Budget dilemmas in Israel and the US

The most fateful decision by governments is the split between spending on defense, and spending on making the country worth defending.

In The United States, a broken political system and a broken budgetary process have resulted in an automatic, across-the-board budget cut for the approximately one-third of the governmental budget that is not mandated (social security, medicare, etc.), including defense and internal security. Although the amount is relatively small compared with the total budget since it is spread over ten years, the so-called "sequester" was adopted by Congress at the suggestion of the Obama Administration, precisely in order to avoid what just happened, the reasoning being that neither the executive nor the Congress would allow such an absurdity to take placew, forcing a budgetary compromise.

In Israel, whatever the composition of the new government coalition, after the surprising results of the recent election, it will be faced with the same kind of budgetary decisions, which short of war and peace, are the most difficult decisions to be made by any democratic government, which must respond not only to its own judgements but to preferences and pressures of society at large.

Of all the budgetary decisions which must be made, the most difficult of all is the allocations of the country's resources between defense and security expenditures on the one hand and everything else on the other. This is particularly acute in the US, because of its financial situation and its worldwide responsibilities, and for Israel, because of its geo-political situation and the kinds of public dissatisfaction demonstrated by the sit-ins of 2011 in the major cities and the controversy over elements of the population that are accused of avoiding contributing to the country's resources--indeed, being a drain on them.

This can be expressed as a decisional conflict between what is devoted to defending the country and what is devoted to creating and strengthening a country worth defending. I and colleagues are engaged in a study for the Center for the Study of National Security of Haifa University, on this very problem, based on three case studies: Israel, a case of extreme centralization of the budgetary process; The United States, a case of extreme decentralization of the budgetary process, bordering on chaos (as graphically demonstrated by the "sequester"), and an intermediate case, The United Kingdom.

In Israel, the decision between defense and internal security, and everything else, is basically made through negotiation among three governmental departments: the Ministry of Defense, The Ministry of Finance and the Office of the Prime Minister. In The United States, literally hundreds of entities influence budget decisions: executive branch departments and agencies, as well as divisions within those departments and agencies; various committees and caucuses in both the House of Representatives and the Senate; hundreds of trade and professional associations, corporations, financial institutions, non-governmental agencies, and so on, who spend hundreds of millions of dollars in direct lobbying of both the executive and the Congress, or indirect lobbying through dozens of lobbying, public relations and law firms, as well as attempting to influence public opinion in general. Under the circumstances, exacerbated by a gigantic deficit and accumulated debt, it is hardly surprising, although greatly disturbing, that there has not been a federal budget actually approved since 2009! Even the effort made through the sequester process to force a decision failed to work, as noted above.

As the situation in the Middle East becomes more and more complex and threatening, but at the same time, pressures for ameliorating the economic situation of the middle class, young people starting their careers and minorities increases, and income disparities become wider, the political choice in Israel of a defense minister, a finance minister and of course a prime minister looms very large over society as a whole.

May the Almighty guide their deliberations!

Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.

Published by Globes [online], Israel business news - www.globes-online.com - on March 7, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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