Direct coalition funds to the war effort, now - editorial

The ongoing war between Israel and Hamas has carried tremendous costs in human life, personal security, mental health, and a slew of other realms – including the economy.

According to a recent report by the Institute for National Security Studies (INSS), citing government data, the war is estimated to cost NIS 1 billion per day.

“This amount is significantly higher than the budget cost of previous operations (such as Protective Edge in 2014) or the Second Lebanon War,” the report notes.

Furthermore, “The hefty amount is due to the extensive IDF mobilization and the enormous damage of the surprise attack on October 7, which caused the evacuation of about 125,000 residents of the Gaza border area and the communities near the Lebanese border. Together with the costs of the reconstruction of the communities of the western Negev, the total cost of the war is estimated to be NIS 150-200 billion. This is a significant amount that is about 10 percent of the GDP of the State of Israel.”

The economic impact is already manifesting in a variety of ways, from the absence of hundreds of thousands of Israelis from the workforce due to their mobilization for reserve duty to a slowdown in commercial activity due to the closure and contraction of businesses. The weakened shekel, hesitancy on the part of foreign investors, and the disappearance of incoming tourism – coupled, of course, with necessary investments in both military and civilian war efforts – have all contributed to an economic crisis that is likely to deepen in the coming months and reverberate for years to come.

NIS 14 billion are set aside as coalition funds

As economists and decision-makers grapple with the wartime economic reality and attempt to chart a path forward, a debate has been raging over a financial burden that need not exist at all: coalition funds.

For the uninitiated, coalition funds are budgetary allocations promised to political parties by the prospective prime minister and his or her representatives and then signed into coalition agreements as part of the government-building process. They tend to go to pet projects and causes dear to the parties’ constituencies and are a way to sweeten the deal and entice the parties to commit to joining the government, enabling it to come into being.

The sum total of the coalition funds promised as part of the talks to form the current government came out to roughly NIS 14 billion, to be utilized in 2023 and 2024.

Let us be clear: Coalition funds emit a bad stench under the best of circumstances. Essentially a form of political bribery, these funds are subject to virtually no oversight and are not part of the formal budget-planning process. They may or may not align with national needs and priorities, and they tend to benefit various groups and populations in ways that may be politically advantageous to the parties themselves but are grossly unfair on a societal level.

Today, however, as Israel faces an unforeseen expenditure of enormous proportions and an economic crisis that may linger for years, these funds are downright scandalous.

The Bank of Israel has warned that budget cuts proposed by Finance Minister Bezalel Smotrich will not suffice and that discretionary funding – including coalition money – will have to be diverted to address wartime needs. Smotrich, for his part, has waffled, agreeing to freeze the funds and reallocate a small amount but resisting calls to divert all those funds to finance the war effort.

Predictably, Smotrich’s response has drawn fire from the opposition – but, unusually, voices from the right have joined the chorus of criticism.

In a public letter released this week, a slew of prominent figures associated with Israel’s right wing called on Smotrich to change course.

“The government is required to take immediate emergency steps at a massive scale,” they wrote. “One of them is the cancellation of coalition funds.”

They’re right.

Now is the time for Smotrich, like all government leaders, to rise to the occasion. What was an extravagant luxury months ago is now an immoral use of public funds at a time of war.

The coalition funds should be diverted to the war and reconstruction effort without delay.