A Question of Fungibility

Where does the money you send to Israel really go?

The war hasn’t stopped tax cuts that make the wealthy even wealthier. Reductions in social services continue; the gap between rich and poor is widening. And while the country’s major policy effort beyond its own borders has turned into a quagmire, the nation’s leaders seem determined to pour more resources into it.

Anyone reading those words in New York or Los Angeles would take them as a summary of Bush administration economics. A partisan description, true—but, given how American Jews vote, it’s a safe bet that most would agree with the perspective.

Yet at my desk in Jerusalem, I can testify that the same words aptly sum up the Olmert government’s economic program. The rub is that generous, well-meaning American Jews are inadvertently lending a hand to policies in Israel that they deplore at home. The reason—to cite the motto popular under an earlier Bush—is that “money is fungible,” including money to help Israel.

American Jews, to their lasting credit, vote against their class interests. The last American Jewish Committee poll found that 54 percent identified as Democrats, 29 percent as independents and just 16 percent as Republicans. In 2004, George W. Bush won only a quarter of Jewish votes, according to the Pew Research Center. There’s more to Jewish liberalism than economics—but surely, a sense that the government bears responsibility to have-nots is part of it.

This sense of responsibility is notably absent in the Olmert government, which slogs on with the harshly conservative economic policies of Benjamin Netanyahu. Netanyahu was the one responsible for cutbacks in social benefits, including “guaranteed income” for the poor, unemployment compensation and the per-child stipend paid to families. (The stipend fills the place of tax deductions for children, so low-income families also benefit.)

At the same time, Netanyahu rolled back corporate and individual income taxes. As Ben-Gurion University economist Moshe Justman explains, “the more you earn, the more you profit from the reform.” Israelis at the bottom half of the income scale, he adds, hardly pay income.

While the rich are getting richer, the poor are getting poorer. According to a mid-year official report by the National Insurance Institute, some 100,000 Israelis slipped under the poverty line in 2005, bringing the total to more than 1.6 million people, or 24.7 percent of all Israelis. At 35 percent, Israel has the dubious distinction of having the highest proportion of children living below the poverty line in the developed world. The “land of milk and honey,” it seems, has managed to outdo even Bush’s America in inequality.

After the war in Lebanon this summer, Israel faced sudden new expenses—for defense and for rebuilding the missile-shattered Galilee. Olmert and Finance Minister Abraham Hirchson did not touch the tax cuts. Instead, their proposed budget for next year again asks the poor to make sacrifices. Social benefits, including old-age stipends, will not be updated for inflation. A planned increase in the minimum wage—the Labor Party’s price for joining Olmert’s coalition—will be postponed.

Olmert won last spring’s election largely because the majority of voters believe that Israel will have to give up much of the West Bank, but the treasury also continues to spend on West Bank settlements. No one knows the total since settlement outlays are hidden in myriad corners of the national budget—subsidized mortgages for settlers under the Housing Ministry, job perks for teachers under the Education Ministry, security costs in the defense budget.

American Jews are divided on the settlement issue. On the surface, that shouldn’t affect fundraising, since money from communal campaigns is spent inside the Green Line, the pre-1967 border. But look closer: During and after the war this summer, American Jewry launched an emergency campaign, raising over $260 million within its first weeks to repair public buildings in the Galilee, provide loans to businesses in the region, fund scholarships and help the poor. Without the Diaspora’s help, the government would have to shoulder more of those costs. With the help, it has more money available to spend on settlements and tax cuts for the well-off. That’s fungibility.

My point is not that Jews should stop giving. It is to the credit of American Jewry that giving is a defining ethic of the community. Nor, obviously, can Diaspora Jews dictate Israeli policies. They do not bear the full consequences of decisions, and are removed from the daily political debate.

Yet giving does turn American Jewry into a junior partner in Israeli economic choices, and it should not be a silent partner. Out of a commitment to donors and to Israel itself, leaders of the fundraising effort must insist that Olmert respond to their concerns. They should stress that when American Jews sign checks, they do not intend to sign on to policies they have reason to question.

Gershom Gorenberg is a Jerusalem-based journalist and the author of The Accidental Empire.