A high-stakes week for the U.S.-Israel relationship

Transcript

NIALA: Good morning! Welcome to Axios Today!

It’s Monday, March 6th.

I’m Niala Boodhoo.

Today on the show: an economic mystery for 2023.

But first, major developments in the U.S.-Israel relationship. That’s today’s One Big Thing.

Hundreds of thousands protest in Israel

NIALA: Protests in Israel have grown against Prime Minister Benjamin Netanyahu's plans to reform the courts. Over the weekend – the ninth week of protests -- hundreds of thousands took to the streets. As Israel and the U.S. planned for two high-profile visits, adding more urgency to the situation this week, the U.S. now finds itself in a difficult spot.

Axios’ Barak Ravid is here to explain. Barak first, why are the protests reaching this level? Can you put this in context for us?

BARAK RAVID: Yes. Hi, Niala. So I think, even as someone who's been living here for more than 40 years now, and was born and raised here, even I'm sort of surprised about how strong the Israeli civil society is in the current moment. When for nine weeks, people are going out of their homes to the streets, uh, to protest, and every week this protest grows more and more and more. It started with 20,000 people.

And now just the protest in Tel Aviv, it had 160,000 people. This is the biggest one since the demonstration started. And I was there on Saturday night. And another a hundred thousand people all over the country. And when I say all over the country, I'm not just talking about Jerusalem, which is obvious, I'm talking about places like a settlement in the West Bank called Efrat. It's, it's a right-wing settlement. And 300 people went out and protested. It's really all over the country.

Like the protests in Jerusalem, most of the people there are right-wing, religious zionism people. Who are just, you know, looking at the government plan to weaken, significantly weaken the Supreme Court and other democratic institutions. And they're looking at it and they're saying, "This is not, what, we thought was going to happen when we voted for them." And they're going out and they're protesting against the people that they voted for.

And I think that this, this huge wave of protest in Israel made it clear to the Biden administration that it cannot sit this one out because If Israel is detaching itself from democratic values like rule of law, like independence of the judicial system, then the whole Israel-U.S. relationship is changing.

The U.S. State Department admonishes Israeli Finance Minister

NIALA: And so all of that is against the backdrop of two big visits that are happening this week. You recently reported first about a U.S. visit scheduled for this week for Israeli finance minister, Bezalel Smotrich who, who is first of all, a pretty controversial person. Can you give us the backstory there?

BARAK: You just gave the understatement of the millennium, calling Bezalel Smotrich, a quite controversial person. Uh, Bezalel Smotrich is a person who, who has a track record of a racist, misogynist, xenophobic Jewish supremacist rhetoric. And just, uh, last week, he said that he thinks that the Palestinian village of Hawara near the city of Nablus in the West Bank should be wiped off the map.

And he said it after his supporters went on a pogrom in this village and torched dozens of cars and houses. And, and this statement won Mr. Smotrich a statement by the State Department saying that his remarks were repugnant...

NED PRICE: These comments were irresponsible, they were repugnant, they were disgusting. And just as we condemn Palestinian incitement to violence, uh, we condemn these provocative remarks that also amount to incitement, to violence.

NIALA: That was Ned Price, spokesman for the state department. What's your reaction Barak?

BARAK: As somebody who's covered the U.S.-Israel relationship for 20 years, this was the first time I've heard an official spokesman of the U.S. government talking like that about an Israeli minister.

And, Mr. Smotrich, uh, wants to come to Washington in a week and, right now the State Department is having discussions on whether to grant him a visa or not. This, this is unbelievable. And it just shows you how in two months since this right wing government was formed in Israel, the U.S.-Israel relationship has completely unraveled.

We’ll be back in a moment with more from Axios’ Barak Ravid.

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Violence in the West Bank fuels protests

NIALA: Welcome back to Axios Today. I’m Niala Boodhoo. Axios contributing correspondent in Tel Aviv Barak Ravid is with us, with the context for this pivotal week in the U.S.-Israel relationship.

Barak, we’ve been talking about the protests against judicial reform, but the tensions and the violence in the West Bank are continuing also... How does that factor into all of this?

BARAK: Those two combined in the last week. How? A few days after the pogrom, there were demonstrations in Tel Aviv and the police sent quite big numbers of riot police against those demonstrations.

And you know what the demonstrators told the cops? They shouted at them, "Where were you when those Jewish supremacists conducted this pogrom?" And this was, I think the first time where a lot of people realized there's a connection between, the situation in the West Bank and what the government is trying to do right now inside Israel.

Israeli military leader calls Hawara attack "pogrom"

NIALA: Barak, is that why you use the word pogrom? Because I will say as an American, when I hear that, my definition of that is violence against Jewish people.

BARAK: The person who used this word to describe what happened in the village of Hawara is not me. It's not Barak Ravid. It’s the commander of the I.D.F. Central Command, General Yehuda Fuchs the person who is in charge of maintaining Israel's occupation in the West Bank. He went on tv and said that what happened in Hawara was a pogrom that was conducted by outlaws, and this is the official position of the I.D.F. This is not the official position of Prime Minister Netanyahu.

U.S. and Israel to discuss Iran's nuclear capabilities

NIALA: U.S. Defense Secretary Lloyd Austin is coming to Israel this week. That's the other big visit. What are you watching for? What do you think Defense Secretary Austin is going to be saying?

BARAK: You know, while everything we just talked about is a major development, there are other major developments in, in the U.S.-Israel relationship and this is what's going on in Iran.

The Iranian nuclear program has been advancing very significantly. Just two weeks ago, U.N. inspectors found in one of Iran's nuclear facilities enriched uranium that was enriched to the level of 84%, which is really inches away from weapons-grade uranium. And so this week starts when, on Monday and Tuesday, a delegation of senior Israeli officials will come to Washington for meetings in the White House and in the State Department to talk about Iran and the way forward and what can be done to stop the Iranians.

And then a day later, Secretary Austin who landed on Sunday night in the region. He, he, started in Jordan. He's gonna be in Iraq, he's gonna be in Egypt, and his visit in Israel on Wednesday and Thursday will focus mostly on how Israel and the U.S. can prepare for a scenario. It's a last resort scenario, but it is a scenario that both countries are getting ready for and this is a scenario where there will need to use military force to stop Iran from getting a nuclear weapon.

NIALA: Barak Ravid is a contributing correspondent for Axios from Tel Aviv. Thanks as always, Barak.

BARAK: Thank you. Niala.

An economic mystery

NIALA: Something really strange has been happening in the US economy, reports Axios' Neil Irwin. I asked him to explain to us why rate hikes aren’t having a bigger effect on the economy.

NEIL IRWIN: The Federal Reserve has been doing everything it can to bring down inflation. It's raised interest rates, 4.5 percentage points. It's cut its balance sheet by $600 billion. The whole goal is to cool down the economy, bring growth down, bring inflation down. And it just hasn't worked.

Inflation is still running way above the 2% that the Fed thinks is okay. the unemployment rate is 3.4%, the lowest it's been in 50 years. It's a very strange world. The question is what's wrong? It's kind of the mirror image of what we experienced back in the early 2010s when you had the Fed trying to stimulate growth and they just couldn't do it. No matter how much they lowered interest rates, no matter how much they did novel programs.

Um, so what's going on? Well, there are a few theories. One of them is that there's changes in the structure of the economy and how different industries operate, and that's resulting in, in a less interest-sensitive economy.

I also have a theory that that wealth inequality might be a factor. You know, if you have, uh, a lot of assets held by the very rich, those assets decline in price, they're probably not gonna cut their spending the way a middle class family would. So we don't really know for sure, but it's one of these great mysteries that we're gonna be monitoring and trying to make sense of as things move forward in 2023.

NIALA: That’s Axios Chief Economic Correspondent, Neil Irwin, and that's it for us today. I'm Niala Boodhoo.

Thanks for listening. Stay safe and we'll see you back here tomorrow morning.