Feldstein Says Reagan Administration Favors a Free Trade Zone Between U.S. and Israel

Dr. Martin Feldstein, former chairman of President Reagan’s Council of Economic Advisors, told more than 400 leaders of the Israel Bond Organization that the Reagan Administration is in favor of a free trade zone between the United States and Israel similar to the one that Israel has with the European Economic Community (EEC).

Such an agreement, he indicated, might alleviate many of Israel’s economic difficulties, including its high rate of inflation, trade problems and budget deficits.

Turning to the American economy, Feldstein told the Jewish leaders from the United States and Canada, meeting here at the 1984 national leadership conference of Israel Bonds, that after the November elections, certain steps would have to be taken to reduce America’s national deficit, including an eight percent decrease in government spending and an eight percent increase in taxes, which he said would bring about a balanced budget by the end of 1989.

Feldstein said that, in his opinion, Reagan is personally committed to reducing the deficits and government spending and would accept a tax increase to lower the deficit, but only as a last resort. Among the taxes Feldstein proposed are a value added tax, similar to the one used in Europe, and a restructuring of personal and corporate income taxes.

In a cable addressed to David Hermelin, national campaign chairman, and Yehuda Halevy, president of the Israel Bond Organization, President Chaim Herzog of Israel urged the Bond leaders to help Israel overcome its current economic difficulties by providing “support for our effort to continue building our infrastructure.”

Herzog recalled the key role that bonds have played in the development of Israel since 1951. “During my years of service to Israel, I have always known the Bond Organization as a source of strength an support for all our economic endeavors,” he said.