'IDF is Undergoing a Multidimensional Crisis'

The Brodet Commission to examine the Israeli defense budget was appointed in November 2006 and presented its recommendations to the Prime Minister in May 2007. The Commission was set up against a background of ongoing arguments between the Finance and Defense Ministries over the size of the budget and the government’s difficulty, given its lack of professional tools, to decide between them. The issue was one of long standing and came to a head following the Second Lebanon War.

The Committee finds that “the Israel Defense Forces and the entire defense establishment suffer from a multidimensional crisis: budgetary, management, organizational, cultural and strategic. It argues that in the years preceding the Second Lebanon War, the army showed no improvement in efficiency despite cuts in its budget. The Report also finds that staff work to set the defense budget does not explain to decision makers the connection between expenditures and benefits and that the debate on the budget resembles a bazaar. The Commission concludes that the budget has not played its role as a tool for planning, management and oversight in recent years.

The following are the Report’s main recommendations:

1. To improve efficiency. The Commission criticizes the inefficiencies of expenditure in a number of areas, such as utilization of manpower and munitions. One of its specific recommendations is to raise the retirement age for permanent army personnel (in the support echelon) to at least 57.
2. To adapt the budget to IDF programs and the threat assessment, while emphasizing to the government which security threats the budget addresses and which it does not.
3. To adopt a multi-(at least five-)year budget for the IDF. In this framework it is recommends that in critical areas such as readiness and serviceability, minimal requirements be clearly stated.
4. To introduce a link between growth in national product and the budget. The Commission suggests raising the budget by 2.5% per annum on the assumption that national product will grow by 4%.
5. To introduce external control over the defense budget. The Commission suggests that the National Security Council be given a central role as a staff organ and sometimes as a control mechanism on behalf of the Prime Minister.
6. To ensure transparency and common language in describing the defense budget and its component parts to the political leadership.

It is doubtful whether the implications of all of these recommendations were properly examined. One example is the recommendation to raise the retirement age in rear-area units to 57 (that is, to an average of at least 60). The retirement age is anyway tending to rise, and what that means for the functioning of the IDF is not clear. Implementing the recommendation would result in an army of grandfathers in the rear and grandchildren at the front. It would put an end to the vital circulation between staff and line positions, encourage intellectual paralysis in staffs (people under 40 are more inclined to creativity and initiative), and perhaps lead to a sharp drop in recruitment of appropriate people to the career army. In the end, the damage in terms of security outputs might well exceed the savings. A better solution might be a more modest rise in the retirement age coupled with the greater use of civilians to fill professional positions in the commands.

The Report also emphasizes the fact that “Israel’s defense expenditures are deviant by any international standard.” That is irrelevant in determining the optimal size of the budget. A more significant set of data (some of which appear in the Report) reveals that Israel’s defense burden, i.e., the ratio of defense expenditure to total resources, has actually been declining quite sharply since the mid-1970s and is now lower than at any time since the early 1950s.

Israeli Defense Expenditures in Relation to GDP

Year 1956 1967 1973 1982 1991 2006
Defense expenditure as % of GDP 14.1 17.4 31.2 20.9 12.7 8.1
Local defense expenditure (excluding imports) as % of GDP 10.2 14.6 14.8 9.4 6.2

Source: Central Bureau of Statistics

The Report exaggerates the negative impact on the economy of defense expenditures and underestimates the value contributed by the defense establishment. For example, the Report claims that “overall defense expenditure” is higher than acknowledged expenditure because it also includes the alternative cost (loss of output) of conscripts and the security-related expenditures of other ministries, and that the real defense burden is therefore higher by 2%. But the Report does not balance these hidden costs against the uncalculated contributions of the IDF to the economy, such as the injection of professional manpower and entrepreneurship; some of Israel’s hi-tech companies were set up by IDF veterans. Moreover, American assistance, which is given as a grant, should be deducted from the defense burden. The Commission claims that the assistance “obliges Israel to act in coordination with and full transparency vis-à-vis the United States, which means operating according to fiscal norms: non-deviation from expenditure targets, maintenance of deficit targets, reduction of the national debt, etc.” In fact, U.S. assistance is not conditional on any of these things.

The Commission briefly mentions the benefits of defense expenditures: “deterrence and war prevention, reduction of the duration of fighting and the damage, and, of course, military achievements at the end of the fighting.” However, the Commission does not help establishment the actual link between expenditures and security benefits. One of the difficulties in establishing such a link is that military force is intended to provide a response to a variety of threats, and calculating the cost of building capacity for one mission (such as defense against Syria) is problematic. The Commission’s recommendation – to measure the quality and serviceability of force as a multiple of four factors (force preparation, quality of combat systems, training levels and logistical endurance) – falls far short of providing a solution for the problem.

The Commission’s findings on decision making in the realm of defense budgets are not surprising, and the situation in other areas, such as education, is probably no different. The root causes of flaws in the decision making process are found in the political culture. One example is the practice of appointing people to government posts based on political rather than professional considerations. It is doubtful whether the process of defense budgeting can be substantially improved without a parallel improvement in the level of national decision making.

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