For the first time in months we have a real proposal that will help extricate Israel from the economic crisis. Instead of another proposal calling for spending billions of taxpayer dollars to build bridges that aren’t needed, PM wannabe Benjamin Netanyahu, has called for a comprehensive overhaul in the tax code calling for steep cuts in both personal and more importantly corporate income taxes.

Finally we have someone who understands that if citizens can keep more of there money, they can then invest, spend and save it according to their needs. The problem with all these other proposals is that with big time increases in government spending you end up taking money from individuals and they have less to create new wealth.

According to Globes: “Netanyahu said, “Over the course of four years, we will lower the top personal tax rate from today’s 46% to a level of 35%, and we will lower the top corporate tax rate from 27% to only 18%.”

Netanyahu added, “The tax cut will be spread over the entire term, and lead to everyone paying about 20% less than what they pay today”.

He also called for more privatization of government held monopolies like the electric, and water companies as well the ports.

With the world on fast track to socialism, it’s so refreshing to hear a leader speak with common sense, and a firm knowledge of what will actually save the economy.

I know that certain newly sworn in presidents believe that we all need to suffer in order to fix the economic issues that we all face, and that ‘greed’ was what caused all these problems, but ‘greed’ is what powers the economy forward. It’s not a bad thing but a good thing. the greed that Netanyahu talks about is about letting you and I keep more of what we earn, incentivize us to make more so that w can better our lives. Is that Greed? The fact is that as personal incomes rise, so do donations to charities. It appears that there is a correlation between making more and giving more. That doesn’t sound much like greed to me, and that’s the kind of personal sacrifice that should be encouraged.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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Even with most commodity and fuel prices dropping at the speed of light, Israel’s CPI for December fell by just 0.1%, far less than the consensus of an expected 0.5% fall. The December reading means that the CPI was 3.8% for 2008, above the Bank of Israel target.

According to a report in Globes: “According to figures released by the Central Bureau of Statistics, the items which showed the most significant price drops in December were energy, with a fall of 5%, and tomatoes, which fell 41%. Other areas with sharp falls included fresh fruits, overseas travel, meat and poultry, cosmetics, furniture, medicines, and glasses. Telephone bills and car prices jumped, and there were also rises in the housing section, and a 12% jump in clothing.”

I would expect that the January ‘09 CPI will drop as well, as the economy has stalled rapidly. i would expect last months rise in housing as well as car prices, to be a one time aberration and if they drop as well, the overall CPI will get a lot closer to the minus 0.5% that analysts had expected for December.

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As if we didn’t know that the Israeli economy has slowed to a crawl, a report by employment agency Manpower shows a sinking demand for Israeli workers. According to a report in Globes: ” The company reported that, in December, total demand for workers fell 6.8% in comparison with November, and by 19.1% in comparison with December 2007. In comparison with 2007 as a whole, total demand for new workers in all sectors of the economy fell by 6.2%. “  The article continues, “Demand for workers in high tech fell 9% in December in comparison with November, and by 6.8% in comparison with 2007 as a whole. In both cases (total demand and demand in high tech) the December figure is the lowest in annual terms since 2004.”

I would expect to see this number continue to fall in the coming months, as Israel seeks deeper into an economic slowdown.

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Speaking to a group of students, Bank of Israel governor, Stanley Fischer said that it remains to be seen how the Israeli economy will do after the war with Hamas is completed. Citing the abysmal global economy, Fischer thinks that a strong Israeli economic recovery will coincide with a global economic revival.

Globes reports, “Everyone can be wise in hindsight, but as of now, the Bank of Israel forecast is for 1.5% growth - but clearly we will have to change it in light of the worsening situation and in line with the situation of the fighting. It’s hard to know exactly, but we are already in a difficult situation. “When will we exit the crisis in Israel? It depends primarily on the global economy.”

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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