Government Expenditure for Social Services – 2001-2002
Author: Yaakov Kop Policy Research

The Israeli economy experienced severe setbacks in 2001, and according to realistic forecasts this situation will continue, if not worsen, in 2002.

Thus, the global economic situation, the state of the domestic economy, and the security situation may combine to force a rollback in the social services. Cuts in the state budget – including social service budgets – are sometimes unavoidable. This is the case when the damage caused to the economy by an increase in the budget deficit exceeds the damage caused by a reduction in social spending. Such an evaluation is linked, of course, to value judgments, but it is also a question of the size of the deficit, and the general economic circumstances and expectations. If the size of the deficit and its trend threatens economic stability, budget cuts may become unavoidable.  It is, however, important that the government exercise extreme caution when facing difficult dilemmas of this sort. The budget deficit problem should be regarded as a temporary development caused by an economic slowdown that will be followed by an upturn. As soon as the economic outlook will show significant indications of this expected recovery, the basic structure of government expenditure should return to its pre-cutback track.

This paper appears as a chapter in the Center’s annual publication, Israel’s Social Services 2001-2002, Yaakov Kop (editor).

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