U.S. Tax Dollars at Work: Calculating Foreign Aid to Israel 

Shirl McArthur 

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 of aid. 
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 Beit Jala. 
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. 
Center for Policy Analysis on Palestine / 2425-35 Virginia Avenue, NW /  Washington, DC 20037 / Tel: 202.338.1290 / Fax: 202.333.7742 /   http://www.palestinecenter.org < http://www.palestinecenter.org/ >