Barak chides Steinitz, his calls for defense cuts

Defense minister says slashing budget will damage Israel's economy, ability to defend itself.

By LAHAV HARKOV, NADAV SHEMER
Defense Minister Ehud Barak _311 (photo credit: Reuters/Blaire Gable)
Defense Minister Ehud Barak _311
(photo credit: Reuters/Blaire Gable)
Defense Minister Ehud Barak slammed Finance Minister Yuval Steinitz’s economic policies following the latter’s call to cut the defense budget in Monday’s Knesset Foreign Affairs and Defense Committee meeting.
“The Finance Ministry is mistaken and apparently does not understand the economic reality and the steps it requires,” Barak said. “[Calling for] cuts at present, and facing today’s challenges, borders on a lack of intelligence in macroeconomic matters.”
In the meeting, intended to focus on defense spending, the defense minister discussed his general economic philosophy, suggesting the state deficit be increased by 0.9 percent.
He added that whoever thinks such a move is impossible is likely to find himself in a “dangerous situation,” being unable to see the challenges that lie ahead.
Barak also quoted Nobel Prize-winning economists such as Joseph Stiglitz and Paul Krugman to back up his arguments for increasing the deficit during a recession, comparing the budget to “a bear that eats salmon in the summer so he’ll have reserves for the winter.”
“We must store resources and reduce the national deficit during times of growth,” he said. “Conversely, we must strengthen the market infrastructure and the human element in times of difficulty in order to allow them to overcome the crisis and return to growth.”
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The defense minister repeated his assertion that “the Finance Ministry doesn’t understand macroeconomics. Instead of throwing [the economy] a life preserver, it’s throwing weights.”
Barak explained to the committee that Israel faces three major issues requiring an increase in the state deficit and defense budget: instability in the Middle East, social protests and the global recession.
According to Barak, the defense budget is constantly shrinking, regardless of its amount in shekels, because its proportion to the state budget decreased from 24% in 1986 to 13% in 2012, the lowest percentage since the establishment of the state. At the same time, he said, other ministries’ budgets had grown more than his.
“The ‘burden’ that the defense budget poses on the market is clearly getting smaller,” he pointed out, adding that Israel’s defense is “an investment, not a burden.”
“If we could ask for only one thing, it would be to decrease the defense budget only in proportion to the state budget and the gross national product.”
In reference to the 2007 Brodet Commission report, which looked into defense spending, Barak said long-term planning is the best way to ensure that the Defense Ministry can address future challenges. At the same time, he said, there is a gap of billions of shekels between Brodet’s estimations and reality due to a rise in prices and taxes.
The Bank of Israel said following Barak’s statements that according to its assessment, the original defense ministry budget for 2011 was NIS 1 billion lower than that coordinated by the Brodet Commission, but that when including additions expected to be approved by the end of the year, it will be around NIS 2 billion higher.
The original budget for 2012 is also NIS 1 billion lower than that set by Brodet, but with the planned addition it will end up NIS 1.6 billion higher.
Between the years 2008-2012, defense expenditure was on average NIS 400 million higher each year than the figure coordinated with Brodet, the central bank said.
The Finance Ministry said it backed the Bank of Israel’s statement, adding that there was a need to restrain budget irregularities starting from 2012, beginning mainly with implementing transparency and control of the defense budget.
MKs at the meeting expressed frustration over Barak’s comments, saying he focused on politics and not on the meeting’s scheduled topic.
Labor MK Eitan Cabel said the defense minister failed to answer “the most important questions” regarding the defense budget.
“It’s embarrassing,” he said. “No one really knows what goes into the budget.”
MK Arye Eldad from the National Union said it was empty talk.
“He missed his opportunity and did not succeed in getting support from the committee,” he said. “This was just a PR move against the Finance Ministry, with no explanation as to why the Defense Ministry is requesting an enlargement [of its budget]. It was a waste of a meeting.”