Arms and Aid: Through a Glass Darkly

By Dennis J. Wamsted

Congressional efforts to give Israel ever-larger sums of U.S. aid took a significant step forward in mid-November when the Senate Appropriations Committee approved a one-year reduction of the interest rate on Israel's U.S. loans from the current average of 11.4 percent to 5 percent. This move will cost the U.S. Treasury more than $531 million in foregone interest payments, pushing the effective amount of U.S. aid to Israel for Fiscal Year (FY) 1986 to $4.28 billion.

The principal movers behind the campaign were the Foreign Operations Subcommittee's ranking minority member, Daniel Inouye (D-HI), and its chairman, Robert Kasten (R-WI). Both Senators are up for reelection in 1986. The similarities, however, end there. Inouye won reelection in 1974 and 1980 by staggering victory margins and has a safe seat. Kasten, on the other hand, edged his opponent in 1980 by slightly less than 40,000 votes of the more than two million cast, and, Democratic sources say, will have difficulty winning reelection next year no matter who runs against him. Kasten has prepared by amassing a huge campaign chest—more than $1 million as of July, 1985—and working overtime to line up supporters both in Wisconsin and throughout the country. Interestingly, strong support in recent months has come from a somewhat unexpected source—pro-Israel political action committees (PACs). In fact, for the six months from January to July of this year, Kasten was the number one recipient of pro-Israel PAC money—$55,000 out of a total of $306,000 given to all candidates—receiving nearly twice as much as the runner-up, Senator Arlen Specter of Pennsylvania, another "vulnerable" Republican.

How to Make $500 Million to Israel Vanish From the Record

Kasten's and Inouye's plan—a version of which was first reported in the July 15 issue of the Washington Report—was kept on the back burner until mid-November, when Kasten's subcommittee (normally responsible for appropriating the monies for the U.S. foreign aid budget) approved the interest rate reduction resolution which the Appropriations Committee later adopted. To avoid a supplemental appropriation—which would generally be necessary to "buy down" the loans as the Kasten-Inouye proposal dictates—and also to avoid the impression that aid to Israel was being boosted significantly, Kasten and his allies proposed using authorized, but unappropriated monies from the FY 1985 budget. Perhaps not coincidentally, Kasten and his supporters pointed out that some $500 million in FY 1985 funds originally authorized for the Export-Import Bank remained unspent. Consequently, Kasten proposed using this unspent sum to buy down the U.S. loans to Israel, thereby preventing this effective increase from appearing in the FY 1986 budget.

Although Appropriations Committee Chairman Mark Hatfield (R-OR) and Ranking Minority Member of the Senate Budget Committee Lawton Chiles (D-FL) criticized the Kasten-Inouye proposal, it passed the full Appropriations Committee. Normally, the next step would be full Senate consideration of the measure. However, Senate sources say this one will not be considered separately, but rather will be thrown in as part of a new omnibus Continuing Resolution that will be considered sometime before the current Continuing Resolution expires on December 12. [Traditionally, Congress has used Continuing Resolutions to fund U.S. Government activities and agencies when it is unable to pass an independent appropriations measure.] Both the timing of the debate and vote on the measure (right before Christmas recess) and the fact that the interest rate reduction proposal will be considered with a number of other issues significantly lessen the chances of strenuous opposition to the measure. In the event that it is opposed on the floor, Kasten and Inouye say they have an as-yet-unspecified substitute amendment ready at hand.

Even if the measure is rejected, however, it has set a dangerous Congressional precedent. A long-standing Senatorial objection to the Kasten-Inouye plan is that, while it ostensibly only buys Israel a one-year fiscal reprieve to help her implement her economic reform package, it could easily turn out to be another permanent subsidy, since few Senators with a seat on the line in the 1986 elections would risk committing political suicide with a vote to restore the rate to 11 percent. In addition, Senator Hatfield expressed fears that approving the interest rate reduction scheme might open the floodgates to a deluge of requests for similar treatment by Egypt and a host of other countries—requests which would be difficult to deny, given the Israeli precedent, and even more difficult to approve, given the hundreds of millions they would cost the U.S. Treasury, already $500 million plus poorer as a result of the Kasten-Inouye measure. [Examples of concessions given originally to Israel that have later been granted to other countries include the long-term, low-interest military loans now enjoyed by Egypt, Somalia, Sudan, Greece and Turkey.]

Despite these concerns, the realities of U.S. politics make it likely that even if the proposal is rejected this year, it will be reintroduced and passed during the 1986 election year.

If ultimately adopted, the Kasten-Inouye proposal would add significantly to the record-setting levels of aid the U.S. is already scheduled to transfer to the Israeli government during FY 1986. Regular FY 1986 U.S. aid to Israel will total at least $3.75 billion: $1.8 billion in military credits, $1.2 billion in economic aid and $750 million in the form of a supplemental cash transfer. Israel will get from the U.S. during the next fiscal year $400 million more than it got in FY 1985, and a whopping $1.14 billion more than it got in FY 1984. Furthermore, all of the FY 1986 aid is in so-called "forgiven" loans, which is another way of saying that the Israeli government does not have to repay them. [in FY 1984, by contrast, only 50 percent of U.S. military aid to Israel was in the form of "forgiven" loans, meaning that the FY 1986 figures represent an even larger effective increase in aid level than the numbers alone would indicate.]

Jordan Arms Sale Far From Dead

In an unrelated development, Congress has resolved—at least for the time being—the Jordan arms sale issue. On November 12, the House adopted by voice vote a resolution (S J Res 228) previously passed by the Senate delaying the proposed arms sale until March 1, 1986. Even though the House adopted the Senate's resolution intact, a number of House members asked for assurances—from the leadership of both the House and Senate—for themselves and, presumably, the pro-Israel lobby, that the vote not be interpreted as a de facto approval for the sale to proceed in March. To this end, House Foreign Affairs Committee Chairman Dante Fascell (D-FL) asked for and received a letter from Senate Foreign Relations Committee Chairman Richard Lugar (R-IN) reportedly pledging the Senate committee to block the sale if Israeli-Jordanian peace talks have not begun by early next year. Fascell also sought to define, to the advantage of those opposed to the sale, the clause "direct and meaningful negotiations" that is the backbone of the Senate resolution. Specifically, Fascell said this term means:

Direct, publicly acknowledged, ongoing peace negotiations between leaders of Jordan and Israel or their negotiating teams.
The establishment of a mechanism by the two parties to ensure the continuation of the substantive negotiating process and regular face-to-face talks between the two parties.
A process which would result in a clear public declaration to end the state of belligerency between Jordan and Israel.

Fascell's statements and the concerns of other House members aside, there is now virtually nothing Congress can do to prevent the sale from proceeding. Several well-informed sources note that the Reagan Administration was free to proceed with the sale the moment Congress let the formal notification period required by the U.S. Arms Export Control Act (AECA) expire November 21 without having voted to reject the sale. They add, however, that the Administration, rather than risk a major confrontation with Congress at this time, is likely to wait until March before taking any substantive action, using the intervening months to whittle down Congressional opposition to the sale.

Obviously, there is no common ground between these two interpretations. The two sides do agree on one thing, however: If the sale ultimately does go through, it is certain to be the last such sale approved under current AECA regulations. In fact, efforts are already underway in both chambers to rewrite the act to mandate "expedited consideration" on future joint resolutions. The result would make it easier for Congressmen to block future arms sales.

Dennis J Wamsted, of Washington D.C., has lived and studied in the Middle East and writes frequently on it.