Ever since its establishment, Israel has had to deal with two budgetary challenges: a military challenge — maintaining a relatively large army, one capable of successfully dealing with frequent confrontations with the military forces of neighboring states as well as with local and regional guerilla forces; and the socio-economic challenge – the need to maintain a complex system of social services on the level of western states, one that has the capacity to bring the general standard of living up to the level of developed nations, as well as to provide modern capabilities for its citizens.

The Defense Budget and the Socio-Economic Budget

Some three decades ago, in October 1995, the Adva Center began publishing independent annual budget analyses of the proposed national budget. In most of the years since that time, the Adva document focused on the socio-economic budget. The reasons for that focus were twofold: one, the fact that Israel’s defense budget was never revealed in full; and two, Adva’s socio-economic analysis became in high demand for dozens of socially oriented organizations that were founded in subsequent years. It will be recalled that a decade before, in 1985, the Emergency Economic Stabilization Plan was initiated, whose main thrust was privatization of the social services. Since then, most of the social welfare services were handed over to external contractors, as were informal and enrichment educational services. At the same time, efforts were made to weaken labor unions, first and foremost the Histadrut – the national federation of labor.

Not long afterwards, in 2001, Israel found itself in a double bind:  it experienced both the second intifada and the global hi-tech crisis. In response, the government adopted drastic economic measures, the main one being cutbacks in the budgets of Israel’s social services. While those unkind cuts had an adverse effect on the majority of Israelis, the individuals most affected were those with middle and low incomes.

That being the case, we at the Adva Center entitled our annual budget analysis Dark Year. When the national budget of the following year held no respite, we named the next analysis Dark Years. (Published in Hebrew)

A generation has passed since those dark years, and here we are, once again faced with two crises at one and the same time: a war and a severe economic setback. It is no secret that the defense budget and the social affairs budgets are interdependent.

The human suffering caused by the present war is unprecedented in Israel’s war history. Tens of thousands of families are now bereft of loved ones, of their sources of livelihood and of the roof over their heads. On the defense front, the IDF mobilized tens of thousands of reserves for more than a year and utilized a huge quantity of equipment and ammunition. The mobilization of so many reserve soldiers, in turn, had a deleterious effect on many parts of the economy.

What is needed, therefore, is a socio-economic budget that will put the economy back on its feet.  However, this time the budget debate goes beyond the “usual” division between the defense and the social budgets, for the “Iron Swords” war, which began as a “regular” conflict between Israel and the Palestinians, expanded into a far broader confrontation:  a power conflict between the United States and its allies, on the one side, and China, Russia and Iran on the other, over control over the entire Middle East.

As one of the US partners in this battle, Israel found itself fighting in seven different arenas.

Since the beginning of the war in October 2023, the US has provided military aid in the amount of NIS 22 billion.[1]

This amount is often presented as a “gift”; however, it is a self-gift, as most of it is utilized for the purchase of equipment and armaments from US firms, thus strengthening the US defense industry. [2]

Not only that: the equipment thus purchased requires active utilization and regular maintenance by Israeli military personnel. In other words, what we have is an arrangement that obligates Israel to maintain a large defense budget for years to come. Stated differently, that arrangement stands in the way of Israel’s continued development of a proper social budget.

That is exactly the way the present extreme right-wing Minister of Finance, Betzalel Smotrich, views the situation, but from the opposite point of view. In a press conference held on September 3, 2024, Smotrich described the burden of defense as one that is to continue for a long time to come. He stressed that Israel will have to continue to fight on all the fronts of the present war – the South, the North, the West Bank and also more distant locations, as it has no choice.

Against this background, the 2025 budget proposal promises Israelis numerous “dark years” — years without a social agenda.