Do those who celebrate Israel's Independence Day as a religious holiday celebrate as commemoration of the original "miracle" that Hashem gave jurisdiction of the land to the Jewish people, regardless of whether or not we may have bungled it, or is it a celebration of the current state of affairs?
According to R' Mordechai Greenberg, head of Yeshivat Kerem B'Yavneh, in his essay "The Significance of Yom Ha'atzmaut", the holiday celebrates a turning point in history, inaugurating a process of redemption that continues to this day.
R' Greenberg cites R' Avraham Yitzchak Kook as explaining that the Midrashic "Three Oaths" apparently preventing the Jews from retaking control of the Land of Israel were not actual promises made by the Jews but arrangements by Divine Providence of circumstances in a way that caused the Jews to behave as if bound by an oath. Thus, for most of the past two millenia, circumstances such as the desolation of the land, its rule by nations who were against Jewish rule, and a general sense of fear in the dispersed Jewish people made it impossible for Jews to return en masse to the Land.
Then, God permitted more and more Jews to start moving back, permitted the Land to start blooming again, and arranged the geopolitical map so that the nations of the world would permit Jewish sovereignty in the Land. The climax of this shift was the Jews' decision in 1948 to declare the establishment of the State of Israel, asserting sovereignty over the Land. "With this move the "fear" was removed, despite the fact that on that very same day the war broke out."
The significance of Yom Ha'atzmaut is that we crossed the barrier between galut1 to geulah2; we have passed the turning point. Now we are the owners of the land, and we have the possibility of establishing the kind of government that G-d wants, on that links religion with the State. Although the road it still long, we have passed the barrier and are now on the other side. Now we have the free choice to do as we will. There is much work to do, but the land is ours, and the nations recognize this.
R' Greenberg makes it clear that although the geulah process is in motion, it is not complete. However, the trend of this process has continued in a dramatically positive direction. The number of Jews in Israel has exploded: When the Vilna Gaon was encouraging his students to move to Israel in the 1700s, there were a few thousand Jews already there; now there are millions. In the early years of the State of Israel, "people were embarrassed to wear a kipah"; now, the country is full of countless yeshivot.
"This is the day Hashem has made; let us rejoice and be glad on it!" (Tehillim 118:24)