Israel Votes, Weighing the Leadership of Benjamin Netanyahu

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0:17From the opinion pages of The Wall Street Journal, this is Potomac Watch. Israeli voters go to the polls for the first time since the October 7 massacre. in a referendum on the leadership of Prime Minister Benjamin Netanyahu. Plus, Brazil's elections give another term to leftist President Lula da Silva, and Venezuelan opposition figure Maria Carina Machado returns home to an uncertain future. Welcome, I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleagues on the WSJ's opinion pages, columnist Mary Anastasia O 'Grady and editorial board member Elliot Kaufman, who is also the author of the recent book In the War Room, the inside story of Israel's fight against Hamas and the Iranian axis.

1:06Elliot, let's start in Israel. The vote is today. We don't know the outcome yet. Some results might be trickling in by the time listeners are getting and listening to this podcast. But give us a sense of what the challengers are saying, why this should be the end of Benjamin Netanyahu's political career, and what he's saying in response. The case against Prime Minister Netanyahu, as it has been made by the entire Israeli opposition led by former military chief Gadi Eisenkot, the case goes like this. He failed on October 7th, 2023. Okay, Hamas invaded, succeeded in massacring some 1 ,200 Israelis and taking more than 250 hostages.

1:52So that's failure number one. Failure number two would be the inability of the current Israeli government to enlist ultra-Orthodox Jews known as Haredi Jews in the army. They have a longstanding exemption from that, but amid the significant military casualties of this war, that exemption has come to be extremely unpopular in Israel and really seem offensive. Netanyahu is allied with those Haredi parties. And for that reason, and really that reason alone, has not been able to come out against that exemption. And failure number three would be the diplomatic failures of the war and the growing sense that Israel could be losing American support and certainly support elsewhere in the Western world.

2:49And so the Israeli opposition points the finger at the prime minister and says, these failures happened on your watch. Israel needs change, a new government. And what is Netanyahu's response? Why is he saying that he deserves another stint as prime minister? So Netanyahu, in part, he speaks about the achievements of the war, which are certainly not insignificant. I mean, Iran was on the brink of a nuclear breakout. Now its nuclear program lies under rubble. Hezbollah had 150 ,000 rockets and missiles looming over Israel. Now it's at roughly a tenth of that. These are existential threats lifted.

3:33The main two things, Prime Minister Netanyahu argues, number one, he says, Israel has two years now, two final years of the Trump administration in the US to finish the job in Iran. And who do you want focused on Iran? Who do you want working with President Trump? He says it's him. The second and final point he makes is that his opponent, Gadi Eisenkut, had been the most dovish in the Israeli war room, ready to end the war in Gaza and the larger war really by late 2023 and early 2024. This is before most of the major accomplishments of the war. And so one of his slogans, which actually rhymes in Hebrew, is either the right or Palestine.

4:25You have to choose. Do you support the right wing of the spectrum or the center left, which will face tremendous Western pressure and maybe give in by making disastrous and dangerous concessions on the Palestinian front? But Eisenkot is also saying that he does not support a state of Palestine. And one line in the journal's editorial setting up the stakes of the election that jumped out at me was this. Israeli voters want change and are also more right wing. Tease that out a little bit because it is easy sometimes to project the politics that you know best on other parts of the world. But Eisenkot is not a left figure on security questions in the American sense of the American progressive left.

5:13Correct me if I'm wrong. No, that's absolutely right. I mean, he is the former head of the Israeli military. OK, and he served in that role under Prime Minister Netanyahu in the past. He's even the architect of a doctrine of more aggressive responses against Hezbollah in Lebanon. OK, so he is no squish on these questions. What he is, is more moderate about a lot of questions in terms of how long Israel should be fighting, how it has to handle its foreign relations with the West, whether it necessarily needs to hold security buffer zones on these fronts or could try out other potential political solutions.

5:55But what he knows is that Israel's electorate is more right wing now on all of these security questions. It is a very complicated thing, just given how much has happened in Israel in the past four years since the last election. Not only the October 7th invasion and massacre and the subsequent war, but also before that, the whole judicial reform controversy, which really convulsed Israel. And so Eisenkot has been trying to signal that he is hawkish on security matters, that he is every bit as tough as the prime minister. And voters know that Eisenkot lost his own son fighting in Gaza, and they respect that.

6:36He has been absolutely trying to make right wing campaign statements, which Prime Minister Netanyahu has been trying to undermine by bringing up some older statements and other suggestions about what he might do. Give us a sense of what the polls have been suggesting and then just the nuts and bolts about how these elections work. It's a multi-party parliamentary system, so it's very different than the elections that are coming in the United States next Tuesday. The way it works is everyone in the country votes in one single election. So they're not voting for some smaller candidate in your district.

7:12They are all voting for a single party in the national parliament. The parties will then form together a coalition until they can get to a majority in the parliament. That's 60 or more of the 120 seats. Most of the polls project that the opposition led by Eisenkott will come out just slightly on top, but will still have a very difficult path to form a coalition government. In that case, what you could see is Eisenkot breaking all sorts of promises about who he won't work with, the ultra-Orthodox parties, the Arab parties who don't support the existence of the state, or even reaching across the aisle to some of the government's bloc.

8:02So these are all questions going forward. And part of what makes this hard to predict, too, is that there's a threshold for minor parties. You have to get 3.25 % of the vote to get any seats at all. So if they make that cutoff or if they don't, that changes the process of coalition building and is part of why this might take a while. Absolutely. There are two smaller parties in particular, one of them on the right, one of them in the center. They both sound notes of wanting unity in some ways. And so much of the hope for a cross block unity government could rest on them. But that's right. If they get under three point two five percent of the vote, they get zero seats.

8:46If they get just over that, they get four seats. And so when you're when you're talking about a potential margin of two seats overall or, you know, a question, can the Eisencott block get to fifty nine or can it get to sixty one? This could make all the difference. We'll give the last word on this topic, but what's your view of the U.S. interest here? Has the Trump administration weighed in? Is it is it hoping to have continued partnership by Prime Minister Netanyahu? The Trump administration has weighed in endorsing Prime Minister Netanyahu. In the past, you've had U.S. presidents supporting one side or the other.

9:24You haven't had a clear, formal endorsement in another country's election. So that's what we have here. And the argument from President Trump is that he wants to work with Prime Minister Netanyahu in Iran. OK, that is what it's all about. And from his perspective, he knows that Prime Minister Netanyahu is willing to fight. He's also won some successes with the with the Prime Minister. In his first term, that would be the Abraham Accords. In this term, it would be the June 2025 12-day war in Iran, which leveled Iran's nuclear program. The current Iran war is still undecided. It's still up in the air.

10:07Will it be ultimately remembered as a failure or can they wring some larger success out of it? He wants to work with Prime Minister Netanyahu. But if you look beyond it and think about Israel's foreign relations, perhaps under a democratic administration, they would hate to have Prime Minister Netanyahu in there. They would demonize him. And I think it would make Israel a target for Democratic Party and U.S. sanctions. And so Israeli voters are aware of this on both sides and have to make some sense out of all of these questions. Hang tight. We'll be right back in a moment. This episode is brought to you by Charles Schwab.

10:51Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise. This is Matthew Hennessey, the editor of Free Expression. I want to personally invite you to come check out what we're doing. Signing up for the newsletter couldn't be easier. Just go to our homepage. Directly below the Wall Street Journal logo, you'll find the magic words. Free Expression, wedged between opinion and arts. There's an option to sign up for the newsletter right at the top of our section.

11:27Just hit that button and you'll start getting the world's hardest working newsletter delivered directly to your inbox Monday through Friday. If you aren't a journal subscriber, the newsletter is free, but we are going to need your email address. There's a lot of fun stuff in the newsletter that you can only read in the newsletter, and I don't want you to miss any of it. Sign up for free expression today. We'll see you in your inbox. Let's turn to Brazil. Mary, your latest America's column is on the surprising election result on the weekend under the headline Brazil votes for more Lula. And I say surprising because some of the pollsters had suggested that he would lose this election to the conservative challenger Flavio Bolsonaro, who actually also led the voting in the first round in October.

12:16Mary, how do you read this result? Another term for Lula? Well, you make a good point about the first round. Not only did he lead, of course, neither one of them got 50 percent. So that's what triggered the runoff. But not only did he lead, but he also if you added in the smaller center right or right candidates who didn't finish in the top two, if you added all those votes together and assume that they would go for a conservative candidate, you would have seen Flavio Bolsonaro winning. I think the main effect we saw here was that in the first round, people stayed home a little bit more. Lula supporters stayed home.

12:59And in this round, between the first round and the second round, Lula really piled on the populist goodies, if I would call them that. He offered a 15 % increase in welfare payments, free buses on the weekends, and a huge cash transfer and loan forgiveness for micro enterprises. And those aren't small businesses. Those are really small businesses. That's like the juice vendor in the park, you know. So that's his constituency. And he just felt the need, obviously, to sweeten the pot. And he did. And I think that, combined with the fact that the Workers' Party put on a full court press to really get the vote out, is what put him over the top.

13:50Here's part of what you write in your column. The price tag for Lula's re-election handouts over the past year is estimated near$60 billion or more than 2 % of gross domestic product. You then go on to say the question is when he will run out of other people's money. There have also been claims about election shenanigans, the effort by the Supreme Court justice to keep polls open for longer than they were supposed to be. What is your assessment of the fairness of the election and those arguments that maybe there were some meddling going on? Well, I don't think there's any evidence that the two hour extension actually threw the polls.

14:32I think they threw a lot of confusion into the picture. And the electronic voting system is already sort of suspect in a lot of people's eyes because there's no paper trail. So if you want to make a challenge, you can't have an audit. You just have to sort of trust that the machines work. But I think the best explanation for this is the populist rush, the spending rush. And some of that may have been illegal because I know during the campaign season and during, you know, between the runoff, you can't, even if you're the incumbent, you can't all of a sudden dump a lot of money into the pockets of voters.

15:11So I think if there's shenanigans, as we would call them, they're more related to that than they are to the actual vote. It's not clear. I mean, you would have to do deep dive into what happened at each one of those polling stations to really know what effect the two hour extension had. It's clear that in some places, polls stayed open longer. In other places, polling machines were already locked. But we don't have a good assessment of where that happened. So we don't know that yet. But I really do think it's the spending binge that did the trick. The market response was fascinating. On Monday, the main stock index in Brazil falling 10 percent at opening and then trading halted.

15:56What do you think that says about the leftist stagnation of Brazil as an economy and what it really needs? What kind of reforms would really be demanded there to respond to these years of governance under Lula? Well, what it says is that they have a big fiscal problem and everybody knows it. And the idea that Bolsonaro was going to come in and deal with it sort of made markets more confident because they said he's going to do something about it. You know, Lula will have to do something about it. You see capital fleeing the country, which is why you saw, you know, markets diving. The currency itself was down over 10 percent.

16:42I think by the end of the day, it was about 8 percent. But, you know, people are just going to flee the country because they have this 10 percent of GDP fiscal deficit. And that's unsustainable. I mean, they generated an 8 percent fiscal deficit, 8 percent or more. And so that's a serious problem for the real and for anybody who owns Brazilian debt, because in order to anchor the currency with all that fiscal spending, the central bank has had to send interest rates like 14 percent, the overnight rates. And of course, the government has more and more debt to close the fiscal deficit every year.

17:24They have to issue more debt. So debt is now 82 percent of GDP and it's rising. And servicing that debt is very expensive. You know, this is like a vicious spiral upwards. And markets are worried about that, which is why people freaked out when they saw that Lula, who's the spendthrift, is going to stay in office. Hang tight. We'll be right back after one more break. Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi wealth team built with the Gemini platform on Google Cloud.

18:01Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. Citi Wealth investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC.

18:21From the opinion pages of the Wall Street Journal, this is Potomac Watch. To the point about capital fleeing the country, this victory by Lula kind of bucking a trend in Latin America where many elections are turning to the right. And as other countries become more attractive places to put money and invest, that may only deepen these problems for Brazil. You also take up in your column some victories at lower level offices by the right, which maybe bolsters your argument that it was these handouts, these gifts by Lula that kept him in office here. How much do you suppose he may be checked by the fact that other offices are moving against him?

19:09There's a problem in Brasilia in the sense that the way the government works, who's ever in the executive has a lot of power. And so what you end up seeing is that a lot of the politicians are kind of entrepreneurial, if I can use that word. They gravitate toward the guy who has the power because he can dole out a lot of favors in Brasilia. So I'm less confident that the Congress will stand up to Lula the way that I had originally hoped when I thought Bolsonaro might win. But I do think that the ace in the hole that the right has are the markets. I mean, the markets are not going to cooperate with a government that keeps running fiscal deficits and has this monetary problem where the real is under so much pressure that they have to carry overnight rates at 14%.

19:59So I think the market is going to be more of a check on him than the conservatives. I would note that the governor of Sao Paulo, which is a huge state, a very powerful state, is a member of what they call the Republicans. And that's not the Liberal Party, that's not Bolsonaro's party, but it is the center-right party, a more market-oriented party. And governors are very powerful in Brazil. So you have that governor, you have the governor of Mato Grosso, which is the big agriculture state. So the right is not out of things entirely. I'll just add one other thing, which I think is the most worrying factor that Brazilians face in the next four years, and that is that Lula is going to be able to name four new Supreme Court justices.

20:45And the Supreme Court, already packed with Lula allies, has shown itself to be very political and not interested in the rule of law or institutional rules. And that's going to be a big problem for the country. What we've seen in any country that loses its democracy is the first thing that the elected president will do is remake the court. And then the court uses the law to put all its enemies in jail. This is what we saw in Venezuela and in lots of other countries around the world that have moved from elected democracies to authoritarian systems. And that, I think, is what Brazilians need to be worried about right now.

21:30Mary, while we're in the region, let's also take up the return to Venezuela of Maria Corina Machado, who left that country under threat in 2025 to receive the Nobel Peace Prize. She then gifted to President Trump. What is she walking into now? A country under different leadership, Delce Rodriguez, after the Trump administration extradited Nicolas Maduro to U.S. justice. And what is Machado hoping to accomplish? I should say at the onset that it's a very brave move on her part. I mean, she basically has shown that she is not going to stop until she restores Venezuelan democracy. And she puts her life at risk in doing that because Because although the Trump administration has basically told the regime that they need to make sure that nothing happens to her, I don't trust that possibility.

22:25I mean, it's very risky for her. But what she's trying to accomplish is that she goes back there. I mean, she met adoring crowds. She was escorted by all these cars and motorcycles waving flags. I mean, she's an amazingly popular personality. And she, you know, she entered in Bacchisimetro in the state of Laura, and then she moves through several other states until she ended in Caracas and to just throngs of crowds. What she's hoping to accomplish is to push the regime and the Trump administration into setting a date for elections and holding elections, because if they do that, she will be elected the next president of Venezuela.

23:08Is there more until then that the Trump administration can do or should do to make clear to the Rodriguez regime now that it expects Machado to be kept safe? Well, they have a negotiating table where they're supposedly negotiating between the regime's representative at the National Assembly, who's the brother of Delcy Rodriguez, and a former member of the 2015 elected Congress, Dinara Figuera. And they're negotiating or discussing a new Supreme Court and a new electoral council. And the Trump administration has said, once that's set up, then we'll set a date for elections. So I guess you would say that that needs, you know, they need to put pressure on Jorge Rodriguez to get that done.

24:01The other thing that they need to do, I think, which I think apparently I'm told they're doing behind the scenes is basically clean up the military and these paramilitary groups who are enforcers of Chavismo, of the old Chavis way. And that requires intelligence and political will. That's what they say is going on behind the scenes, that they're pressuring Diazado Cabello, who is the interior minister, very bad guy, to basically go through this process and change from this sort of thuggish government to a more professional military, get rid of the paramilitary, professionalize the national police, and have them accountable through the rule of law.

24:52That's a big job. And a lot of Venezuelans are impatient with the Trump administration, but the Trump administration is saying, look, we want this to be a transition to democracy that won't require the U.S. to go in and put boots on the ground and so forth. And that's why it's taking time. So I think I'd feel more confident about that if the Trump administration wasn't also simultaneously doing secret backroom deals with bad actors in the oil industry. And that's what I think has eroded confidence in their interest in actually building a new democracy that's transparent and accountable to the population.

25:35Thank you, Mary and Elliot. Thank you all for listening. You can email us at pwpodcast at wsj.com. If you like the show, please hit that subscribe button. And we'll be back tomorrow with another edition of Potomac Watch.

25:59a secure AI member of your Citi Wealth team built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. Citi Wealth investment products and services are provided by Citigroup Global Markets, Inc. Member FINRA and SIPC.