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The Cost of Israel to U.S. Taxpayers

Exempting Israel Makes Foreign Aid Savings Insignificant

By Nathan Jones

Washington Report on Middle East Affairs

March 1995 , Pages 43-45


In testimony to Congress on Jan. 10, Chairman Alan Greenspan of the U.S. Federal Reserve Board declared that adoption of new standards by the Bureau of Labor Statistics for measuring real increases in the cost of living could save the U.S. government up to $150 billion in entitlements payments over the next five years. The new $30 billion in annual savings would be realized by reducing annual cost of living allowances (COLAs) added to U.S. government-funded pensions.

Such reductions would affect everyone receiving any kind of government annuities, from social security recipients and retired civil servants and military personnel to their widows, orphans and all those on disability payments. One of the new methods of calculation would involve factoring into the government-prepared consumer price index (CPI) any improvements in the quality of the product being sold. Thus annual increases in the prices of automobiles, personal computers, or video recorders might be cancelled out altogether because of qualitative improvements in the products. Calculating the CPI on this basis, Greenspan estimated, might reduce the annual COLA increases in annuities between .5 and 1.5 percent. Put that way, the change doesn't sound significant. However, since the COLA for U.S. government annuitant pensions for 1995 is 2 percent, application of Greenspan's proposal this year would have cut the 1995 COLA by 25 to 75 percent--and would continue to reduce each new annual COLA by similar rates.

It probably will not escape the attention of the tens of millions of Americans who would be affected by COLA reductions that the American taxpayer's annual $13 billion bill for direct, bilateral foreign aid is very close to half of the $30 billion maximum per year that Greenspan estimates his proposal would save. If Israel's additional annual $2 billion in loan guarantees is added, it becomes exactly half.

Despite the incoming Republican Congress's pledge to re-examine foreign aid, there is no chance of significant reductions there that might reduce the necessity of taking such a severe annual bite out of pension checks. The reason is that aid to Israel and to Middle East countries at peace with Israel has been exempted from any reductions. Israel alone received a $3.1 billion slice of the annual direct foreign aid pie. (Other subsidies from various federal agency budgets brought Israel's total of direct U.S. taxpayer aid to about $4.3 billion per year in 1993, to which must be added Israel's $2 billion in annual U.S. government loan guarantees. The 1993 figure is significant because President Bill Clinton promised Israeli Prime Minister Yitzhak Rabin that the 1994 and 1995 totals for U.S. aid to Israel would be no less.)

Clinton has kept that promise, although the Israeli government made it difficult for him to do so. Because Israeli Prime Minister Rabin repeatedly has violated his own 1992 promise to former President George Bush to stop Israeli government expenditures on Jewish settlements in Israeli-occupied territories, Clinton is obligated by U.S. law to reduce Israel's U.S. loan guarantees by one dollar for every dollar Israel has spent on the settlements during the previous year. The U.S. State Department estimated that the Israeli government spent $437 million on settlements in 1993 and U.S. loan guarantees for 1994 were reduced accordingly.

But Clinton then arbitrarily added $500 million to direct U.S. aid to Israel for 1994, giving the Israelis not only a profit for breaking their promise, but $500 million in cash in lieu of $437 million in loan guarantees. Similarly, Clinton was forced by law to reduce 1995 loan guarantees to Israel by the $311.8 million that the U.S. State Department estimated the Israeli government had spent on settlements in 1994. However, Clinton again has assured the Israeli government that the total of U.S. economic assistance to Israel in 1995 will remain at the 1993 level, regardless of what the Israeli government does in or for the settlements. This means Clinton again will find a way to slip $311.8 million or more back to Israel during 1995.

Is it any wonder, then, that this year the Rabin government is building or planning to build new residential units in and around East Jerusalem for another 80,000 Israelis, according to two Israeli organizations, IrShalem and Peace Now, and has granted permits for another 5,000 privately financed housing units for Jewish residents in suburban settlements ringing Jerusalem?

This is corroborated by a leaked Israeli Housing Ministry report that reveals that the Israeli government has authorized the construction of 1,833 homes in the West Bank in 1994 and 3,230 more in 1995. Quoting Israeli government sources, Los Angeles Times correspondent Michael Parks reported on Jan. 18 that "Israel has nearly doubled the number of housing units it plans to build in Arab East Jerusalem and the West Bank, increasing them to 30,000 instead of the 17,000 originally planned over the next three years."

Rabin also has begun extensive land seizures from Palestinian individuals and municipalities to build a network of new roads linking the Jewish settlements to Israel and each other, and cutting the West Bank Palestinian towns off from Jerusalem and each other. These roads, for which the Israeli government already has expropriated 450 acres of land and appropriated $400 million, will make it feasible for most settlers to bypass Palestinian-populated areas altogether. All of this is possible because of the Clinton administration's promise to keep aid to Israel at the 1993 level, no matter how many promises to the U.S. the Israeli government breaks. So don't look for administration proposals for savings in foreign aid to Israel.

As for the personal promise to re-examine foreign aid by incoming Senate Foreign Relations Committee Chairman Jesse Helms (R-NC), he already has said that he will exempt aid to Israel, which takes a third of the world-wide pot off the table. Similarly, incoming Chairman Mitch McConnell (R-KY) of the Senate Appropriations Subcommittee on Foreign Operations says he wants to cut foreign aid by 20 percent, but first he wants to exempt the Middle East, South Korea and the former Soviet republics from the cuts.

That takes Egypt's additional $2.115 billion in annual foreign aid off the table, plus whatever amounts will be appropriated for Jordan, the Palestinians and, in the unlikely event of an Israeli-Syrian agreement, Syria's sweetener too. Even excluding potential aid to Syria, the total appropriated for all participants in the Middle East peace process very likely will approach two-thirds of America's world-wide foreign aid by fiscal year 1996.

Protecting all that from cuts leaves only peanuts to seal deals of considerable political importance with all other potential aid recipients. These include not only Russia, but also Ukraine, Kazakhstan, North Korea and others to whom the U.S. has promised specific amounts of aid in return for giving up their existing nuclear weapons or their uranium processing facilities for building them.

In fact, there is no way to cut foreign aid by 20 percent without touching the shares of Israel and the countries the U.S. pays to keep the peace with Israel unless the United States is prepared to make penny-wise, pound-foolish cuts that Americans undoubtedly will have cause to regret. A prime example is what the Clinton administration already has done to Oman, one of the few Middle Eastern countries not bordering Israel that has been receiving any U.S. economic aid at all. Oman plays a key role in all U.S. defense plans for the Arabian/Persian Gulf area, which contains 65 percent of the world's oil reserves. Omani ports and airfields are used by ships and helicopters of the U.S. Seventh Fleet, which also play a major role in U.S. defenses for the Far East. U.S. military aircraft also have access to Omani airfields if needed, as they were in Desert Shield in 1990, Desert Storm in 1991 and in the October 1994 U.S. response to Iraq's military buildup near its border with Kuwait. In return, Oman gets the U.S. protection provided to Gulf Cooperation Council members.

Until this year, Oman also received $20 million annually in U.S. economic aid. However, the Clinton administration is closing out the USAID projects in Oman to save money.

By comparison, the annual U.S. total of $6.321 billion in taxpayer grants and loan guarantees to Israel breaks down to $17,317,808 per day, seven days a week, 52 weeks a year. Closing down aid to Oman, therefore, will save over a full year only what the U.S. spends on Israel in less than 28 hours.

The result, according to an article in the Jan. 4 Washington Times by journalist Dennis Mullin and former National Security Council staffer Roger Fontaine, is that Omanis have become very unhappy U.S. allies. "They feel abandoned," a U.S. official told the two reporters. "We aren't recognizing that this is a stable, long-standing relationship."

So, to borrow a phrase addressed to his detractors by newly re-elected Washington, DC Mayor Marion Barry, social security recipients and all other pensioners hoping that cuts in foreign aid might be used to protect the COLAs that heretofore have protected their entitlements against inflation, might just as well "get over it"--at least until Congress and the Clinton administration get over their love affair with Israel and its powerful Washington lobby.

Nathan Jones writes on political affairs from Washington, DC.

© Copyright 1997 American Educational Trust
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