Israeli Parties Face Economic Scrutiny Over Funding Campaign Promises

Israel's upcoming general elections have cast a spotlight on a fundamental economic dilemma: how political parties plan to finance their ambitious promises amid soaring defense expenditures. Following the outbreak of the war on October 7, 2023, the nation's security budget surged by approximately 100 billion shekels annually, a financial burden projected to remain elevated over the coming decade. Experts from the Israel Democracy Institute, the Berl Katznelson Foundation, the Arlozorov Forum, and the Kohelet Forum emphasize that the next government will be forced to choose between tax hikes, cuts to public services, defense spending reductions, or issuing additional national debt.

To evaluate the economic credibility of the running factions, experts analyzed party platforms through a populism index. While parties such as Yesh, BeYachad, Yisrael Beytenu, The Democrats, the Joint List, and Religious Zionism provided various funding mechanisms, Likud, Shas, and Otzma Yehudit declined to respond. Consequently, experts evaluated the latter factions based on their past governance and public statements.

Party Proposals and Expert Evaluations

• Yesh: The party proposed financing its plans through budget cuts, including the abolition of coalition funds, a review of benefits for non-working populations, and the closure of redundant government ministries. Experts noted that while these measures address immediate spending, they may fall short of covering long-term investments in growth alongside heavy defense obligations.

• BeYachad: The joint electoral slate of Naftali Bennett and Yair Lapid proposed reallocating budgetary priorities by cutting coalition funds and student-stipend equivalencies, alongside deregulation and boosting high-tech growth. Economists pointed out that the platform lacks full coverage for initiatives such as a promised one-million-shekel housing voucher for military reservists.

• Yisrael Beytenu: Advocating for public sector efficiency, voluntary retirement without staff replacements, and the elimination of child allowances starting from the fifth child, the party aims to fund infrastructure and education investments. Experts warned that these steps are insufficient to cover substantial civil service expansion and a targeted 8% to 10% defense budget increase.

• The Democrats: Proposing to shift funds away from sectoral benefits and reduce reserve duty days, the party also floated a modest earmarked household tax. Analysts noted that The Democrats were unique in providing explicit quantitative funding sources rather than relying solely on future economic growth.

• Joint List: Centered on capital asset taxation and a diplomatic settlement aimed at yielding substantial annual savings, the platform was praised for addressing asset taxation directly, though experts questioned the short-term feasibility of its financial estimates.

• Religious Zionism: Led by Finance Minister Bezalel Smotrich, the party's economic plan relies on tax base expansion through digitalization, private capital mobilization for defense, and a national infrastructure fund. Analysts cautioned that private capital constitutes debt and that tax reductions compete directly with high defense and civil service expenses.

According to the Israel Democracy Institute, structural deficits and rising interest payments on national debt mean that the incoming government cannot indefinitely expand defense budgets while maintaining public services and stabilizing the economy without difficult trade-offs.