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Jack Kemp, former NFL quarterback, one time VP nominee, and champion for the ‘little guy’ has died of cancer. He had been diagnosed with an undisclosed type of cancer in January and it was at an already advanced stage.

He was certainly the flag bearer of compassionate conservatism. That if we cut taxes, not just the rich but everyone will benefit and be able to pull themselves up into the middle class.

According to the USA Today: “Through his political life, Kemp’s positions spanned the social spectrum: He opposed abortion and supported school prayer, yet appealed to liberals with his outreach toward minorities and compassion for the poor. He pushed for immigration reform to include a guest-worker program and status for the illegal immigrants already here.”

In another story illustrating his love for freedom, Foxnewsreports: ” Dole’s more sober demeanor contrasted sharply by Kemp’s high-spiritedness, which was recalled in various accounts, including one by Marlin Fitzwater, Bush’s press secretary.

Fitzwater wrote in his memoirs about a time when Kemp lunged at Secretary of State James Baker III in the Oval Office. The housing secretary was “nagging, nagging, nagging” Bush to recognize the breakaway Soviet satellite of Lithuania and Baker, the color rising in his face, screamed an epithet at Kemp, Fitzwater recalled. Kemp bounded across the furniture and grabbed at Baker’s throat. They were pulled apart to avoid a fistfight.”

Jack Kemp will be missed by all. May god bless you.

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As if to add insult to injury, Israel may be heading for a period of deflation. Figures released yesterday show a drop in CPI for the 3rd consecutive month. According to Globes: “The Consumer Price Index (CPI) fell 0.5% in January. According to figures released by the Central Bureau of Statistics the fall in the CPI was due to lower prices for three main items housing, energy and vacation packages in both Israel and abroad.”

I would expect these numbers to allow BOI head Stanley Fischer to drop interest rates by at least 0.5%. With such low interest rates, things are setting up for a big economic expansion. the problem in Israel is that the banks have shut off the lending faucet.

Low interest rates coupled with banks loosening credit plus tax cuts, if Netanyahu can form a coalition, could be the fuel that the Israeli economy needs for some strong growth in the second half of ‘09.

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Due to the economic slowdown, which will hurt tax receipts, as well as an expected pickup in government spending, the Bank of Israel has estimated that the Israeli budget deficit will reach 3% of GDP. This happens to be a great number compared to the rest of the developed world where it is much higher, over 4% in most cases.

According to a JPost article, Stanley Fischer has nonetheless called for a reduction in taxes: “The government should go ahead with its plan to reduce taxes next year, even while the deficit is expected to grow, as tax receipts fall due to the slowdown and government spending rises.”

The fact is that by cutting taxes, government tax collection will actually increase, as supply-side economics has continually taught us. If people make more money, even if they pay a lower tax rate, the amount they pay will actually be greater. It’s the beauty of economic growth and lower taxes. Too bad the world, in its’ rush towards nationalization, has forgot this basic principle.

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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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Aaron Katsman
www.IsraelNewsletter.com

It’s official. Israel is no longer an emerging market. Yesterday, ratings agency Moody’s joined Standard & Poor’s and Fitch, by upgrading its ratings for Israel. The government foreign and local currency bond ratings have been upgraded to A1 from A2, and the foreign currency ceiling for bank deposits has been upgraded to A1 from A2 as well.

This is another feather in the cap of the Israeli economy. It was only 6 years ago that Israel was on the verge of economic collapse, but thanks to then Finance Minister and former PM Benjamin Netanyahu’s courageous economic reform policy, the economy has strengthened considerably. By lowering taxes, limiting government spending and privatizing state owned industry, Israel has experienced some of the strongest growth outside China that world has seen in some time.

The sign of a strong economy is a strong currency. Over the last year, the Israeli Shekel is one of the 3-4 strongest currencies in the world.

“Fiscal reforms are paying off in terms of increased economic vibrancy, diversification and competitiveness, and to the benefit of strengthening tax revenues, in spite of tax cuts,” said Moody’s Analyst Joan Feldbaum-Vidra.

In spite of tax-cuts? Joan, it’s because of the tax cuts. This is another proof that supply- side economics is the way to go. If you increase the economic pie, you will have larger tax revenues even with lower taxes. How do you increase the pie? By cutting taxes. 

Disclosure: Author’s fund has no position in any other stock mentioned as of 4/18/08.

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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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