Defeating enemies proves easier than paying the defense contractors

JERUSALEM, Israel — After more than three years of military conflict, Israel’s government has discovered that maintaining an advanced military is financially comparable to renovating a house, except the contractors deliver fighter aircraft instead of bathroom tiles and nobody accepts an ordinary mortgage.

Israel’s economy has remained resilient despite extraordinary defense expenditures.

Unfortunately, resilience does not come with a receipt marked PAID IN FULL.

The country’s wartime costs are estimated at approximately 405 billion shekels, or about $130 billion, over 2023–2026, according to The Wall Street Journal’s examination of Israel’s economic and defense challenges.

Israeli finance officials are now confronting the same question faced by every homeowner who has hired an expensive contractor.

“How did the final bill get this big?”

The Defense Industry Discovers Its Business Model

Military technology is expensive for several understandable reasons.

Fighter jets require extraordinary engineering. Missile-defense systems rely on sophisticated equipment. Radar networks, communications systems and precision weapons require years of research and development.

None of these items can be purchased economically by waiting for a holiday sale.

A defense contractor explained that military pricing reflects numerous complicated considerations.

“Research, development, manufacturing, testing, maintenance and the fact that you absolutely cannot afford for it to fail.”

An Israeli accountant examined the invoice.

“Why does this replacement component cost $84,000?”

“Because the original costs $92,000.”

The accountant asked whether volume discounts were available.

The contractor suggested ordering another hundred.

Finance Ministers Discover Opportunity Costs

Economists describe an opportunity cost as the value of something sacrificed when resources are directed toward another purpose.

For Israel, the tradeoffs are substantial.

Money spent on defense cannot simultaneously be spent on education, hospitals, infrastructure or reducing taxes.

Yet inadequate national security could threaten all those investments.

This is the uncomfortable reality of public finance: governments must choose between competing needs, including some that are absolutely essential.

The Bank of Israel’s economic forecast projects a government deficit of 4.4% of GDP for 2026 under its baseline assumptions.

In simpler language, government expenditures continue exceeding revenues.

The difference must be financed.

A budget adviser proposed eliminating all unnecessary government spending.

The finance minister asked him to define unnecessary.

The adviser immediately discovered that every government program was essential to somebody with political influence.

Winning the Battle Against Arithmetic

Israel also faces uncertainty about future American military assistance, which has historically helped support its defense capabilities.

Reducing dependence on foreign assistance may offer greater strategic independence.

It also means paying more of the bill.

A finance ministry official compared the situation to purchasing a family car.

“For years, somebody helped make the payments. Now we’re considering paying for it ourselves, except the car costs billions and occasionally needs replacement missiles.”

Security officials insisted that expensive defensive capabilities could not simply be abandoned.

Economists agreed, but reminded them that public money remains finite even when national security requirements are not.

The government’s challenge is therefore not merely defending the country.

It is maintaining defense capabilities without undermining the productive economy that pays for them.

Israel has demonstrated considerable economic endurance during wartime.

Now its finance ministry must perform a similarly difficult operation: protecting national security, preserving essential public services and finding a budget that adds up.

Defense contractors remain optimistic.

They have already offered to help.

For a consulting fee.