Israel’s economy and society moved on two different tracks in the past two years. The economy grew significantly but the social situation, as reflected in various indicators, did not improve and, in some respects, actually suffered a setback.
Part of the hardships faced by many Israelis may be attributed to government policy, especially the State budget directed to social services. The State budget for the coming year was based on the previous year’s budget with an increase in expenditure of only one percent of GDP. Even if the entire increase were allocated to social services, it would not cancel out the cumulative decline that occurred in 2002–2004. Analysis of the State budget as presented to the Knesset shows that total social expenditure in the 2006 will be equal to that in 2005 — meaning that the per capita budget is smaller than in recent years.