The treasury on Sunday released the results of the government's budget performance for 2012, and the depth of the failure is clear. The budget deficit soared to a record NIS 39 billion - 4.2 percent of the gross domestic product, more than twice the originally planned deficit of NIS 18.3 billion.
This huge and dangerous shortfall is the result of the adventurous policies of the Finance Ministry and the government of Prime Minister Benjamin Netanyahu. The government approved exaggerated outlays over the past two years, and to preserve appearances of a sane deficit of about 2 percent, it projected an unrealistic level of growth in tax revenue. Thus at the start of 2012 it was already clear that the deficit would be large. But they preferred not to do anything, because to "do something" would mean cutting budgets and raising taxes, which are not popular moves.
A significant element of this irresponsible policy is the defense budget, which grew significantly over the past four years as Finance Minister Yuval Steinitz's opposition to this had no influence. At the end of last week, former Prime Minister Ehud Olmert said that over the past two years, "Some NIS 11 billion was spent on military delusions that weren't implemented and won't be implemented." According to Olmert, these sums were above and beyond the planned multiyear increases in the defense budget, which were already high. Last year, he said, the government scared the whole world (with veiled threats of an attack on Iran ), but in the end it did nothing and it would do nothing now. Olmert stressed that there were surpluses in the defense budget that must be cut.
It's known that the defense budget has been growing at an annual pace that is divorced from the security threats Israel faces. The surrounding Arab states are sunk in a revolutionary wave and the chances of their launching a war against Israel are practically nonexistent. Yet this has had no effect on the demands of the defense establishment, nor on Netanyahu's willingness to capitulate to those demands. This is because one can't scare people about the dangers posed by our neighbors - so that they can run terrified to the voting booths to elect the only leader who can save them - and at the same time cut the defense budget.
But once the election battles are over, any government that arises must set new priorities with an aim toward cutting the defense budget. If not, we'll be hurled into a macroeconomic crisis that nobody wants.
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