When you are faced with an existential threat to your very national survival, this is what you do. You mobilize your economy for all-out struggle and impose heavy-duty “War Taxes” to pay for a dramatic build-up of military capabilities.
For instance, between 1939 and 1945 Federal government receipts rose nearly seven-fold – from $6 billion to $42 billion per year, owing to across-the-board tax increases that took the average income tax rate from 4% to 24% and the top rate to upwards of 90%. Relative to the national economy, Federal receipts (red bars) rose from 6% of GDP to a peak of nearly 20% in 1945.
On top of that came a huge amount of war bonds and borrowing. Accordingly, outlays from taxes and borrowing (blue bars), mostly for military mobilization, rose from less than 10% of GDP in 1940 to a war-time peak of 40% in 1944-1945.
Call that America’s national mobilization triggered by Pearl Harbor. It’s what a self-respecting democracy does when its very existence is called into question.
Surge In Federal Outlays and Receipts As % Of GDP During WWII
Alas, to a man and woman Israel’s leadership has likened the barbaric Hamas attacks of October 7th to Pearl Harbor. And Netanyahu in particular has insisted that Israel’s withering bombardment of Gaza must not give way to a “pause” or ceasefire just as Washington did not stand down after Pearl Harbor, either.
Fine. But then again, where is Netanyahu’s powerful “budget speech” to the Knesset akin to FDR’s famous call to arms and economic sacrifice before the Congress in January 1942? Where is Netanyahu’s lobbying campaign for an all-out Israeli economic mobilization and stiff War Taxes that would dramatically increase the government’s claim on the nation’s economic resources?
Where is the plan for a true Garrison State with the vastly expanded military budget and armed forces that would be needed in the future to protect Israel’s citizens from being caught flat-footed again? Where are the plans for the hundreds of thousands of additional soldiers that would be required to ensure that the several thousand Hamas barbarians who inhabit the open-air prison on Israel’s southern border never again break through a properly sealed-off, militarized barrier on the perimeter of the Gaza Strip?
Of course, there is no such thing in the works. There is a whole lot of lobbying going on – but it’s not in the Knesset. Instead, it’s on behalf of a largely symbolic $14 billion Israel aid package from the war finance capital of the world on the Potomac.
But in the great scheme of things that’s a false comfort to the Israelis and an unaffordable virtue signal for the Washington pols. The fact is, Uncle Sam is flat-out broke. Washington cannot afford a single dime of the $106 billion package that Biden is trying to shove down the collective throats of America’s hapless legislators. That especially includes the utter waste of another $61 billion for Washington’s insane proxy war against Russia in Ukraine and the $14 billion for Israel, as well.
In truth, Israel has not yet even begun to tighten its own economic belt to pay for the war policy that its militaristic and religious extremist government insists upon. Indeed, the pending US aid package amounts to only 2.5% of Israel’s GDP and comes on the back of Netanyahu’s ceaseless decades-long campaign for a Garrison State national security policy, but one funded on the cheap via a quasi-pacifist defense spending level.
That’s right. Israel’s military expenditures had plunged from more than 20% of GDP at the time of the last existential crisis during the Yom Kippur War of 1973 to just 5% of GDP on the eve of the October 7 attacks. In effect, Netanyahu falsely told Israeli voters that they didn’t have to take the risks and make the territorial concessions implicit in a two-state and diplomatically-based solution to the Palestine problem. But at the same time, they could also avoid having to be taxed to the gills to pay for the alternative – a costly, heavily militarized Garrison State.
The wink and nod underlying this false solution, of course, was a pitiless willingness to keep Hamas in check by “mowing the grass” every few years in Gaza, as a desperate Israeli government is now doing once again to the horror of much of the civilized world.
So even more than the failure of Israel’s vaunted intelligence operations in the run-up to the October 7th massacres, the real deep policy failure is the flaccid blue line below, slouching toward 5.0% of GDP defense spending after the Netanyahu coalition came to dominate policy in the 1990s. You simply can’t have a Garrison State policy – no negotiations with the Palestinians, no two-state solution, no continuation of the Oslo or other international negotiations process and the quarantine of 2.3 million largely destitute Palestinians in a congested dysfunctional strip of land cheek-by-jowl with the Mediterranean Sea – on a 5% of GDP war budget.
As we recently pointed out, Israel’s $25 billion defense budget is a pittance compared to its booming, technologically advanced and robust $550 billion national economy. The latter, in turn, is 20X larger than what had been the $28 billion that passes for an economy in the shambles of Gaza – a whisp of GDP mainly funded by foreign philanthropists and malign actors alike. And even that will soon virtually cease to exist.
Even if you count the aid from the so-called malign actors – a few hundred million per year from Iran and others – that flows through Qatar to Hamas, there is simply no contest. Israel is an economic Goliath relative to the thin resources of the Hamas terrorist apparatus and does not need any virtue signaling hand-outs from the politicians of the bankrupt state domiciled on the Potomac in order to handle its own security. They just need to either –
- return to the international negotiating table for a two-state solution based on the pre-1967 borders and the re-unification of Gaza and the West Bank under an internationally accountable and guaranteed authority.
- or, in the alternative, shackle their voters with heavy-duty War Taxes to fund the full military might their current rejectionist policies require.
Needless to say, Bibi Netanyahu and his coalition of rightwing religious parties would have likely never stayed in power with their “rejectionist front” against an internationally brokered and superintended two-state arrangement had they leveled with the public about the immense increase in military spending and taxes these policies required.
But even that is not the half of it. The truth is, Netanyahu is a megalomaniacal madman who has had the reckless audacity to pursue an utterly dangerous Machiavellian strategy of promoting and funding Hamas in order to kill dead as a doornail any prospect whatever of a two-state arrangement.
The public record makes absolutely clear that this is what Netanyahu clearly has done, even as he failed to tell the Israel’s public that this policy, in turn, necessitated a full-bodied Garrison State with crushing taxes to keep his Frankenstein monster contained inside the Gaza prison walls.
And we do mean crushing. To spend another $25 billion or even $50 billion on a Garrison State approach to national security, as would be needed, would amount to 5% to 10% of GDP in higher taxes. Yet according to the World Bank, the Israeli tax burden has been falling since the turn of the century when Netanyahu’s one-state policy came to dominate Israel’s national security posture.
Israel Tax Revenue As % Of GDP, 1995 to 2021
For want of doubt, the facts are these. Between 2012 and 2018 Netanyahu gave Qatar approval to transfer a cumulative sum of nearly one billion dollars to Gaza in the form of suitcases full of cash. And at least half of that is estimated to have reached Hamas, including its military wing.
According to the Jerusalem Post,
……in a private meeting with members of his Likud party on March 11, 2019, Netanyahu explained the reckless step as follows: The money transfer is part of the strategy to divide the Palestinians in Gaza and the West Bank. Anyone who opposes the establishment of a Palestinian state needs to support the transfer of the money from Qatar to Hamas. In that way, we will foil the establishment of a Palestinian state (as reported in former cabinet member Haim Ramon’s Hebrew-language book “Neged Haruach”, p. 417).
Indeed, earlier that spring Netanyahu himself was widely quoted as saying during the aforementioned meeting of Likud MKs that,
“Whoever opposes a Palestinian state must support delivery of funds to Gaza (cash in suitcases from Qatar) because maintaining separation between the PA in the West Bank and Hamas in Gaza will prevent the establishment of a Palestinian state.”
So Israel’s governing faction of religious extremists, militarists, messianic settlers and Eretz Yisrael ideologues have chosen, instead, to live in a Garrison State and to be periodically compelled to “mow the grass” in the Gaza outdoor prison. Yet if its rightwing governments want to operate a modern-day Sparta, they need to tap their own taxpayers first.
In the meanwhile, Washington needs to truly sober up. Uncle Sam’s checking account is massively overdrawn. Now is not the time to fund wars which do nothing for America’s homeland security (Ukraine) or to provide purely symbolic aid to an ally that has more than enough resources to fund the unwise war policies it insists on pursuing.
David Stockman was a two-term Congressman from Michigan. He was also the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street. He’s the author of three books, The Triumph of Politics: Why the Reagan Revolution Failed, The Great Deformation: The Corruption of Capitalism in America, TRUMPED! A Nation on the Brink of Ruin… And How to Bring It Back, and the recently released Great Money Bubble: Protect Yourself From The Coming Inflation Storm. He also is founder of David Stockman’s Contra Corner and David Stockman’s Bubble Finance Trader.