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Israel’s 2024 budget shows misplaced priorities

Indiscriminate cuts to social welfare sectors endanger vulnerable populations and widen existing societal fault line
Israeli prime minister Benjamin Netanyahu and Minister of Finance Bezalel Smotrich seen during a press conference, at the Prime Minister's office in Jerusalem, on April 30, 2023. Photo by Alex Kolomoisky/POOL***POOL PICTURE, EDITORIAL USE ONLY/NO SALES, PLEASE CREDIT THE PHOTOGRAPHER AS WRITTEN - ALEX KOLOMOISKY/POOL*** *** Local Caption *** áéáé
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Prime Minister Benjamin Netanyahu (left) and Finance Minister Bezalel Smotrich during a press conference, at the Prime Minister's Office in Jerusalem, on April 30, 2023. (Alex Kolomoisky/Pool)

In the complex realm of global uncertainties, the fiscal choices made by governments become a potent reflection of a nation’s values and priorities. This month’s ministerial endorsement of Israel’s revised 2024 budget, ostensibly aimed at funding the ongoing conflict with Hamas, has brought to light crucial concerns about the government’s dedication to social equity and economic prudence. It is now up to Knesset members, who began to debate the budget last week, to make sure its final version does not forsake those in need of vital wartime assistance.

The Netanyahu-Smotrich government, in their quest for financial backing to fortify the war effort, has introduced a budget marked by a sweeping 3% reduction in overall government spending. While the urgency of financing a military confrontation is irrefutable, the broader implications of these fiscal choices demand meticulous examination, and yes, serious critique.

A distinctive facet of this budget lies in the indiscriminate cuts to welfare, education, healthcare, and Arab society—a move that not only endangers vulnerable demographics but also widens existing societal fault lines. The refusal to disband unnecessary ministries, as advised by the Finance Ministry, underscores a missed opportunity to streamline government spending efficiently. This lack of strategic reallocation represents a failure of fiscal imagination, squandering a chance to address the nation’s needs more judiciously.

The glaring omission of any adjustment to the budget for religious institutions, particularly the untouched 1.7 billion shekels allocated to religious yeshivot, prompts a question of the government’s commitment to a fair and balanced distribution of limited resources. One cannot help but wonder if these funds could have been redirected to more pressing areas during these turbulent times.

Perhaps the most perplexing aspect of this budget lies in its commitment to increasing VAT from 17% to 18% in 2025 without a concomitant strategy to alleviate the burgeoning cost of living. This decision appears to be a regressive tax policy, disproportionately burdening lower-income populations. Regressive taxation is a counterproductive approach that not only exacerbates income inequality but also fails to address the core issue of rising living expenses.

The economic fallout from the conflict, underscored by the decision to impose a 400-shekel “contribution” on every worker in the economy, paints a vivid picture of a fiscal strategy with skewed priorities. Again, this move symbolizes a failure to adopt an equitable distribution of the financial burden, with the workforce bearing the brunt of economic challenges, rather than adopting a more nuanced and socially conscious approach.

While the additional 55 billion shekels earmarked for defense is ostensibly justifiable in the context of the ongoing conflict, the absence of a comprehensive plan to address the cost of living crisis is striking. The government’s oversight in mitigating the struggles of everyday citizens to cope with rising living expenses raises a red flag. It signals a conspicuous lack of attention to the economic hardships faced by ordinary Israelis, as the budgetary decisions appear to disproportionately favor military priorities over the economic well-being of the populace.

Furthermore, the budget’s failure to include substantive measures to combat the rising cost of living is a glaring omission that runs contrary to the principles of responsible fiscal governance. It highlights the shortsightedness of the fiscal plan, which seemingly neglects the crucial aspect of addressing inflation and the overall increased cost of living—an imperative in times of war.

Even as we fight the war, we must open our eyes to the fact that Israel is confronting a ticking time bomb in terms of economic disparities and the mounting cost of living. These challenges pose a grave threat to the country’s future, potentially even surpassing some of its perilous security challenges.

In 2003, I was part of the Ministry of Finance team that, under Benjamin Netanyahu’s leadership, implemented an economic plan that proved instrumental in propelling Israel’s economy for the next two decades. The current economic crisis, resembling the circumstances of 2003 when Israel faced the Second Intifada, presents a critical juncture to properly address economic inequality. Prime Minister Netanyahu of 2024 must take an example from Finance Minister Netanyahu of 2003, prioritizing comprehensive wealth distribution that considers the needs of all marginalized and underserved populations.

Ostensibly crafted to navigate the challenges posed by conflict, the revised 2024 budget unfortunately exposes a disconcerting misalignment of priorities. The government’s choices reflect a concerning pattern of neglecting the well-being of its citizens. As the Knesset Finance Committee and the wider Knesset plenum debates the budget, it is up to Knesset members to rise above the fray and make sure that key amendments are made. Now more than ever, they must embody the essence of fiscal accountability, championing a recalibration of resources that prioritizes the economic prosperity and social harmony of all citizens, even amidst the tumult of war. Only through a conscientious and socially conscious approach can Israel navigate these turbulent times with resilience and fairness for all.

About the Author
Sagi Balasha is the CEO of the Ogen Group, leading five non-profit organizations dedicated to expanding access to affordable credit in Israel. He previously served as the CEO of the Israeli-American Council and co-founded Concert to combat BDS efforts against Israel. He has also held significant roles at Beit Hatfutsot and in Israel's Ministry of Finance, where he played a crucial role in far-reaching structural reforms.
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