Key Challenges Facing the Israeli Economy and their Ramifications for National Security

Two topics taking center stage in the public economic discourse in Israel are the government’s fiscal policy, particularly the defense budget, and the various factors contributing to economic inequality. This essay surveys the latest developments in both topics, discusses their ramifications for Israel’s national security, and offers policy insights about the macroeconomic challenges facing the economy. In the short term, the economy needs to be managed on the basis of informed fiscal policy, helped by the establishment of a fiscal council. This policy would include a rationalization of defense budget planning. In the long term, the country must fundamentally tackle the inequality in the economy by, inter alia, changing tax policy, incentivizing work, and significantly investing in the human infrastructure of the economy.