Sacrificing the Budget for a Mess of Pottage

Did the Israeli army lack the appropriate budget to prepare for the war in the north? Or is the opposite the case, that surplus money and confidence were the reason it failed to properly assess the Hezbollah threat?

Whether or not the conflict persists, that question must be answered, and within two weeks. Why? Because that's when the draft budget for 2007 is to be submitted to the Knesset for approval, and under "Defense", somebody has to write a figure.

Nobody has the slightest idea what that figure will be, neither in the defense establishment or at the Finance Ministry, either. Two weeks before the deadline, by which time everything should be pretty much ready - the people in charge of preparing the budget are stymied. Any number they write there might be right, and the gap between the highest and lowest estimates is an unbelievable NIS 7 billion.

The only thing that the people at the treasury know, is that some number has to appear there.

Battle in Jerusalem

The job of preparing a budget and delivering it to parliament is no less important a mission than protecting Israel's north. While the army fights for Israel's security, Jerusalem fights to protect proper administration of the nation, and budget management is the cornerstone of that job.

It is no fun to manage the budget these days, and not only because of the uncertainty regarding Israel's defense needs in 2007. It isn't fun mainly because the consensus over the budget's goals and targets has been badly cracked. The war up north has brought the importance of the defense budget into sharp focus, while derogating from the importance of other non-security related issues. It is all but certain that the war on poverty, for instance, will pay a heavy price for the war.

The war to protect the public's coffers could also be a casualty.

It is all too easy to sacrifice budgetary discipline on the altar of "emergency". All along the Knesset members and government suspected that the dogged insistence of the treasury and Bank of Israel people, that the budget must not be breached, was the result of indoctrination by foreigners - Americans.

"Where did these kids at the treasury get the prerogative to decide on priorities for the State of Israel, choosing which shall prevail among the threats we face?" an army officer demanded this week. Who said they should preserve the budget rather than increase security-related spending if needed? Who said that budget preservation is more important than social gaps by helping the poor?

Hard questions, to be sure: in the absence of an organized mechanism to make decisions in Israel, there is no answer, either. Nobody ever laid down national priorities, and into the vacuum came the Bank of Israel, followed by  the Finance Ministry, fifteen years ago, and they set down their own set of priorities: everything and anything goes, as long as the budget is sacrosanct.

Naturally, that set of priorities can be challenged, and rest assured that it will be in the next two weeks. For the first time since the 1990s, when the disinflationary policy was instated, the budget framework's sacred status is being challenged. Not only Knesset members but ministers can be expected to attack. Instead of paying for the northern war with the war on poverty, they will want to do both and increase the deficit.

Is that legitimate? Surely, as long as the person sacrificing the budget's integrity is prepared to pay the price. The price is that Israel will become less attractive to foreign investment. The price is that Israel's sovereign credit rating will almost certain suffer, and interest rates will therefore rise. The price is that debt will increase, as will the burden on our children.

And no less importantly, the price is that the culture elevating budget management will be lost, and with it the economic achievements of the last 15 years.

That is the price. Are the ministers crowding around the cabinet table prepared to pay it?