Tuesday, December 2, 2008

Is It Win at All Costs for Netanyahu?

The Bibi haters are out in full force today, charging that PM hopeful Benjamin Netanyahu has thrown his 'free-market' principles to the wind and will do/say anything to get elected.

Nehemia Shtrasler writes in Haaretz: "It will be interesting to see where else Benjamin Netanyahu goes in his eager pursuit of voters' hearts. He wants so badly to sit in the prime minister's chair that he is even willing to scrap his entire economic worldview and masquerade as Histadrut chairman Ofer Eini."

He says that Netanyahu has given up his ideology in order to get elected. Calling for a broad pension safety net, increasing child allowances and a large increase in government spending, Bibi has basically moved his policies to be in line with those of national labor chairman Ofer Eini.

I am not a big fan of Shtrasler but he does make some good points. Instead of calling for more spending and basically abandonding budgetary discipline, Netanyahu should be out there championing lower taxes, and incentivizing entrepreneurship. After all, the real engine to economic growth is not bailing out billionaires, but it's by encouraging small and and mid-size business creation.

As for the pension safety net, Shtrasler is correct on the facts but wrong on the safety net. He says, " He knows that this "safety net" is a regressive, antisocial policy that no other country has adopted. And who knows better than he that the people have not lost anything in the provident funds, but have in fact earned a profit? From 2003 through 2007, these funds posted a very nice profit - 66 percent. Only this year have there been a loss - 20 percent. In other words, the gains far exceed the losses. So why should we be transferring money to people who made a profit?"

No question that much of this discussion is based on zero facts. Most pensions increased handsomely since Bibi opened up the system. I am not for a broad safety-net. We need to follow the Chilean pension model. Chile faced a bankrupt pension system, and they decided to privatize the system by allowing people to have individual savings accounts. But for those approaching retirement they were given a choice. Accept the new system or you could take a guaranteed pension from the government. Basically a safety net for those close to retiring. That's exactly what we should do here in Israel. For those 5 years away from retirement, give them the choice of accepting a guaranteed government pension, or letting it ride in a private account.

This is the kind of policy we need Netanyahu to speak about. We don't need him encouraging building a road or bridge that no one needs.


Noah said...

Wow, did you actually suggest some form of social "safety net" - I knew things were bad, but this is the most telling "economic indicator" of them all. Next thing you know, you will say that the US economy has been in a recession since last December (http://www.iht.com/articles/2008/12/02/business/02econ.php).

While I agree that citizens have the "right" to expect some form of "safety net" - especially in a state such as Israel that was founded on socialist ideals and requires its citizens to contribute so much to the the country (making up their own "social contract" if you will) - I am not sure of the real effects of tax cuts, especially in a country such as Israel. The question I would have is how much of the economy is made up of "tangible goods" that can be purchased locally and employ large sectors of "less skilled" tier workers as opposed to tech goods or exports that A. will not create large pools of jobs in the tech case and B. or will be effected by the global economic melt down in the export case.

Further, while their are certainly strategic advantages to government infrastructure projects (such as increased road safety, dispersing the population centers) who would actually be doing the work? Is Israel a country that has gotten away from more the manual labor that it was founded on? And if so, would you just be putting money into non-citizens that would send the money out of the country?

For the current crisis wouldn't it be better to give tax breaks to the middle to lower class - whom will spend it quickly because they have too. As opposed to wealthier people that, specifically right now, will neither spend it or invest it due to the current economic downturn? I am also not sure how a public works project will help create jobs for people in the service industry or finance for instance.

Just a few random thoughts to keep this page interesting. I expect a Katsman feeding frenzy on all this.

Aaron Katsman said...

Thanks for taking the time to post your 'feelings.' As was mentioned in my post the pension saftey net for those bout to approach retirement isn't socialist. it's giing them a choice. go with the governmnt or keep your private pension and try and make soem real money. This applies to no other workers and once you get past those approaching retirement, everyone else will ONLY get private pensions. It appears that your understanding of how tax cuts work is a bit off base. Who do you think creates jobs? Why punish them by raising taxes and forcing them to freeze their business growth. What should happen is that teh bottom 10% of wage earners should eb taken off the tax rolls completely and everyone else rich, poor, middle class should get accross the board tax cuts, on income, capital gains and most of all on VAT. You can't have it boh ways. Either tax income or tax consumption but you can't do both.
Thanks again for taking the time to write

abekatsman said...

noah, just curious--since you don't believe in supply-side economics, or even "trickle-down" as you ignorantly misunderstand it, why do you think the entire nyc economy is in trouble just because a bunch of wealthy bankers lost their jobs?

Noah said...

You know I am reading the blogasphere and people are saying the only difference between this page and a socialist is lipstick and an earing. Why don't you just embrace your inner socialist?

Regardless, you are probably the only person (besides your family) that are still trying to sell private pensions. I mean, people are getting wiped out now. What would have happened if Leamans was managing your money?

As for creating jobs - I didn't say anything about corporate tax, I just said it about wealthy individuals. I don't think that they will invest their money right now. Nor do I believe corporations will until the current situation plays out. Besides, even if corporation do want to invest, the banking situation is still a mess (though slowly getting better, I hope). On the other hand, middle class people, especially in Israel are living close to pay check to pay check and will quickly inject any tax credits they get back into the economy. With that said, as a business model, I am not sure why the government would want to cut off its current stream of revenue from the wealthy when they are loosing tax revenue in general. Yes, you could give tax incentives to invest - but just to give them a break and have them not do anything with the money - that doesn't seem to make good business sense.
Thanks for responding to my previous comments

Aaron Katsman said...

Noah thanks again for you insight?
" From 2003 through 2007, these funds posted a very nice profit - 66 percent. Only this year have there been a loss - 20 percent." yes that means for the past five years even with a market thats gotten crushed we hav over 50% rise in pension values! before bibi wasn't the pension system bankrupt? You need to see through the leftist media, who by the way have about as good an undertsanding of economics as i do of paleontolgy, and look at teh fcats. the numbers don't lie. people have made a very nice profit intheir pensions, and ther has been trickle down. before bibi unemployemnt was well over 10% now it's under 7%..so we ahev a lot more employed improving their lot. I kinow that soprt of blows away your socialist utopia but facts are facts
Thanks forn your interest

Noah said...

I would first like to address my colleague Abe. I believe in "common sense". If that is wrong, I don't want to be right. One of the reasons NYC economy is in such a tailspin, and the rest of the world, is A. the financial markets created nonsensical instruments and some other "too smart and half" people insured them. Underlying the problem of when the "paper" takes on its own value regardless of the asset it is supposed to support. B. We have been in a recession since last December - believe it or not. It is this confluence of distinct events and others that have gotten NYC and much of the world in this current situation. Also, it appears not buying American cars - I take some responsibility for that - but did you really expect me to buy a Pontiac?

As for my colleague Aaron I would think understanding (and Abe for that matter) I would think that paleontolgy would be the equivelent of self awareness.

Regarding Bibi, I do believe he did a great job. I think Sharon had set him up - Bibi would have to make hard choices and if he failed Sharon could blame it on him, if Bibi succeeded Sharon could take all the credit - regardless - Sharon just left and started a new party.

As for the numbers don't lie - well lets see what comes out of the Lehman's investigation. But I don't doubt what you wrote. My question is A. Are you fighting the last war - this is a different scenario then previous B. Similarly, is there it always the same answer to different economic problems? I most situation, even a rote answer needs to be messaged for the specific problem
Thank you again for taking time to respond to me. Certainly, I only aim to entertain and never to offend.

Aaron Katsman said...

Noah- thanks again for the stimulating feedback. yes there is one answer to almost all economic problems. lower taxes, less government and empowering people. the reason we are in this mess is that congress forced banlks to lend money to those who had absolutely no chnace to pay it back. As for american cars, it's the government forcing all knds of emission standards, green standards, unions..etc... detroit can't compete against asian automakers because they make a product that is 20% mcheaper. again it's interfernce in the free market that keeps screwing things up