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For decades, Benjamin Netanyahu, Israel’s prime minister, has championed the doctrine of free market economics. As finance minister 20 years ago, Mr Netanyahu was praised by Milton Friedman, the godfather of neoliberal economics, because he cut welfare payments, slashed government spending, accelerated privatization and promoted the country’s technology industry.
In his autobiography last year, Mr. Netanyahu spent three chapters explaining how his tenure in the treasury had rescued the economy from the “ancient semi-socialist quagmire,” partly by cutting remittances to ultraconservative Jewish Israelis, who often shun the job market for religious studies, and nudging others. to work.
Mr Netanyahu’s new national budget, passed by the Israeli Parliament early Wednesday, risks turning that legacy on its head.
Bowing to the demands of his ultra-Orthodox partners in the shaky coalition government, Mr Netanyahu has massively increased state funding for ultra-Orthodox schools, seminaries and other religious and social projects, as well as for ministries run by Israeli settlers in the region. occupied the West Bank.
Mr Netanyahu said the increase was necessary to ensure equality between the religious and secular school systems. But critics say the move will do long-term damage to Israel’s economy because it supports an ultra-Orthodox school system that largely fails to teach math, science and English, leaving children unprepared for the modern workplace.
Mr. Netanyahu’s stance on the issue has caused a storm in Israel, raising tensions between ultraconservatives, who want to preserve an autonomous lifestyle, and their secular neighbors, who argue that taxes are increasing for a portion of the population that provides them. little in return and generally avoid military service.
The debate led to one secular television presenter describing the ultra-Orthodox as “bloodsuckers”, while religious leaders said community volunteer work for charities and emergency medical groups was underappreciated.
And the furor over the budget has also damaged Mr Netanyahu’s free-market credentials amid accusations that he makes economic decisions based on political expediency.
“It seems that the Netanyahu of 20 years ago and the Netanyahu of today hold opposing economic values and agendas,” said Prof. Karnit Flug, former governor of the Bank of Israel who is now vice president of the Israel Democracy Institute, a Jerusalem-based research group.
Ultra-Orthodox Jews, or Haredim, are the fastest-growing part of Israel’s population: They now form about 13 percent of the population, a proportion projected to triple in forty years. Economists say this increase will cost Israel trillions of dollars – unless the largely autonomous ultra-Orthodox school system prepares Haredi children better for the world of work, and more Haredi adults are encouraged to work rather than study in seminaries.
Israel’s new budget does the opposite. It increases the annual state funding for seminaries, or yeshivas, and stipends for students in institutions of at least 50 percent, or more than $160 million, according to an assessment by analysts at the Berl Katznelson Center, a political research group. And it more than tripled annual state funding for Haredi schools, rising to more than $400 million, according to the same analyst.
Asked to comment for this article, the prime minister’s office said the increase would stimulate, not hinder, Haredi participation in the labor market, and would strike a balance between state funding for Haredi and secular schools.
“Religious children must have the same opportunities as secular children,” the prime minister’s office wrote in a statement. “This is an important step for social cohesion and inclusiveness.”
The statement added that the budget “is in line with Prime Minister Netanyahu’s free market principles that helped unleash the Israeli economy twenty years ago and transform it into an innovative and economic powerhouse. Prime Minister Netanyahu remains committed to these principles.
But economists are not convinced, including those in the finance ministry and a right-wing research group that largely supports Mr. Netanyahu.
The Israeli government, including the previous administration led by Mr. Netanyahu, funded Haredi education for many years, as well as secular schools and colleges. But the huge increase in funding is causing alarm.
In an internal government assessment published in Israeli news media, a senior economist at the finance ministry warned that, even before the new budget is passed, the slow employment rate among the Haredim will cost the Israeli economy nearly $2 trillion over the next four decades. Israelis in the workforce would face a 16 percent income tax increase to maintain current levels of government services, the assessment said.
The report raised concerns even from the Kohelet Forum, a right-wing research group that supports another flagship project of the government, the judicial overhaul. Kohelet’s chief economist, Michael Sarel, issued a statement supporting the right of Haredim to live “according to their choice,” but criticized the government for creating “a very wrong economic incentive for ultra-Orthodox families.”
Three hundred economists from across the political spectrum then called on the government to “come to its senses,” warning that the budget would “transform Israel in the long term from a developed and prosperous country to a backward country with a large population lacking the basic skills to survive in the century the 21st.”
The entire budget covers all state spending, including military, transport and infrastructure, and will provide the ministry with approximately $270 billion over two years. Among other measures, it has increased funding for the national security ministry, led by Itamar Ben-Gvir, a former far-right activist, and set up a new food stamp program.
The government also said the budget would help reduce the cost of living, a claim disputed by the opposition.
In his memoirs last year, Mr. Netanyahu wrote that he was prepared to cut subsidies and maintain fiscal discipline in the 2000s because “I was willing to risk my political future.”
Now, political commentators say that is no longer the case. Mr Netanyahu’s four-seat majority in Parliament rests on two ultra-Orthodox political parties. If they vote against the budget, as some leaders have threatened, the government will fall automatically, setting the stage for new elections.
“Survival – that sums it up,” said Anshel Pfeffer, Mr Netanyahu’s biographer.
“Netanyahu’s belief in the absolute necessity of being the leader of Israel runs deeper than his belief in fiscal conservatism,” Mr. Pfeffer said. To retain power, “he is willing to pay the price in the form of a budget that betrays all the economic principles he believes in.”
Gabby Sobelman contributed reports from Rehovot, Israel, and Myra Noveck from Jerusalem.
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