The thirty billion Shekel question: The underlying dynamics of the emerging budget debate in Israel


There are three things, as Niccolo Machiavelli taught us (or rather, reminded us) long ago, that are always needed for the pursuit of war – and now, are equally vital for the post-war reconstruction and for the re-tooling of the IDF for future conflict: money, money, and more money. But how much? Where should it go, if we are to apply the painful lessons of the last round? And where should it come from?

Last week, two groups within the coalition ranks Knesset Finance Committee – on one hand, Labor members identified with the party's social agenda, namely Avishai Bravermann, Sheli Yechimowitz and Orit Noked; and on the other, the ultra-Orthodox, angry about cuts in their educational systems and over the high-handed manner in which the Finance Ministry handled the issues – rebelled against the government's plans for a 2 billion shekel supplemental budget. The latter was meant to cover some of the war's immediate costs, through the reallocation of resources (i.e., reduction in government services), while avoiding an overall increase in outlays and taxes, which Prime Minister Ehud Olmert fears would endanger Israel's now-robust standing in the international markets. For the "rebels," however, this was one more example of what went wrong in recent years – in terms of the government's basic priorities and its attitude towards social cohesion.

This battle, however – which has yet to be won (the chairman of the Committee, MK Ya'acov Litzmann from Agudath Yisrael, is a master of the Knesset version of filibusters) – is just a "promo" for what Israelis call "the real film" – namely, the huge tug-of-war which will ensue over next year's budget. The Ministry of Defense has already indicated it might ask for 30 billion shekels over the next four years. This may not be as dramatic as it may sound at first – less than 2 billion dollars a year, in a country which has crossed the magic line of 100 billion dollar annual GDP some years ago: but it would force a fundamental debate, in public, over issues which for some time now have been settled in quiet negotiations between the Military and "the Treasury (i.e. Finance) boys," Bibi Netanyahu's young professionals in the Budget Division (equivalent to the White House's OMB). The latter often won; and while a different kind of war was being fought against Palestinian terror, the stocks and training hours of the reserve divisions, the IDF's backbone in any large scale ground engagement, were depleted. Has the time now come not only to replenish what was lost in battle, but also to undo the "mistakes" of 2000-2006?

Not at all costs, counter the voices from Finance: such huge sums would by necessity – they warn – roll Israel back by twenty years, in terms of her economic balance (and standing in the world). They would thus frighten away investors; intimidate the initiatives of the new group of Israeli rich; and retard, if not reverse, the dramatic predictions of 5% growth a year, for the foreseeable future. This is a frightening swing in the opposite direction: a necessary wake up call for the wealthy, but perhaps too rude a shock for a society seeking stability and certainties. The real sum will be much lower, and again, the product of a compromise, not a systemic analysis of our new national security needs.

What are these needs, in general terms? What the IDF is now saying (and Defense Minister Amir Peretz is preparing to fight for, thus proving his relevance for the soldiers) is that the resumption of hostilities could come at any time, and Israel should be ready:

  • To fight Hezbollah again, if they provoke us. This, however, looks less likely now than it did even 48 hours ago. With his admission that he was wrong to provoke this war, Hasan Nasrallah conceded that he had been unwise – so as to beat back the accusations, even among his own Shi'a community, that he had knowingly and callously put so many and so much in harm's way: better a fool than a knave. This reveals the depth of anger (and the scope of destruction) which may well deter him for some time: and thus, the true prospect that the precarious ceasefire will hold, and will not be blatantly used to our disadvantage (as one right-wing Israeli warned, a "ceasefire" is often a time in which they fire and we cease...).

  • To fight and prevail in the face of greater Syrian involvement. True, neither country wants a full-scale clash of regular forces (Syrian president Bashar Assad, unwise as he may have been, has no illusions about what would happen if the full capacities of the IAF and Israel ground forces were to be unleashed – not against the scattered targets presented by Hezbollah but against massed Syrian formations and the vulnerable Syrian industries and stocks). But any number of causes could quickly ignite a crisis – Israeli interdiction of re-supply convoys; Syrian attempts to ignite "resistance" in the Golan; or simply a misreading of each other’s movements. It should be borne in mind that Syria has a well-stocked arsenal – which we know about for certain: no Iraqi fairy tales here – of chemical weapons and SCUD SSM's: full preparedness for war with Syria would involve the reinforcement of preventive measures in the rear, including the Tel Aviv conurbation, side by side with the capacity to take the war to the enemy.

  • To stay on guard on the Palestinian front(s): Largely unnoticed, the last two months have been marked by highly successful preventive action on all three fronts from which a terror attack could be launched – the Gaza Strip border; the complex seam zone in the West bank and Jerusalem; and as Ralph Peters noted, in a recent article in the New York Post (based on his visit as a guest of AJC's Project Interchange), Israel's sea lanes and coastline. The Qassam "yield" is way down, particularly in terms of damage (and no loss of life has been registered for some time); and the daily pressure on Gaza, coupled with serious internal trouble, has led the spokesperson of the Palestinian Government – Ghazi Hamad – to write a scathing and unprecedented attack, in the PA's own daily, al-Ayyam, on the folly of the present confrontation (and in particular, the Qassam attacks). All of this requires constant vigilance, a great investment in all-source intelligence collection and quick translation into action by all relevant agencies – in other words, more resources.

  • To prepare for the possibility of a confrontation with Iran: It should be repeated again and again: everything else is secondary. The choice Israel faces, in terms of the costs of preparedness, is between the possibility of conflict tomorrow, perhaps with Shihab IRBM (Intermediate-Range Ballistic Missiles) aimed at us, and the day after tomorrow, when they would have nuclear warheads. The latest letter sent by the Iranian regime's president, Mahmud Ahmadinejad to Angela Merkel in Berlin – in which he again explained the Holocaust as a hoax invented by the Allies to shame to noble German people – should leave us in no doubt as to what is at stake. While Israel gears for a diplomatic battle, to remind the world that this is not our problem alone, the crisis also requires military preparations, on a scale hitherto unprecedented, and led by a team under the IAF C-in-C, Major General Eliezer Shkedi.

Where would the money for all of this come from (even if, as indicated above, it ends up being much less then the MoD now asks for)? It is at this level that the deepest questions, already brought into focus by the war, will need to be dealt with. To what extent are we still a besieged, cohesive society, which needs to focus on security needs while also attending to the needs of the "periphery" (is if a country the size of Massachusetts really has "remote areas"...) and of the poor? Or have we transformed ourselves, in our practices and in our minds, into a lower-tax heaven and a post-industrial theme park for high-tech investors? If the former, then the budget framework can be and will be bent somewhat to accommodate all needs, on the assumption that growth will resume at a steady rate (the size of the breach may not be too big: before July, Israel was headed towards significant budget surpluses). If, on the other hand, strict OECD rules and market standards are to be applied, it is social services which will suffer, and with them, the precious sense of solidarity which had flowered during the war.

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