Opposition head and Yesh Atid chairman Yair Lapid presented on Tuesday his “New Deal” for Israel’s economy – a plan to save the country’s economy from the crisis he says is looming.
“Prices won’t stop rising, the middle class is buckling, families of reservists are collapsing,” he said, adding that while public opinion is that this is because of the Israel-Hamas war and its significant economic implications, this isn’t the case.
“Israel received aid to fund the war from the US, and one-time expenses, as big and dramatic as they may be, don’t lead a strong country with a strong economy to crisis,” Lapid said.
“The current crisis stems from mismanagement and irresponsibility. It is the result of unprecedented political bribery, harm to the judicial system, and unprofessional and non-objective governance by the government,” he added.
The public is not yet feeling the full brunt of the crisis, Lapid said, explaining that this is because of two reasons – the strong starting point of Israel’s economy and the expanding deficit.
“In 2025, the State of Israel will pay NIS 55 billion in interest on debt. This is a recipe for disaster,” he said.
Instead of working to prevent economic crisis, the government is making the situation worse, Lapid charged, saying that it is working to pass “a populist budget that avoids all the burning problems.”
The current government’s proposed budget expands political money while making widespread budget cuts at the same time, he emphasized, saying that this harms vital systems like the country’s healthcare and education.
“There was no economic or even security-related reason for the VAT increase last January, which triggered a wave of price hikes. It wasn’t because of the war – it was due to a distorted and politically driven set of priorities,” he said.
Had the government cut 80% of its coalition funds, it would have brought in NIS 13 billion, negating the need to increase taxes, Lapid said. Another option would have been closing redundant government ministries, he added, highlighting that Israel “does not need both a Ministry of Heritage and a Ministry of Jewish Tradition, primarily since they are exactly the same thing.”
The current trajectory will cause additional credit ratings drops, spiking interest on the state’s debt, a severe financial crisis, and tax increases, he said.
The opposition leader stressed two primary principles in his new deal for the economy, the first of which was cutting needless government spending and coalition money.
This is important “not only for the money, despite it being a lot of money,” he said, explaining that it is important because without this, there will not be public trust in the government.
“The economy is built on trust. Growth is built on trust. The public and investors need to know that the country has an economic leadership that does not only think of itself.”
The second principle was a heavy emphasis on cutting taxes for the middle class, with Lapid saying that this would encourage growth and private consumption.
He also stressed the need to help the country’s productive population and middle class. “The middle class is keeping Israel’s economy alive, so the middle class is who we must help. Those who give more should get more,” he said.
The government must understand that the country’s working and productive sector is “not a cow that can be milked more and more, until it dies of exhaustion,” he added.
“The government is taking money from working people and giving it to those who don’t work,” Lapid said, offering as an example NIS 1.3 billion in yeshiva student budgets that were allocated while, at the same time, NIS 1.3 billion was brought in to the government coffers through cutting one health day for all employees.
The structural problems in Israel’s economy that the government must contend with are haredi employment, making state security more efficient, cutting needless ministries, and getting rid of coalition funds, Lapid said.
This means that Israel must create a new security concept and budget; create regional alliances meant to stop the war, prevent a new war, and create new economic opportunity; train haredi men and women and Arab women for the job market; improve the state education system, and focus on math and English studies in every school in Israel; lower taxes for the middle class and encourage social initiatives; create national plans for housing for young families; and create plans to adapt to new technologies such as artificial intelligence, he said.
The four categories of the plan
Lapid’s plan is divided into four categories that aim to address these challenges: incentives and investments; changing the government structure; education and training; and national projects.
Among other steps in each of these categories, Lapid highlighted the need to push back against the rising cost of living by giving regulators more teeth to tackle competition and allow for freer imports.
He also highlighted the need to encourage aliyah, prevent the brain drain of doctors, and strengthen the healthcare system.
Also in the plan, Lapid proposed creating a government representative responsible for cutting bureaucracy and increasing efficiency in government ministries.
The plan also included investing in infrastructure that promotes growth, such as public transportation and digital infrastructure.
“The economic crisis can still be prevented. Despite the war, Israel could even become one of the world’s top ten economies. But to achieve that, we need one thing we currently lack: a government – a government that is efficient, has vision, an economic worldview, and an understanding of the connection between different sectors: security, the labor market, and the global economy,” Lapid said.
“Above all, [Israel needs] a government that recognizes Israel’s most rare and valuable resource: its middle class. Strengthening it will strengthen the economy. If it continues to be trampled, it will collapse – and the economy will collapse with it,” he added.