups are the employees at The Israeli Electric Corporation, Bezeq, etc.
They continuously jacked up their demands on the public purse, exerting pressure through strikes, eventually getting everything they sought while callously wreaking economical damage. This is the source of the current huge income gap between rich and poor.
When Baiga Shochat was first appointed finance minister in 1992, he sold out the country -- giving in to all the demands of public employees. He gave away astronomical sums--billions of dollars of public funds to kibbutzim and moshavim, to save them from the tremendous debt they accumulated from dabbling in the stock market. The salaries of public sector workers rose phenomenally. No economy could absorb such expenditures without disaster. It was necessary to drastically curb the budget to cover the huge deficit Mr. Shochat left at the end of his first term.
Closing the economic gap
Israelis have now been presented with a national unity government. There is no doubt that the new Finance Minister Silvan Shalom is a man of substance who will understand the importance of the crossroads at which the economy is standing. It?s not enough to elevate the income of the higher and middle classes. Neither of these groups should receive even one extra shekel without twice that amount going to the lower classes. If a salary of 15,000 shekels a month would gain 200 shekels as a result of the tax reform, a worker who does not pay taxes as a result of his low income, should gain 400 shekels extra in his paycheck. There is no other way! Hopefully, when the new government is formed, it will be possible to amend Ben- Bassat?s recommendations to include the 2 million salaried workers who were previously ignored.
The new heads of state should strive to make the income gap their first priority. Just as Bibi Netanyahu and his professional finance ministers, such as Yaakov Neeman, were able to cover the huge deficit left behind by Beiga Shochat, Ariel Sharon?s officials should be able to diminish the gulf dividing Israeli society.