REAGAN'S JEWISH SON:

Bibi as Economic Reformer : Three generations of Israeli statism is enough. (Daniel Doron, 01/12/2004, Weekly Standard)

The wildest optimists would not have predicted that Netanyahu could reverse this downward economic trend, and in fairly short order. Yet the economy is growing again. Netanyahu has managed to make substantial cuts in two consecutive budgets and reduce the bloated public workforce and salaries (though not enough). He has even managed to reduce unemployment benefits that discouraged lower paid Israelis from working.

Netanyahu also launched a modest tax reform, bringing the top marginal rate below 50 percent of income. And he courageously took over the Histadrut-controlled pension funds that were going bankrupt as a result of the labor federation's mismanagement. But the Histadrut, cynically posing as the protector of workers' pensions (that the union itself has squandered), launched a well-financed campaign of massive demonstrations, strike threats, and a PR drive vilifying Netanyahu as the benefactor of the rich (because he cut taxes). The strikes, only some of which materialized, almost broke an already teetering Israeli economy.

Netanyahu's showdown with labor is an epic struggle. He wants to privatize the hugely wasteful public-sector monopolies, but that means taking on Israel's most powerful unions. Workers in the seaports and airports and in the electrical and water works--all government-owned monopolies--earn five times the average Israeli salary and have cushy work arrangements. Jaguar-driving union bosses enjoy fantastic perks for no-show jobs. They threatened to bring the economy to a halt to protect these privileges, counting on support from other public-sector workers, government employees, teachers, etc.

This continues to be a far more important struggle to the future of Israel--because the forces of reform could easily lose--than that with the Palestinians--the conclusion of which is in no doubt.

Posted by Orrin Judd at January 6, 2004 9:48 AM