With Total U.S. Aid to Israel Already Exceeding $91 Billion, Congress Resists Clinton Pressure for More

By Richard H. Curtiss

Both houses of Congress have voted to reduce U.S. economic aid to Israel by $120 million but increase U.S. military aid to Israel by $60 million for fiscal year 2000. This will bring U.S. foreign aid to Israel for the coming fiscal year to $960 million in economic aid, $1.92 million in military aid, and $60 million for “refugee resettlement,” for a total of $2.94 billion. Congress plans to continue this formula for an annual $60 million reduction in total foreign aid to Israel for a span of 10 years, reducing the eventual annual total of bilateral U.S. foreign aid to Israel to $2.4 billion.

Annual U.S. foreign aid to Egypt for keeping the peace with Israel is about

Benefits to Israel of U.S. Aid Since 1949

(As of Oct. 31, 1999)

Foreign Aid Grants and Loans $80,097,600,000
Other U.S. Aid (12.2 % of Foreign Aid) 9,771,907,000
Interest to Israel from Advanced Pymts. 1,947,000,000
Grand Total $91,816,507,200
Total Benefits per Israeli $15,052

two-thirds of the amount provided Israel. Accordingly it will be $2.035 billion in FY 00 and will continue to shrink by at least $40 million a year. Nevertheless, the total appropriated for aid to Israel and Egypt combined will continue to consume about half of the U.S. bilateral foreign aid budget worldwide.

In addition to its direct foreign aid, Israel normally receives more than a billion dollars in assistance from other portions of the federal budget. The total of extras for FY 2000 will not be clear until later in the fiscal year, but preliminary indications are that Israel will receive some major extras from the Pentagon budget for joint U.S.-Israeli development of various weapons systems.

Israel also receives all of its annual foreign aid during the first month of each fiscal year, unlike other recipients who receive their aid in quarterly payments. The Israeli government therefore is able to invest its foreign aid in U.S. Treasury notes, thus realizing upwards of $50 million annually in interest.

Although the two houses of Congress have not yet reconciled their versions of the FY 2000 foreign aid bill, it appears that the final result will include one victory and one setback for Israel. House Foreign Operations Subcommittee Chairman Sonny Callahan (R-AL) was rebuffed in an attempt to abolish Israel’s preferential treatment in receiving all of its foreign aid in a lump sum payment at the beginning of the fiscal year.

However, Callahan also had vowed to block any attempt by newly elected Israeli Prime Minister Ehud Barak to collect in advance an additional $1.2 billion in economic assistance promised by President Bill Clinton to former Israeli Prime Minister Binyamin Netanyahu for carrying out territorial withdrawals specified in the Wye agreement, signed in 1998. Pointing out that neither Netanyahu nor Barak had yet carried out the withdrawals, Callahan, joined by Rep. David Obey (D-WI), blocked an administration attempt to include the payment in the fiscal year 2000 appropriation. “The money should not be in the bill until there is performance,” Obey said.

Even before the extras from the Pentagon and other federal budgets are included, the FY 00 appropriation will bring the total of U.S. government grants and loans to Israel from 1949 through Oct. 31, 1999 to approximately $91,816,507,200 as indicated in the accompanying table.

This is more than the total of U.S. aid to all of the countries of sub-Saharan Africa and Latin America and the Caribbean combined. Yet these countries had a combined total population of 1.142 billion people in mid-1999, while Israel claimed a total 1999 population of 6.1 million. This means that Israel, with a population smaller than that of Hong Kong, receives about one-third of U.S bilateral foreign aid world-wide.

The costs of Israel to the U.S. shown in the box include direct American foreign aid grants and loans to Israel, other U.S. assistance calculated at a conservative 12.2 percent of direct foreign aid, and interest earned by Israel on these funds. They do not include the $10 billion in loan guarantees extended by the U.S. to Israel in the 1990s. Nor do they include the costs to the U.S. Treasury of deductions taken by U.S. residents from their income taxes for gifts to tax-exempt U.S. organizations for use in Israel. Such gifts are estimated at approximately $1 billion annually, but the cost to the U.S. Treasury cannot be calculated accurately because it depends upon the income tax brackets of the individual donors.

During the more than half a century that has elapsed since the creation of Israel on May 15, 1948, the U.S. has lost tens of thousands of jobs and billions of dollars as a result of the Arab economic boycott, and more as a result of the 1973 Arab political oil boycott that touched off a recession in the U.S. and the industrialized countries. There also are incalculable costs associated with the vastly increased security outlays for U.S. government installations at home and abroad necessitated as a result of U.S. support for Israel in its long-standing disputes with its Arab neighbors.

Ironically, unconditional U.S. government financial support for Israel, regardless of its performance in the peace process, is a major factor in steadily increasing Israeli intransigence in spurning land-for-peace settlements. Just as such self-defeating U.S. actions are caused by the increasing strength of the Israel lobby and its media supporters in the U.S., the result has been increasing difficulty for any Israeli government, whatever its preferences, in carrying out territorial withdrawals in the face of domestic opposition.

But as Israel becomes increasingly dependent upon American official and private subsidies, the U.S. likewise becomes increasingly vulnerable to unified economic retaliation from the Arab and Muslim countries organizing to support the Palestinians.

Ultimately the cost to U.S. manufacturers in the aircraft, auto, and other industries may become so great that they will be forced to mount a counter-lobby to Israel’s otherwise unopposed domestic lobby, the American Israel Public Affairs Committee. Although the transfer of U.S. resources to Israel, and the expenditure of U.S. resources in defense of Israel, certainly are unprecedented in world history, the individual cost to American citizens still is growing, with no end in sight.

Richard H. Curtiss is the executive editor of the Washington Report on Middle East Affairs.