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Thread: The Cost of Israel to U.S. Taxpayers "Friends of Israel would argue that America's financial mismanagement is not the fault of its Israeli client state. They even go so far as to say that federal loan guarantees to Israel cost the American taxpayer

  1. #1
    Guest
    The Cost of Israel to
    U.S. Taxpayers
    U.S. Spending More On Aid to Israel Than On War on Drugs

    By Ruth E. Steele



    The United States spends $6 billion annually on domestic drug enforcement. It's a lot of money but few Americans begrudge it. Most feel there is a direct connection between increased drug use and the explosion of crime that has so degraded the quality of life in America.

    If it takes $6 billion a year to begin addressing a problem that many see as a cancer eating at the heart of the country, so be it, so long as statistics show, despite ups and downs, a gradual reduction both in the use of hard drugs and in violent crimes.

    Harder to understand, however, is the resignation demonstrated by Americans over the staggering annual cost of Israel to U.S. taxpayers. People can differ over the total cost of Israel. Do you just count the more than $60 billion that has flowed from the United States to Israel since 1949 in outright grants, forgiven loans, and loan guarantees? Do you turn those simple annual totals into inflation-adjusted 1996 dollars, in which case they might start to approach $100 billion? Do you also count the interest that those outlays have cost American taxpayers, since the U.S. government has had to borrow every cent of them? In that case the amount soars past $100 billion and starts climbing toward $200 billion.

    Friends of Israel would argue that America's financial mismanagement is not the fault of its Israeli client state. They even go so far as to say that federal loan guarantees to Israel cost the American taxpayer nothing, since Israel "has never defaulted on a loan." The truth, however, is that Israel has never repaid a U.S. government loan because Congress eventually forgives them all.

    Until it does, the "Cranston Amendment," named after one of Israel's greatest Senate friends, the late California Democrat Alan Cranston, and attached to every foreign aid appropriation bill since 1984, mandates that the annual level of U.S. economic aid to Israel cannot sink below the level of interest Israel must pay on outstanding (not yet forgiven) U.S. government loans for that year.

    There is no reason to believe that the Israelis are about to renounce their practice of successfully lobbying Congress to forgive loans to Israel, and to have the U.S. taxpayer bear the costs of such loans until they are forgiven. It is certain, therefore, that they will repeat this pattern when it is time to begin repaying the principal and interest on the $10 billion in loan guarantees they currently are collecting at the rate of $2 billion annually. (Repayment of principal and interest begins only 10 years after the Israeli government borrows the money.)

    Therefore, whatever legitimate differences may exist about how the cumulative total of U.S. aid to Israel should be compiled, there is no question as to the total in 1996 dollars of current annual American aid to Israel. It is approximately the same as the $6.321 billion in grants and loan guarantees Israel received from the U.S. in the 1993 fiscal year (see chart below).

    Each year since then, President Clinton has promised Israel to maintain that level. He has kept that promise scrupulously, despite legislation that mandated that Israel's annual $2 billion in loan guarantees be reduced by the amount that the Israeli government spent on Jewish settlements in the West Bank and Gaza during the previous fiscal year.

    The Clinton administration has made such reductions annually since FY 1993 as required by law. But President Clinton then has made an additional gift of funds or equipment to Israel over and above the total deducted, bringing the actual U.S. aid to Israel back to at least the $6.321 billion figure. So, from FY 1993 through FY 1995 U.S. aid to Israel has totaled $17,317,808 a day, seven days a week, 52 weeks a year.

    At this writing the foreign aid total for FY 1996 (which began on Oct. 1, 1995) has not yet been approved because of the ongoing battle between the Democratic administration and the Republican-controlled Congress over the manner in which the budget is to be balanced, and the wording of some of the bills submitted by Congress to the president.

    Since Congress has agreed to keep foreign aid to Israel (which is more than one- third of the U.S. world-wide total) "off the table" in the current negotiations, however, there is no reason to believe the FY 1996 total will differ significantly from the total of the previous three years.

    Indeed, the Israeli media have begun surfacing "leaks" or "trial balloons" indicating that the Israelis are planning to ask the United States for an additional $l2.5 billion as compensation for their withdrawal from the Golan Heights as part of a land-for-peace agreement with Syria. This Israeli estimate has nothing to do with whatever additional sums Syria might also seek from the United States.

    Rather, the estimate has more to do with Israeli hopes to replace the annual $2 billion in loan guarantees when they end, as scheduled, in FY 1997. Although the loans originally were supposed to be used to help settle Jews from the former Soviet Union and Ethiopia in Israel, the drop in immigration from both areas has enabled the Israeli government to use the U.S. loan guarantees in a variety of creative ways. In the period Israel has been receiving this tremendously enhanced aid figure, its per capita gross domestic product has climbed to an estimated $14,000 to $16,000, putting it well above that of Ireland and making it comparable to that of Britain or Spain.

    None of these are considered needy countries. All, in fact, have foreign aid programs of their own. Why does only Israel, of all the "developed" countries, shamelessly use a percentage of its U.S. aid to fund lawyers, consultants and "membership groups" like the American Israel Public Affairs Committee, the Israeli government's principal Washington, DC lobby, to importune, browbeat and intimidate U.S. presidents and Congress into appropriating ever larger sums to a country that should be giving, not receiving, foreign aid?

    Perhaps the way to change that is for readers of this magazine to mail a copy of this page not only to other taxpayers, but also to their two senators and one representative in Congress, the publishers and the editorial page editors of whatever newspapers and other magazines they read, and to talk show hosts--not just to Rush Limbaugh or Mario Cuomo, both of whom are petrified with fear of the Israel lobby and of the advertisers on radio stations that broadcast their syndicated programs--but also to local talk show hosts. Some of them are quite fearless. Perhaps in the real America some radio stations and independent newspapers don't have to worry about major advertisers with a special agenda. If Israel's outrageous annual raid on the U.S. treasury is ever to be stopped, it has to start somewhere.

  2. #2
    Guest
    The Cost of Israel to
    U.S. Taxpayers
    U.S. Spending More On Aid to Israel Than On War on Drugs

    By Ruth E. Steele



    The United States spends $6 billion annually on domestic drug enforcement. It's a lot of money but few Americans begrudge it. Most feel there is a direct connection between increased drug use and the explosion of crime that has so degraded the quality of life in America.

    If it takes $6 billion a year to begin addressing a problem that many see as a cancer eating at the heart of the country, so be it, so long as statistics show, despite ups and downs, a gradual reduction both in the use of hard drugs and in violent crimes.

    Harder to understand, however, is the resignation demonstrated by Americans over the staggering annual cost of Israel to U.S. taxpayers. People can differ over the total cost of Israel. Do you just count the more than $60 billion that has flowed from the United States to Israel since 1949 in outright grants, forgiven loans, and loan guarantees? Do you turn those simple annual totals into inflation-adjusted 1996 dollars, in which case they might start to approach $100 billion? Do you also count the interest that those outlays have cost American taxpayers, since the U.S. government has had to borrow every cent of them? In that case the amount soars past $100 billion and starts climbing toward $200 billion.

    Friends of Israel would argue that America's financial mismanagement is not the fault of its Israeli client state. They even go so far as to say that federal loan guarantees to Israel cost the American taxpayer nothing, since Israel "has never defaulted on a loan." The truth, however, is that Israel has never repaid a U.S. government loan because Congress eventually forgives them all.

    Until it does, the "Cranston Amendment," named after one of Israel's greatest Senate friends, the late California Democrat Alan Cranston, and attached to every foreign aid appropriation bill since 1984, mandates that the annual level of U.S. economic aid to Israel cannot sink below the level of interest Israel must pay on outstanding (not yet forgiven) U.S. government loans for that year.

    There is no reason to believe that the Israelis are about to renounce their practice of successfully lobbying Congress to forgive loans to Israel, and to have the U.S. taxpayer bear the costs of such loans until they are forgiven. It is certain, therefore, that they will repeat this pattern when it is time to begin repaying the principal and interest on the $10 billion in loan guarantees they currently are collecting at the rate of $2 billion annually. (Repayment of principal and interest begins only 10 years after the Israeli government borrows the money.)

    Therefore, whatever legitimate differences may exist about how the cumulative total of U.S. aid to Israel should be compiled, there is no question as to the total in 1996 dollars of current annual American aid to Israel. It is approximately the same as the $6.321 billion in grants and loan guarantees Israel received from the U.S. in the 1993 fiscal year (see chart below).

    Each year since then, President Clinton has promised Israel to maintain that level. He has kept that promise scrupulously, despite legislation that mandated that Israel's annual $2 billion in loan guarantees be reduced by the amount that the Israeli government spent on Jewish settlements in the West Bank and Gaza during the previous fiscal year.

    The Clinton administration has made such reductions annually since FY 1993 as required by law. But President Clinton then has made an additional gift of funds or equipment to Israel over and above the total deducted, bringing the actual U.S. aid to Israel back to at least the $6.321 billion figure. So, from FY 1993 through FY 1995 U.S. aid to Israel has totaled $17,317,808 a day, seven days a week, 52 weeks a year.

    At this writing the foreign aid total for FY 1996 (which began on Oct. 1, 1995) has not yet been approved because of the ongoing battle between the Democratic administration and the Republican-controlled Congress over the manner in which the budget is to be balanced, and the wording of some of the bills submitted by Congress to the president.

    Since Congress has agreed to keep foreign aid to Israel (which is more than one- third of the U.S. world-wide total) "off the table" in the current negotiations, however, there is no reason to believe the FY 1996 total will differ significantly from the total of the previous three years.

    Indeed, the Israeli media have begun surfacing "leaks" or "trial balloons" indicating that the Israelis are planning to ask the United States for an additional $l2.5 billion as compensation for their withdrawal from the Golan Heights as part of a land-for-peace agreement with Syria. This Israeli estimate has nothing to do with whatever additional sums Syria might also seek from the United States.

    Rather, the estimate has more to do with Israeli hopes to replace the annual $2 billion in loan guarantees when they end, as scheduled, in FY 1997. Although the loans originally were supposed to be used to help settle Jews from the former Soviet Union and Ethiopia in Israel, the drop in immigration from both areas has enabled the Israeli government to use the U.S. loan guarantees in a variety of creative ways. In the period Israel has been receiving this tremendously enhanced aid figure, its per capita gross domestic product has climbed to an estimated $14,000 to $16,000, putting it well above that of Ireland and making it comparable to that of Britain or Spain.

    None of these are considered needy countries. All, in fact, have foreign aid programs of their own. Why does only Israel, of all the "developed" countries, shamelessly use a percentage of its U.S. aid to fund lawyers, consultants and "membership groups" like the American Israel Public Affairs Committee, the Israeli government's principal Washington, DC lobby, to importune, browbeat and intimidate U.S. presidents and Congress into appropriating ever larger sums to a country that should be giving, not receiving, foreign aid?

    Perhaps the way to change that is for readers of this magazine to mail a copy of this page not only to other taxpayers, but also to their two senators and one representative in Congress, the publishers and the editorial page editors of whatever newspapers and other magazines they read, and to talk show hosts--not just to Rush Limbaugh or Mario Cuomo, both of whom are petrified with fear of the Israel lobby and of the advertisers on radio stations that broadcast their syndicated programs--but also to local talk show hosts. Some of them are quite fearless. Perhaps in the real America some radio stations and independent newspapers don't have to worry about major advertisers with a special agenda. If Israel's outrageous annual raid on the U.S. treasury is ever to be stopped, it has to start somewhere.

  3. #3
    Guest
    Israel's Untouchable Entitlement Programs


    How much is Israel costing the U.S. in 1993? What has been the total cost of Israel to the U. S. taxpayer since its establishment in 1948? These are the two most frequently asked questions by readers of the Washington Report on Middle East Affairs.

    There is no single answer to either question because there are many different ways to calculate these costs. For those who would minimize the visible cost of Israel to U.S. taxpayers, Congress designs legislation that makes U.S. military equipment available to Israel, but keeps the cost outside the military assistance budget. Similarly, some economic grants appear outside the foreign assistance budget.

    In the budget for the current 1993 fiscal year are U.S. grants for $1.8 billion in military aid and $1.2 billion in economic aid to Israel. In addition, there are special grants of various kinds totaling $91 million. This means that $3.091 billion has been added to the already staggering federal deficit in this fiscal year.

    This total does not include items such as $700 million for the "drawdown" of U.S. weapons from Europe and their transfer to Israel, the creation of a $300 million U.S. weapons stockpile in Israel and contributions of fuel tanks and oil to fill them for a $ 180 million petroleum reserve in Israel.

    These items total an off-budget $1.18 billion. The rationale for omitting these items from the budget is that they nominally remain U.S. property, although it is certain that this country will never see them again. These items bring this year's outlay past the $4 billion mark to $4,271,000,000.

    Chairman Lee H. Hamilton of the subcommittee on Europe and the Middle East of the House Foreign Affairs Committee also notes that the sleight-of-hand practice whereby Israel receives its full annual grant at the beginning of each fiscal year, instead of quarterly, as do all other recipient countries, costs the Treasury more than $50 million in interest.

    With the U.S. budget greatly out of balance, grants-in-aid for Israel are added to the federal debt each year instead of being paid off on a current basis. The U.S. Treasury then must pay compound interest on the cumulative grants (interest both on the unpaid principal and on the unpaid back interest) until such time as the national debt is liquidated. Over the years, the compound interest on the U.S. debt is far greater than the principal itself, a proposition that is readily understood by every homeowner with a mortgage.

    By the end of FY 1992, the total of grants that had been extended to Israel since 1951 was $44.8 billion. Adding compound interest calculated at the prevailing interest rate for each of the past years brings that to a total of $80 billion added to the national debt. This figure does not include the many off-budget items such as the $1.18 billion cited above for 1993. This year's interest on the $80 billion will amount to $5 billion at last year's interest rates, an amount greater than this year's on-budget grant of $3.091 billion. The $5 billion is included in the federal budget in the item "interest outlay." Annual compound interest due to grants to Israel has been greater than the annual grant to Israel since 1988.

    There is also the practical question as to what the U.S. gains for its substantial aid to Israel every year. Most of the economic aid granted to Israel every year is used to pay back to the U. S. Treasury the interest and payments due on principal for loans prior to 1974 (as distinguished from grants). This forgiveness of loans is provided for under the terms of the Cranston amendment, which has been attached to each year's grant package since 1984. In effect, the Cranston amendment provides a mechanism for the incremental conversion of all past U.S government loans to Israel into outright grants.

    The military grants are mostly, but not completely, expended on U. S. weaponry. Some of the money is earmarked for the Israelis to buy military hardware and services from themselves. Israel's public relations people argue that since the bulk of U.S. military aid is spent by Israel to purchase U.S. weapons, the cost to the U.S. taxpayer is nothing. This is as absurd as saying that a merchant loses nothing by giving away instead of selling the store's merchandise to its customers.

    The Loan Guarantees

    In addition to the grants-in-aid, Israel has asked the United States to guarantee $10 billion in private loans to Israel over the next five years. As reported in the Washington Report's February 1993 issue, the agreement covering the first installment of $2 billion of the loan guarantees was signed by President Bush in January.

    Unlike agreements of this kind with all other countries receiving loan guarantees, the document signed with Israel does not require U.S. approval of individual projects to be financed under the loans, thus giving the Israeli government the opportunity to spend the money in any way it chooses. This makes a dead letter of the requirement passed by Congress that the loan money not be expended for projects in the occupied territories. This is exactly what happened in the case of $400 million in loan guarantees for housing for Russian immigrants extended by the U.S. to Israel two years ago.

    The money borrowed by Israel under the U. S. guarantees promises to be little more than a gigantic slush fund in the hands of the leading Israeli politicians for their partisan interests. When, after 10 years, Israel is forced to begin paying back the principal on these loans, it is utterly predictable that Israel will default, making the U.S. government liable for the entire amount of the loans, or that Israel will request a further increase in U.S. government aid in order to cover repayment of loans obtained under U.S. Loan guarantees. Either way, this adds an additional $2 billion to the U.S. taxpayer liability for fiscal 1993.

    To summarize, the cost of on-budget aid to Israel from 1951 through 1992 is $44.8 billion. Adding compound interest for rates prevailing in each of the 42 years involved, the cost becomes $80 billion. Additional 1993 costs of more than $11 billion.

    Frank Collins is a free-lance journalist specializing in the Middle East.

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