Israel's 190% inflation sparks debate

David, a Jerusalem office worker, is tired of hearing people call Israel's 190 percent inflation rate, mammoth foreign debt, yawning trade deficit, and unsteady stock market an ''economic crisis.''

''What worries me,'' he says while unloading a carefully budgeted mix of staple foodstuffs at a supermarket checkout counter, ''is the danger to the social fabric of this country. . . .''

He is, he very nearly shouts, ''damned bitter'' at what has become of the Jewish state he emigrated to a quarter century ago. Many Israelis feel less bitter or draw different lessons from their country's tightest economic straits in decades. Yet many share David's sense that the crisis is not just an economic one.

Dollars-and-cents calculations seem to be forcing political choices on Israelis. Ultimately at issue is Israel's identity: socialist or laissez faire; secular or religious; territorially expansive or modest; externally bankrolled or more nearly self-propelling.

Specifically, the agenda includes questions like how long the Israeli Army will stay in Lebanon or how many Jewish settlements get planted on the West Bank - and whether the conservative government will manage to serve out its term, until 1985.

Under Prime Minister Yitzhak Shamir, both a West Bank settlement freeze and an early pullout from Lebanon are highly unlikely.

If Israel's economic woes theoretically give its American bankrollers ever greater leverage on such questions, there is no sign yet that Washington is inclined, or able, to force the West Bank settlement freeze it says it wants. Indeed, a congressional committee proved true to tradition early this month by adding $250 million to the already hefty administration aid proposal for Israel. The result is a proposed record $2.5 billion package of economic and military aid - all of it, for the first time, in outright grants.

Yet the need to set spending priorities is encouraging strain among Israel's ethnic, religious, social, and political groups. Gone are the days when conflict with the Arab world defused such internal differences. Gone are the towering leaders - David Ben Gurion, Golda Meir, and Menachem Begin - whose ability to define national goals and capture loyalty might put the Israeli edifice back together again.

A rare example of bipartisan teamwork helped create the current economic mess. Labor, which ruled Israel for its first three decades until 1977, built a state-dominated welfare economy marked increasingly by mismanagement, waste, and official corruption. Mr. Begin introduced an equally mismanaged trend toward laissez faire. He lifted currency-exchange restrictions, printed a lot of money, and financed with ludicrously overvalued Israeli currency a boom in stock trading and luxury imports.

The result: a newly and artificially well-off middle class. Then came the inevitable stock-market crash. Then, last fall, came ''austerity'' in the form of official warnings that the standard of living and consumption must drop through at least the end of 1984.

Various pressures - a rash of strikes or go-slow protests, and special-interest demands from within the coalition - have produced an oddly Israeli brand of austerity. Foreign-currency restrictions have been reintroduced. The Israeli shekel is regularly devalued. State consumer-price subsidies are being phased out. A car dealer says sales have dived by 70 percent since the stock market crashed.

Yet workers do continue to get automatic wage bonuses to compensate for at least a good chunk of the 190 percent inflation. The government and banks are subsidizing inflation-indexed bonds and other schemes, printing money, and in effect financing a recent revival of the Tel Aviv stock market.

Unemployment has gone up only slightly, and the government has sworn off any move to allow it to rise more than a percentage point or two. The government notes that Israel is a state whose future existence depends on attracting Jewish immigrants and forestalling the ''brain drain'' that unemployment or further austerity measures might provoke.

At Mahane Yehuda, Jerusalem's fruit-and-vegetable market, shoppers explain with a mix of rancor and pride the ''miracle'' of making ends meet in an economy where monthly salaries are only a few hundred dollars, while prices are roughly the same as in the United States.

Almost all Israelis overdraw their bank accounts as a matter of course, with government and bank acquiescence. Other people are defying foreign-currency restrictions by buying dollars or other inflation-proof commodities on the black market. Many people hold down more than one job - often not declaring their second incomes for tax purposes. Both husband and wife usually work.

At the market, a woman who emigrated from the US suggests two ''obvious'' exits from economic crisis: ''First, get out of Lebanon. To stay there is costing us a bundle. And it is not worth it, not the money and not the lives lost. Second, leave the (occupied) territories.'' On the West Bank issue a recent poll shows widespread support for reduced settlement expenditures.

Pegging the cost of West Bank settlement is hard, since it falls under a slew of different budgets and ministries. But estimates are between $350 and $750 million a year. The Lebanon war is estimated to cost Israel $100 million daily.

A few market stalls away, a young immigrant - with the skullcap of a religious Jew - argues that any substantial cut in defense spending seems an unrealistic hope. He says it would be folly to pull out of Lebanon hastily. And he scoffs at the suggestion that it is time to freeze West Bank settlement for the good of the economy.

''Sure, that costs a lot of money. But by that reasoning, why not give the whole country back to the Arabs? Then you'll save a lot!''

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