The unbearable cost of a unity government

Ever since Israel's snap election drew to a close on September 17, the country's chattering class has ginned up its campaign to convince Israelis that what they really want is a national unity government.  To drive home their point, pundits, commentators, and other members of the country's intelligentsia have drawn parallels between Israel circa 1984 and today.

This is a false equivalence.  When Likud leader Yitzhak Shamir and Labor's Shimon Peres agreed to share power, the Israeli economy was teetering on the verge of collapse, with inflation running rampant.  Israel was also a country at war in 1984 — the first Lebanon War.

Fast-forward to here and now.  Israel's economy and security are relatively stable and have been that way for some time.  Despite regular skirmishes with Hamas in Gaza and Hezb'allah in Lebanon, the Israel Defense Forces aren't waging a ground war on enemy territory.

Yet Israeli's cultural, media, and educational elites are bum-rushing citizens like a pesky used car salesman trying to unload a wreck.  Why?  Because in a country increasingly divided along political, religious, and economic lines, even seasoned observers are intoxicated by the appeal of national unity.  But their enthusiastic embrace of a grand coalition is worse than naïve; it's dangerous to the well-being of Israeli society.

A national unity government would be a clunker for most Israelis because of the exploding cost of living here.  Sure, the country's macroeconomic performance is impressive, especially compared to 1984.  But a report released by the Organization for Economic Cooperation and Development (OECD) is setting off alarm bells that most citizens have been hearing for years.

Daily life in Israel is grotesquely expensive.  Food here is 19% higher than the OECD average.  Meanwhile, apartment renters in Israel spend 25% of their gross adjusted disposable income on rent, while homeowners paying mortgages spend 15%, a discrepancy that's among the highest in the OECD.  Since 2009, according to Israel's Central Bureau of Statistics, housing prices have shot up by over 90%.

If you're raising children in Israel, good luck.  Elementary school education and academic studies are 17% more expensive than a decade ago, while the average cost of preschools has risen by 14%.  And Israel's floundering public health care system is forcing many Israelis to supplement their mandatory universal medical insurance with out-of-pocket private policies.  According to the OECD, only 8% of Israelis rely solely on public health care. 

Here's one more stat to consider: Israel ranked a lowly 38th on the economic freedom scale, dropping one place from 2018, according to the Economic Freedom of the World: 2019 Annual Report.  In general, the higher a country's level of economic freedom is, the better off its citizens are.

What you won't hear advocates for a national unity government say is that history shows that such grand coalitions hit the pause button on the implementation of seriously needed policy changes.  Neither Shamir nor Peres was able to advance any major issues during their national unity government because each of them was immediately scuttled by the other.

Israel's next government will be tasked with an awesome responsibility: to develop and carry out policies that remove the disproportionately large financial burden being carried by Israel's working men and women.  For millions of Israelis today, a government of national paralysis is not a viable option.

The cost of prolonged stagnation is simply too high.

Ever since Israel's snap election drew to a close on September 17, the country's chattering class has ginned up its campaign to convince Israelis that what they really want is a national unity government.  To drive home their point, pundits, commentators, and other members of the country's intelligentsia have drawn parallels between Israel circa 1984 and today.

This is a false equivalence.  When Likud leader Yitzhak Shamir and Labor's Shimon Peres agreed to share power, the Israeli economy was teetering on the verge of collapse, with inflation running rampant.  Israel was also a country at war in 1984 — the first Lebanon War.

Fast-forward to here and now.  Israel's economy and security are relatively stable and have been that way for some time.  Despite regular skirmishes with Hamas in Gaza and Hezb'allah in Lebanon, the Israel Defense Forces aren't waging a ground war on enemy territory.

Yet Israeli's cultural, media, and educational elites are bum-rushing citizens like a pesky used car salesman trying to unload a wreck.  Why?  Because in a country increasingly divided along political, religious, and economic lines, even seasoned observers are intoxicated by the appeal of national unity.  But their enthusiastic embrace of a grand coalition is worse than naïve; it's dangerous to the well-being of Israeli society.

A national unity government would be a clunker for most Israelis because of the exploding cost of living here.  Sure, the country's macroeconomic performance is impressive, especially compared to 1984.  But a report released by the Organization for Economic Cooperation and Development (OECD) is setting off alarm bells that most citizens have been hearing for years.

Daily life in Israel is grotesquely expensive.  Food here is 19% higher than the OECD average.  Meanwhile, apartment renters in Israel spend 25% of their gross adjusted disposable income on rent, while homeowners paying mortgages spend 15%, a discrepancy that's among the highest in the OECD.  Since 2009, according to Israel's Central Bureau of Statistics, housing prices have shot up by over 90%.

If you're raising children in Israel, good luck.  Elementary school education and academic studies are 17% more expensive than a decade ago, while the average cost of preschools has risen by 14%.  And Israel's floundering public health care system is forcing many Israelis to supplement their mandatory universal medical insurance with out-of-pocket private policies.  According to the OECD, only 8% of Israelis rely solely on public health care. 

Here's one more stat to consider: Israel ranked a lowly 38th on the economic freedom scale, dropping one place from 2018, according to the Economic Freedom of the World: 2019 Annual Report.  In general, the higher a country's level of economic freedom is, the better off its citizens are.

What you won't hear advocates for a national unity government say is that history shows that such grand coalitions hit the pause button on the implementation of seriously needed policy changes.  Neither Shamir nor Peres was able to advance any major issues during their national unity government because each of them was immediately scuttled by the other.

Israel's next government will be tasked with an awesome responsibility: to develop and carry out policies that remove the disproportionately large financial burden being carried by Israel's working men and women.  For millions of Israelis today, a government of national paralysis is not a viable option.

The cost of prolonged stagnation is simply too high.