If three years ago someone were to have told Kobi Haber - who was then in charge of the defense budget for the Finance Ministry's Budgets Division - that in 2007 the defense budget would reach NIS 52 billion, he would have laughed.

No chance, he would have said. We have grown up; we no longer believe all the stories the Israel Defense Forces tell us. Even the spin that they sell to all the military correspondents every year during the budget debates no longer has an effect on us.

The defense establishment has already internalized the fact that its bloated, corrupt days are over and that it needs to become leaner and more efficient.

Kobi Haber is no longer responsible for just the defense budget; he was promoted to head the entire Budgets Division - which is in charge of the entire state budget.

Last week Haber was not laughing when, at the end of the weekly cabinet meeting, Prime Minister Ehud Olmert decided to surrender once again to the defense establishment heads, and approved the highest defense budget ever: NIS 52 billion.

In fact, Haber didn't make a sound - he just sat there and shut up. You cannot find a single quote by him on the 2007 budget in any newspaper, even though the matter is his responsibility.

He knows why is he is remaining silent - because the 2007 budget is one of the low points in the history of the Budgets Division.

Haber, just like all the treasury officials who came before him, has been tamed by the defense establishment. They have simply learned that in the end, the generals always win.

Therefore, it is forbidden to try to battle them, and forbidden to open your mouth regarding the defense budget. It is even forbidden to pass on information to the media about waste and corruption in the military.

Because the minute such figures leak out, the decisive defeat at the hands of the generals will be clear to all - and it will no longer be possible to claim that the 2007 budget is a great victory for the treasury and the State of Israel.

The 2007 budget, like many of its predecessors, continues to create poverty and misery, and takes advantage of the weakest sectors.

The cabinet is continuing with its policies - taking care of the rich, the well-fed and corrupt at the expense of the elderly, disabled and sick.

The treasury is right when it says that the deficit target cannot be exceeded, and that the national debt must be decreased.

In an era of globalization, the Israeli economy, burdened with its enormous debt, cannot increase its deficit. The price would be swift and terrible.

The deficit target for 2007 is already much higher than it should be. The treasury pretends it is only 3 percent of GDP, but anyone who carefully reads this week's report from the Fitch rating agency will discover that by international standards the real deficit is around 5 percent - one of the world's highest.

But much more serious than the treasury's low targets for next year is the way the budget is divided: Money is being poured into wasteful, powerful bodies at the expense of the weak.

After the colossal failure of the IDF in the second Lebanon war, some expected an internal examination and house cleaning in the army and the Defense Ministry.

But the generals and their government lobby recovered quickly and announced: We have found who is guilty for our failures - the public. They did not give us enough tax money.

The major lesson that came out of the second Lebanon war was the IDF's management failure. Poor management usually goes hand in hand with fat, waste and corruption. And it is very easy to find all of them in the defense establishment.

Anyone who reads the business pages might make the mistake of thinking that high-tech or the stock market has created the most millionaires in Israel.

But anyone who works in high-tech knows the truth: the ones who make it rich are only the top one-thousandth of a percent in the industry. Most high-tech workers need to work at a frenzied pace to make sure that they don't wind up unemployed, or outdated.

Anyone who works in the markets knows that what comes easily, also disappears easily. The feeling of wealth that so many have discovered over the past two years is likely to change quickly when markets reverse.

The biggest production line for millionaires in Israel is the defense establishment: It is the only workplace in the country where you will find thousands of workers who at 45 or 50 have pensions worth NIS 2, 3, 5 and 6 - even 8 million.

The Finance Ministry is hiding information on these pensions from the public. But you do not need to be a brilliant economist to understand that a pension of NIS 15,000 a month from age 42 is worth at least $1 million - a sum that only a few in the private sector can even dream about.

These pensions are the clearest expression of the defense establishment's complete isolation from the rest of the economy, but they are just a small part of the story. Every year the IDF wastes billions of shekels on unnecessary workers, megalomaniacal projects with untold suppliers and consultant posts and jobs for cronies and friends.

Defense Minister Amir Peretz declared last week that he is willing to privatize the defense industries, and proposed merging Rafael with the Israel Military Industries (IMI).

Peretz's announcement is nothing but spin characteristic of the defense establishment: a smokescreen meant to hide the simple facts from the taxpayer.

The state has spilled almost NIS 20 billion over the past 15 years into pensions and severance benefits for the workers at those two government companies.

Past executives of the two firms have admitted that there was an incredible amount of over-staffing at both over the years. Rafael was saved by a massive infusion of cash, but IMI continues to lose hundreds of millions of shekels a year.

The treasury has hardened its heart when facing social-welfare organizations and non-profits that want to increase the health basket, raise old-age allowances or support the disabled. But when it comes to the defense industries - billion-shekel checks are written at the speed of light, sometimes without even informing the press.

The true face of Amir Peretz has been revealed over the past few months during the budget debates. He, or one of his media advisers, has invented a wonderful slogan: "We cannot accept the social equation - the elderly or tanks."

But what alternative equation does Peretz have?

Doesn't he know that 87 percent of the state budget is tied to interest payments, education, welfare and defense?

The billions that Peretz promised the elderly and sick before the elections can only come from the defense budget, for the simple reason that this is where all the money is.

Peretz knows that very well, but the chronically ill, disabled and elderly are not players in his political universe, or in the primaries. The workers at the defense industries and government monopolies are - and the main ones too.

A year ago I wrote here that in spite of my lack of faith in the honesty and leadership of Ehud Olmert and Amir Peretz, the fact that both the prime minister and defense minister were not former generals might just, for the first time in Israeli history, allow for a new, citizen-centered agenda.

For that moment of foolishness, which I wrote in much too much haste, I apologize to my readers.