Defense Secretly Ate the National Budget

However well it may be coping with the troubling times, Israel has a debt problem.

However well it may be coping with the troubling times, Israel has a debt problem. During the last five years, the ratio between Israel's national debt to gross domestic product fell from about 100% to around 80%. That's an improvement, but still high compared with the rest of the developed world. Moreover, after the kind of deficit the government is expected to run this year and next, that ratio is likely to approach 90% again.

The issue of whether or not to cut tax this year, as planned, must be seen through the prism of the debt as well.

Another problem is rising unemployment. Bank of Israel figures place average unemployment at 7.7% of the adult workforce this year, rising to 8.3% in 2010. In 2008, unemployment had averaged 6.1%.

Yet one gargantuan thing the Bank of Israel all but ignored in its annual report is the defense budget. It is a big issue to ignore: One could say that the state calculates its budget based on how much debt it needs to repay, and how much defense needs. Then the other ministries share whatever is left over.

In 2008, the defense budget was almost NIS 50 billion. Leaving debt repayments out of the equation, defense swallows up about a quarter of the national budget. By ignoring the defense budget in its annual report, the Bank of Israel was delivering a flawed, defective package to the nation. Claims that the defense budget is top-secret are specious: Each year the state comptroller delivers a report on the achievements and lack thereof of the defense establishment. The defense establishment cooperates with the comptroller, and also divulges its non-classified budgets, which come to NIS 10.4 billion a year.

At least the Bank of Israel should be able to write about those without compromising anything. And there's no reason why the Bank of Israel's research department shouldn't be allowed access to the classified elements of the defense budget as well.