U.S. Tax Dollars at Work:
Calculating Foreign Aid to Israel
Background: Since clashes erupted in the
West Bank, Gaza, and Israel at the end of September, at least 275 people
are dead and more than 9,000 wounded-90 percent of whom are Palestinian.
Israel has placed the West Bank and Gaza under siege, closing Palestinian
population centers off from one another and prohibiting the passage of
people, medicine, and food. In downtown Hebron, tens of thousands of Palestinians
have been under weeks of curfew, or essentially collective house arrest.
Human rights organizations, including Amnesty International and Human Rights
Watch, have referred to Israels response to the uprising as "excessive."
The United Nations Human Rights Commission (UNHRC) adopted a resolution
on October 19 which concurs with this description, as does UN Security
Council Resolution (UNSCR) 1322, and an October 20 General Assembly resolution.
Against this backdrop of violence and international
condemnation, it is crucial to examine more closely how the U.S. has contributed
to Israel's harsh crackdown. The United States provides a substantial amount
of military aid and weaponry to Israel. Military hardware that Israel receives
from the United States has included the Merkava tank and the Apache helicopter-both
used against Palestinian civilians in an attempt to crush the uprising.
Combining economic and military aid, Israel is the largest cumulative
recipient of U.S. aid since World War II.
The common argument that the United States
gives Israel $3 billion per year-$1.2 billion in economic aid and $1.8
billion in military aid-is misleading. This figure is impressive enough,
since it represents about one-sixth of total U.S. foreign aid. Yet the
true figure is even more remarkable, with estimates ranging as high as
$5.5 billion per year. Calculating the exact amount of U.S. aid to Israel,
however, is difficult. One has to make estimates because much of the aid
is buried in the budgets of other government agencies, mostly the Department
of Defense (DOD). Aid is also allotted in a form that is not easily quantifiable,
such as the early disbursement of financial aid which allows Israel to
gain (and the U.S. taxpayer to lose) the interest on the funds that have
not yet been spent.
Aid to Israel from 1949 to 2001:
According to an October 27 Congressional Research
Service (CRS) report, cumulative aid to Israel from 1949 through fiscal
year (FY) 2000 was $81.38 billion. This number is too low because it omits
"hidden" funds. While it includes the $1.2 billion promised to Israel in
the Wye River Memorandum, the old Food for Peace program, and the current
subsidy for "refugee resettlement," it omits money from the DOD budget
on the grounds that those funds are for research and development projects
that benefit both the United States and Israel-a questionable premise.
The CRS total also excludes estimated interest on the early disbursement
Building up from the amount listed in the
CRS, I have included-with details to follow-$4.28 billion from the DOD
and $1.72 billion from interest accrued due to early aid disbursement.
This comes to a total of $87.38 billion through September 30 of this year
(the end of FY 2000). Add to this amount the $3.98 billion for FY 2001:
This number includes $840 million in economic aid, $1.98 billion in military
aid, $60 million for refugee resettlement, $250 million from the DOD budget,
and $85 million in interest. The resulting grand total of the above calculations
is $91.36 billion in aid to Israel through FY 2001.
Department of Defense:
Examining specific items from the DOD to Israel
and from there estimating on the total costs, I arrived at approximately
$3.42 billion. The largest expenditures were $1.3 billion for the cancelled
Lavi attack fighter project, $628 million for the ongoing Arrow anti-missile
project, and $200 million for the completed Merkava tank. The fact that
the U.S. military was not interested in the Lavi, the Arrow, or the Merkava
for its own use would seem to call into serious question the argument that
these are "joint defense projects."
Foreign aid is typically allocated out in
quarterly installments. However, Israel began receiving early disbursement
of U.S. economic aid in 1982, and of military aid in 1991. This special
treatment has resulted in a significant payoff for Israel. According to
the CRS statement cited earlier, in 1991 it was reported that Israel earned
$86 million in interest on the economic aid money deposited in the U.S.
Treasury. Since the period from 1982 to 1991 had relatively high interest
rates, I used the figure of $860 million (86 x 10) as a conservative estimate
for those 10 years. For the nine years since 1991, I used a six-percent
rate for one-half of the economic aid, resulting in a total of $324 million.
Regarding military aid, I applied the six-percent rate to one-half of the
amount for the 10 years of aid that was disbursed early, or $540 million.
I employed this reduced rate on only half of the amount because one must
assume that the aid monies were drawn down over the course of the year.
Loans and Loan Guarantees:
Israel owes the U.S. government almost $3
billion in economic and military loans. Israeli officials are fond of saying
that Israel has never defaulted on a loan from the United States. While
this is technically true, the CRS report states that from FY 1994 through
FY 1998, Israel received $29 billion in waived loans. It is, therefore,
reasonable to consider all loans to Israel as generally the same as grants.
The amount of U.S. government loan guarantees
to Israel was not included in the above calculations because they have
not (yet) cost the United States any money. They are listed as "contingent
liabilities"-that is, they would become liabilities to the United States
should Israel default. The major loan guarantees were $600 million for
housing between 1972 and 1990, the much publicized $10 billion for Soviet
Jewish resettlement between 1992 and 1997, and about $5 billion to refinance
military loans commercially. Currently, the total U.S. contingent liability
for Israeli loans is about $10 billion.
U.S. Aid to Other Countries in the Region:
This impressive amount of aid becomes even
more so when compared with the aid given to other countries in the Middle
East. The $3 billion in annual aid to Israel-according to the most conservative
estimate-compares with bout $2 billion for Egypt, $225 million for Jordan,
and $35 million for Lebanon. U.S. aid to the Palestinian Authority (PA)
is not earmarked, but it has been running at about $100 million a year.
Furthermore, the United States gives Israel
all of its economic aid directly in cash, without requiring an accounting
of how the funds are used. In contrast, aid to the PA is strictly controlled
by the U.S. Agency for International Development (USAID) and is specified
for particular programs, mostly for civil infrastructure projects. Special
mention should also be made of the Wye agreement. All of the $400 million
promised to the PA in the agreement is for economic aid, whereas all of
the $1.2 billion for Israel is for specific military projects.
The only condition on the military aid to
Israel from the foreign aid bill is that about 75 percent of it has to
be spent in the United States. In addition, in contrast with other countries
receiving military aid who purchase through the DOD, Israel deals directly
with U.S. companies-with no DOD review. The military aid from the DOD budget
is mostly for specific projects. These projects include the Merkava tank.
As mentioned earlier, Israel has used these tanks against Palestinian protestors
and to bomb civilian areas in cities and villages such as Ramallah and
Despite international condemnation of Israels
harsh repression of the Palestinian uprising, President Bill Clinton is
asking for U.S. aid to increase. On November 4 Clinton requested that
Congress consider granting an extra $450 million to Israel, with a suggestion
that next years military aid to Israel increase by $350 million.
Shirl McArthur is a congressional correspondent
for the Washington Report on Middle East Affairs. The above text may be
used without permission but with proper attribution to the author and to
the Center for Policy Analysis on Palestine. This Information Brief does
not necessarily reflect the views of the Center for Policy Analysis on
Palestine or The Jerusalem Fund.
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