Militarism and Israeli Society

9 The Debate over the Defense Budget in Israel

213 nine The Debate over the Defense Budget in Israel Zalman F. Shiffer Israel is a small country whose very existence has been repeatedly challenged by its neighbors. To confront these threats, it has invested large quantities of human and material resources in the development of a strong army—the IDF. Over the years, the country has achieved peace with two of its neighbors, but the security problem has not disappeared and its many facets continue to affect Israeli society in many ways. This chapter deals with one important aspect of the security problem —the domestic debate regarding the allocation of budgetary resources to the defense sector.1 Part 1 offers a characterization of the defense expenditures —their definitions, their importance in absolute and relative terms, and their development over time. Part 2 presents the major players involved in the debate over the defense budget, and parts 3 and 4 review the major arguments and disagreements regarding the resources allocated to defense and the defense budget management. Part 5 deals with the development of the debate in recent years and part 6 offers some concluding remarks. Defense Expenditures in Israel There are essentially three major definitions of defense expenditures in Israel:2 The Defense Budget. This refers to the cash outlays of the Ministry of Defense (MOD) out of the central government’s budget. As such, it does not include defense expenditures of other ministries and government 214 · zalman f. shiffer agencies or nongovernmental bodies, unless they are financed out of MOD transfers. On the other hand, it includes expenditures that do not directly finance the production of defense, at least in its narrow sense. Defense Consumption. This is a National Accounting concept, calculated by Israel’s Central Bureau of Statistics (CBS) according to the international System of National Accounting (SNA). It refers to defense expenditures on an accrual basis, allocates expenditures among different ministries according to their purpose, rather than their administrative affiliation, and replaces pension transfers paid for past services by the imputed cost of future pension payments to active personnel. The Total Cost of Defense. This is a broader concept calculated by the CBS on the basis of the recommendation of a government committee charged with estimating the full cost of defense to the Israeli economy.3 It is not calculated in other countries (and therefore cannot be compared internationally). Its major additions to the Defense Consumption concept are the imputation of the full economic opportunity cost of the mandatory regular and reserve military personnel and the inclusion of defense shelter construction in the civilian sector. The imputed alternative cost of the use of land by the defense sector is not included because of practical difficulties. Israel’s Defense Expenditures in a Comparative Perspective Out of the three aggregates discussed above, only defense consumption has been calculated and published consistently for many years. It has reached some 46 billion shekels or about 8 percent of GDP and 23 percent of total government expenditures in 2005. After deduction of the U.S. defense transfers, which are available only for defense spending, the defense burden on the domestic economy is about 6 percent. In spite of the differences in definition, the defense budget and the defense consumption aggregates are roughly equal. The Gross Defense Budget presented by the treasury in October 2005 for 2006 was also 46 billion shekels. The Total Cost of Defense is generally around 25 percent higher than Defense Consumption and could amount to some 57 billion shekels, namely about 10 percent of GDP. In absolute terms, the 2004 Israeli defense budget, at around $10 billion, was the twelfth highest in the world, similar to that of Canada, Turkey, and Australia, and about one-fourth that of the United Kingdom , France, or Japan.4 In the regional scene, the Israeli defense bud- the debate over the defense budget in israel · 215 get was similar to that of the combined dollar value of the published defense budgets of the four countries with which it shares borders— Egypt, Lebanon, Syria, and Jordan, and about half that of Saudi Arabia. Note, however, that in adjusted purchasing power terms, which correct the comparisons for differences in dollar prices, Israel’s relative ranking is considerably lower when compared to less-developed countries in the Middle East and elsewhere (since its dollar prices are relatively high).5 Turning to the comparison of defense expenditures as a share of GDP, we...