Ehud Barak will be remembered by the Ministry of Finance's Budget Department as the man who turned Israel's defense budget, especially its approval process, into just another political shenanigan. The fact is that in every one of the past four years, the actual defense budget was far larger than what had originally been approved, and it was also different from the multiyear framework set by the Brodet Committee in 2008.
In 2008, the Ministry of Finance and the Ministry of Defense agreed to accept the multiyear framework proposed by the committee chaired by David Brodet, a former Ministry of Finance budget director and director general. The committee sought to enable the IDF to carry out long-term planning by setting budget supplements in advance.
But the Brodet Committee's multiyear framework turned into an academic construct before the ink was dry. The framework has been exceeded every year since 2008. The machinations were repeated year after year: the Knesset would approve a fairly small defense budget; and then the prime minister and defense minister would agree on supplements which the Knesset would subsequently pass.
According to a Bank of Israel estimate made a few months ago, the Ministry of Defense's original 2011 budget was NIS 1 billion less than adjusted Brodet Committee framework, but the total budget included supplements approved at the initiative of Prime Minister Benjamin Netanyahu and the Knesset was NIS 2 billion more than the adjusted framework.
The Ministry of Defense's original 2012 budget was also NIS 1 billion less than Brodet Committee framework, but when the supplements are added, the ministry's budget performance will probably be billions of shekels higher than the adjusted framework approved by the Knesset.
If we want to understand the significance of the budget data, it is necessary to mention the size of defense spending as a percentage of GDP. This figure gives the defense burden on the Israeli economy. The figure reveals a steady decline in the defense burden, despite the effects of the 2006 Second Lebanon War, and Operation Cast Lead in January 2009.
When Barak took over the defense portfolio in 2007 under Prime Minister Ehud Olmert, defense spending was 7.2% of GDP. At the end of 2011, the last year for which there is data, the ratio was 6.2%. The weight of defense consumption fell from 5.2% of GDP to 5.1% over the same period. It must be said that this decline did not begin with Barak; it began in the mid-1990s under Prime Minister Yitzhak Rabin, and has more or less continued steadily ever since. So long as Israel's growth rate was faster than the growth of its defense spending, defense as a proportion of GDP declined.
Barak's problem, therefore, was not the final result, but how he achieved it. Instead of a straightforward and transparent process of setting the budget and adopting the multiyear framework, as set by the Brodet Committee in 2008, Barak always preferred to maneuver in secret and make behind-the-scene deals. The result was that the too-clever-by-half maneuvers created the impression that defense spending had become a bottomless pit.
The annual ritual was understood. The defense minister would agree to a lower budget than what the IDF needed, which would help the government and Netanyahu present a small state budget and restrained deficit. Later in the year, Barak would demand, and get, defense budget supplements, which thus taught the IDF high command that formal acceptance of government and Knesset decisions was meaningless. Barak did not care that the end result could have been achieved more simply and transparently.
Published by Globes [online], Israel business news - www.globes-online.com - on November 26, 2012
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