At stake replacing the Tal Law? It's the economy, stupid.


In one of her last acts as Supreme Court President, the oft controversial Dorit Beinisch forced action on one of Israel’s most sensitive issues: ultra-Orthodox service (or lack thereof) in the IDF.  By ruling the Tal Law—the legal codification of the decades-long practice of exempting the ultra-Orthodox from service—unconstitutional, Beinisch’s court forced the Knesset to come up with a replacement for the law by August 1, 2012, when it is set to expire.

As expected, politicians jumped at the opportunity to champion a populist cause; most Israelis are furious that a small sector of the population is given an outright exemption from serving in the army, self-segregating from the country’s melting pot. Prime Minister Binyamin Netanyahu promised “a new law that will lead to more equality” as IDF Chief of General Staff Lt.-Gen. Benny Gantz denounced, “too much tolerance for those who do not serve.” Kadima leadership hopeful Shaul Mofaz called for “a draft law for all,” while his party rival, opposition leader Tzipi Livni, declared that “the IDF has ceased to be a people''s army.” Addressing the haredim, Livni urged: “You must serve, and our country needs you.”

But does it?

While it is clearly unfair that one group is exempted from service and the remainder must carry the burden, there is nothing to suggest that  the IDF needs or can even afford an influx of new soldiers. While the IDF''s makeup should absoultely reflect Israeli society more accurately, getting everyone to serve would break the bank, plain and simple.

In November, the IDF announced that due to budget cuts, it would have to fire some 1,000 workers - 5 percent of permanent service personnel; that, in a time in which only 67% of those conscripted ultimately join the IDF''s ranks.

Paying for soldiers is not cheap: They need food, uniforms, weapons, training, equipment and places to live. According to a study done by the Institute for National Security Studies''s (INSS) Shmuel Even, 41.8% of gross defense consumption in 2009 paid for these personnel-linked costs (while the rest was spent on procurement, construction, imports and so on, or paid for by US military aid). Salaries and assessment of pension cost that year 22.1 billion NIS—half of total domestic defense spending—while more recent estimates put the figure at 26 billion. In the entire public sector that year, 23.9% of the salaries paid out were for defense. And all this while conscripts earn a measly 400 NIS a month.

Based on those figures (and not considering economies of scale), we can roughly estimate that adding another 85,000 soldiers to the approximately 175,000 currently serving would ultimately cost the government over 8.5 billion NIS—over a fifth of the 2010 defense budget, and 1.6% of projected 2012 GDP.

So what should Israel do?

To put that in perspective, in its most recent report, the International Monetary Fund (IMF) warns that Israel should not go over budget by more than 2% of GDP, and is already expected to do so by 3-3.5% of GDP this year. In fact, Israel’s economic outlook depends on keeping its deficit down so it can pay down its national debt, and defense spending is a major factor.

“Public debt is high relative to stronger OECD and emerging market countries, and, reflecting regional tensions, security expenditures severely constrain room for fiscal maneuver,” the IMF report says. The top priority is to keep public debt on a downward track over the medium-term. “A decisive effort to approach the 2013 budget deficit ceiling should be made. This will require contributions from all sides—from expenditure restraint including defense,” says the report.

So what should Israel do?

First, shorten the length of military service, which would allow more people to serve, but not all at once.

So what should Israel do?

Second, revamp the National Service to make it into an economic growth machine. Currently, some 12,000 people do National Service as an alternative to military service. Though National Service participants make higher salaries than soldiers (about 600 NIS a month, in general, plus travel expense, according to an official), the cost is ultimately lower than that of soldiers because they do not require the same amenities, equipment and in-kind costs that soldiers do. With the right reorientation, National Service could help Israel overcome two of its major economic challenges: employing Arab women and Haredi men.

According to the IMF, if “the employment, wage, and productivity rates in their communities were on a par with others, every year Israeli output would be some 15 percent higher than it is, and annual fiscal revenues would also be higher than they are by some 5 percent of GDP.” Not too shabby!

To get there, the IMF says, Israel needs to invest in education and infrastructure for these communities. Haredi and Arab participants in National Service could be trained and given internships in economically useful fields, while other National Service members could be put to work building infrastructure and providing educational resources to underprivileged communities at relatively cheap prices.

More than sending everyone to the military, using National Service to patch up the problems in Israel''s economy would secure its growth—and its ability to maintain its defense forces—for the long haul.