On Sunday, Prime Minister Benjamin Netanyahu, Finance Minister Moshe Kahlon, Defense Minister Naftali Bennett, IDF Chief of Staff Aviv Kochavi and Finance Ministry Accountant General Rony Hizkiyahu met to discuss a proposal to add 800 million shekels ($232 million) to the defense budget in each of the next two years. It was Kochavi who made the proposal, but it was Netanyahu who called the meeting.
The ministers all supported the idea, and Netanyahu instructed the treasury officials at the meeting to find the funds.
If all of the above leaves the reader with a sense of deja vu, it’s understandable. In mid-December, Kahlon, Bennett and Kochavi also met, and Kochavi said the army needed a budget supplement of hundreds of millions of shekels. Bennett backed him, and Kahlon said he recognized the military’s needs of the and would make sure they were met.
In November, the defense establishment circulated to Knesset members, senior ministers and National Security Council officials a document calling for a budget supplement of 4 billion shekels. A month earlier, Netanyahu declared in an interview with Army Radio that the army would need an additional 4 billion per year.
Kochavi’s position is understandable. Appointed chief of staff a year ago, his goal was to win cabinet approval of a multi-year defense budget that would go into effect by the start of 2020. He needs it to move forward with the Israel Defense Forces’ operational plans.
- The Israeli army doesn’t need more money, it needs a functioning government
- Despite Israel's swelling deficit, 2019 debt-to-GDP ratio looks set to fall
- No Israeli party ready to take on the sacred cow of defense spending
But he’s met with nothing but disappointment, all due to the prime minister, finance minister and defense minister triumvirate.
The next stage in the attempt to increase defense spending is approval by the inner cabinet. Then, the Finance Ministry will show how it plans to pay for the supplement. Hizkiyahu is the one to figure that out.
The Knesset has not yet approved a budget for 2020, so spending is continuing on the basis of the 2019 budget, month to month. By law, it can’t be changed and it sets a ceiling on government spending. The accountant general decides how much money each ministry gets.
As talented as he is, Hizkiyahu has not been able to find an additional 1.6 billion shekels for the military. If and when he does, Netanyahu and Kahlon will be in the unenviable position of having to declare cuts to health, education, housing and social services in order to increase defense spending, thus reversing a years-long decline in real spending in this area.
It remains doubtful that such an announcement will come before the March 2 general election. In the meantime, we get a periodic announcement about the theoretical need to approve the higher spending for the army. If it sounds like an election campaign promise, it’s not a coincidence. In the vernacular, it would be said that if Kochavi got a shekel for every time politicians promised him billions, he would be a trillionaire today.
If Netanyahu really believes in the need for stepped-up defense spending, he has a source available to him. In the middle of December, he met with Yair Katz, the chairman of the workers’ committee at Israel Aerospace Industries, where the main agenda item was the planned initial public offering in the state-owned company.
IAI management is hoping to float the shares at a company valuation of 12 billion shekels before the money, that is, not counting the cash that will go into the company as a result of the IPO. If so, the 25% stake being sold would bring in 4 billion shekels. Even if the government were to take half of that as its share of the proceeds, it would be 2 billion shekels richer.
By law, the proceeds of privatizations like this are supposed to go toward paying down government debt. However, the money that goes into the government’s coffers can be used indirectly to fund the enlarged defense budget, mainly because part of it can be deemed a one-time expense.
The meeting with Katz would have presented an excellent opportunity for the prime minister to exert pressure on the union leader to support the IPO process. However, the meeting occurred just as Gideon Sa’ar was challenging Netanyahu for the leadership of the Likud party, and the prime minister’s main concern was that IAI workers not cast their votes for his rival. For Katz, the main goal is to ensure the IPO doesn’t happen without it being coordinated with him.
The result was a statement issued after the meeting saying “The prime minister determined that the process will be coordinated with the workers’ committee and with its cooperation – as has been the case in previous share offerings.” In other words, the army’s budget requirements are only important to the prime minister so long as they don’t interfere with his electoral calculations.
Katz has since pressed his case that the IPO will in no way affect the generous work conditions at IAI. On Monday, he distributed a video to workers in which he declared that “until the regulations of the Government Companies Authority and the wages supervisor are lifted from IAI, we will not continue discussions on the company’s offering.”
Katz was referring to plans by the treasury wages commissioner to hold hearings in the next few weeks over excessive wages, in violation of the rules for public sector employees, at IAI. That is the first stage in a process under which the Finance Ministry will unilaterally order wage cuts for thousands of IAI employees to put them into compliance with the rules. The excessive wages cost the company hundreds of millions of shekels annually.
Listen carefully to what Katz is saying. He is not asking the Finance Ministry to make a one-time exception to the rules but that IAI be exempt from the rules altogether if management and the government want to move ahead with the IPO at all. Katz is tired of government interference in the employment terms of IAI workers, whether it is pay levels for senior staff or rule barring government companies like IAI from hiring employees’ relatives.
Bennett, who as defense minister is responsible for IAI, has also refrained from making any public statements on the trade union’s militant stance even if it runs squarely against Bennett’s support of the IPO. It was Bennett who, as economy and industry minister years ago, said about the workers’ committee that “out of the great desire to help the workers, we simply can’t do any business” and “Israel’s draconian labor laws not only hurt companies ad their customers but the workers themselves.”
In Bennett’s case the adage, “Things you see from there, you don’t see from here,” couldn’t be more appropriate as he leads the Yamina alliance into the election.