Israeli activism, American apathy

Steve Maas

Israel may be a quarter of the age of the United States, but this fledgling democracy could teach complacent Americans a few lessons in speaking out.

In recent weeks, tens of thousands of people have taken to the streets of Jerusalem and Tel Aviv, calling for “social justice” in general and lower housing prices in particular.

The demonstrations are the latest in a series of economic protests in Israel, which have targeted everything from cottage cheese to gasoline.

All this against the backdrop of one of the world’s fastest-growing economies and an enviable unemployment rate of 5.8 percent.

This is not to say the Israelis are a bunch of whiners. Their housing prices are astronomical, even by Boston standards, and they’ve seen big price spikes in many of life’s basics.

What’s striking is the contrast between Israeli activism and American apathy.

Our unemployment rate is stuck above 9 percent – a figure that jumps above 16 percent when discouraged and underemployed workers are included. Last week, the government reported that the economy is growing at a paltry 1.3 percent.

You’d think that our leaders in Washington would have been arguing over ways to put people back to work. Instead, they were debating huge spending cuts that could toss tens of thousands more people out of work.

That’s because a small minority of congressmen – mostly Republicans beholden to the Tea Party – turned the normally automatic vote to raise the national debt ceiling into an opportunity to force the government to bow to their extreme economic demands.

With one out of every six Americans either jobless or working below his or her capacity, now is not the time to be obsessing about balanced budgets. Businesses won’t start hiring people until demand picks up for their products and services. If people are out of work or worried about being thrown out of work, they’re not going to open their wallets. Thus it’s left to the government to pick up the slack.

While it may seem counterintuitive, deficit spending ultimately will help lift the nation out of its deficit as economic growth generates higher tax revenues and reduces the number of people receiving government assistance. As Catherine Rampell notes in her July 31 story in The New York Times, about a third of the debt accumulated over the last decade results from the downturn in the economy.

All this is not to say “deficits don’t matter” – as Vice President Dick Cheney famously said. In the long run, they indeed are unsustainable. Besides burdening future generations and potentially igniting inflation, they will drive up borrowing costs as the government competes with the private sector for capital. But right now, interest rates are at record lows because slow economic growth gives business no reason to borrow.

The Republicans will tell you that it is President Barack Obama’s fault that we’re in this fix. They blame the stimulus package. And they’re right, but not because it has dug us deeper into debt. As many experts predicted, the package wasn’t nearly big enough to pull us out of the worst economic crisis since the Great Depression.

What’s happening today is exactly what befell the Roosevelt recovery in the mid 1930s. Concerned about the mounting deficit, Congress sharply cut spending and the economy languished until it was saved by the ultimate recovery “plan,” World War II. GOP leaders must know this history, yet they appear willing to let millions endure hardship – at least until the 2012 election.

And the American people are letting them get away with it.

Perhaps we’ve become like the proverbial frog sitting in the pot of water. If you turn up the heat gradually enough, the little guy will simmer silently to his own doom. Consider what has happened over the past three decades, as we’ve been simmering:

 In 1988, the income of an average American was $33,400, adjusted for inflation. Two decades later, the average income was still just $33,000, according to IRS data. During the same period, the richest 1 percent – those earning $380,000 or more – saw their income grow by 33 percent.

 In 1980, the average CEO earned 42 times the compensation of the average worker. In 2009, the CEO earned 262 times as much, according to a AFL-CIO analysis.

 In 1979, the top 1 percent of households accounted for 9.3 percent of the nation’s income. By 2005, according to the Congressional Budget Office, that figure had nearly doubled to 18.1 percent.

In light of how good the US economy has been to the wealthy over the past three decades, it hardly seems unreasonable to repeal the Bush tax cut on earnings over $250,000 or to close a loophole that lets hedge fund managers pay a tax rate that’s about half that of their secretaries. But in America, if you talk about income inequality, you’re accused of fomenting class warfare. You’re called a socialist, slammed for advocating income redistribution. Never mind that we have experienced dramatic income distribution over the past 30 years – from the poor to the rich.

Israel, too, is seeing a growing wealth gap – it’s the dark side of the Start Up Nation story. Threequarters of Israelis said their economic conditions had worsened over the past year or remained the same, according to a poll by the Israel Democracy Institute and Tel Aviv University. Two-thirds said the state should put narrowing the income gap ahead of promoting growth and stability.

They have reason to be concerned. Israel is running neck and neck with the United States in the Top 10 list of countries with the worst income inequality. The US ranks fourth and Israel fifth, according to the Organization for Economic Cooperation and Development.

The Israelis are relatively newcomers to capitalism as we know it. Through much of their history, the government played a large role in the country’s economy – so much so that it shackled growth. Perhaps the pendulum has now swung too far the other way.

This is not to say that Israel should return to its socialist roots or that the United States should take a sharp turn to the left.

But no nation can stand by as too much wealth is concentrated in too few hands. It undermines government, as special interests trump national interests – just witness the fate of Elizabeth Warren, sent packing to Massachusetts for championing the consumer. And it undermines the economy, as a shrinking middle class saps demand for goods and services.

The Israeli people – who have proven to the world that they won’t be pushed around – are showing their government that they are not to be trifled with.

When will the American people show Washington that they, too, cannot be ignored?


Steve Maas is the editor of The Jewish Advocate.