By Amotz Asa-El

 

JUSTICE could hardly be more poetic. With communism fallen and the newspaper chain he represented having bought Budapest’s largest daily, the Hungarian-born Tommy Lapid marched into the Hungarian publisher’s office, ordered him to scram, and – noticing a Lenin portrait on the wall – added: take that with you.

Having later become a politician, Lapid remained true to his convictions. “This government’s capitalist axis is solid,” he told this newspaper in 2004, referring to his full backing, as deputy prime minister, of the market reforms that Benjamin Netanyahu was leading those days, as Ariel Sharon’s finance minister.

Lapid’s son, Yair, upheld his father’s blending of capitalism, liberalism, and patriotism, ever since his own shift to politics 13 years ago. That is why when he met last week with the prime minister in his capacity as leader of the opposition - the younger Lapid heeded the same Netanyahu’s request, to support yet more defense spending, Lapid had only one demand: that Netanyahu fund his new arms purchases by cutting his payments to his ultra-Orthodox chums.

It was but another bout in the cockfights that define Israeli politics. Netanyahu hoped to portray Lapid as the anti-patriot that he is not, and Lapid hoped to expose Netanyahu as the saboteur of the IDF, which he is.

That was the political side of this dialogue of the deaf. Yet it also had an economic dimension, and in this regard what both men agreed – that our already overfed defense system should be further fed – is militarily reckless, socially derelict, and economically catastrophic.

 

THE October 7 debacle was not about a lack of funds. Israel had infinitely more troops and arms than what handling Hamas’s invasion required. The problem was not about the availability of war’s tools, but about their deployment.

Obviously, the war’s subsequent evolution, as it spread to multiple fronts and far-flung horizons, demanded new spending, but the arms that those attacks required, too, were available. The shortages that did emerge were about munitions that could have been manufactured locally, but were not, and ultra-Orthodox manpower that could have been enlisted, but was not.

Yes, the postwar IDF must be more expensive. Everyone understands that the army will need large quantities of missiles, interceptors, and drones, and that it must build new armored divisions, after having dismantled an estimated 20 of them since 1990.

Even more crucially, the IDF must sharply increase the number of troops it deploys daily along the borders and in the West Bank. No one disputes this, but the problem is that defense spending has already ballooned astronomically over the past three years.

The basic prewar defense budget stood at NIS 63 billion. In the weeks after October 7, 2023, a one-off addition of NIS 18 b was approved. The following year the original budget was more than doubled, to NIS 164 b. And this year’s spending, if Netanyahu’s additional requests are heeded, will be nearly three times its prewar size.

This exponential growth was understandable as long as the war was raging, but it cannot possibly dictate, or even just inspire, the IDF’s long-term budgeting. It’s unaffordable. Israel entered the war with one of the world’s best debt-to-GDP (gross domestic product) ratios, at 60 percent. The leap in defense spending spiked this figure by nearly one fifth. By the end of this year national debt is expected to reach 70 percent of GDP.

What, then, should the next government do?

 

THERE are two precedents in Israeli history to the fiscal dilemma this war has created. The first was in 1952. With hardly 1 million Israelis struggling to absorb an equal number of immigrants, the government decided to sharply slash the defense budget.

The IDF, headed at the time by Lt-Gen Yigael Yadin, opposed the plan. Yadin was a personal protégé of David Ben-Gurion, who saw in him a potential successor. Yadin thought defense should get one third of the national budget, and thus resigned in protestation of the cuts.

Ben-Gurion was saddened by the resignation, but he didn’t budge. He cut defense spending by 20%, and the economy embarked on a decade of breakneck growth, that also funded a victorious war (the 1956 Sinai Campaign.)

That’s not what happened in the 1970s.

With the military’s hardware battered by the Yom Kippur War, there was an obvious need in spending enormous sums to rebuild the IDF. However, defense spending was overdone, at one time gobbling nearly half the budget, and one third of the economy.

The economic results were disastrous. The only way to cover the bloated military spending, and the deficits it caused, was to print money. The result of that was the hyperinflation that by 1985 crossed 400% while foreign-currency reserves evaporated, and the national debt became 2.5 times the size of the entire economy.

Israel was well armed, but almost bankrupt. The economy lost a dozen years, until it underwent the 1985 austerity plan’s open-heart surgery.

Fortunately, today’s Israeli economy is an entirely different creature, which emerged from the war with full employment, resumed growth, and one of the world’s strongest currencies. But this does not mean it can spend one tenth of GDP on defense, which is where we are headed. Overspending will mean over-borrowing and over-taxation, which will mean underinvestment, fewer jobs, and social decay.

Militarily, too, overspending can be counterproductive. Look at Saudi Arabia. With an $82 billion defense budget, larger than France’s and Japan’s, it can’t handle the Houthis. Its army is too fat.

Despite the differences, an overfed IDF would suffer from the same syndrome: too much money, too little victory. A study led last decade by economist David Brodet recommended that Israel’s defense spending be fixed at 6 percent of GDP. That’s where we were before our longest war broke out, and that’s where we must return once it ends.

Jerusalem Post 25 September  2026