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CounterPunch
November
16, 2002
US Aid to Israel
Feeding the Cuckoo
by
PAUL de ROOIJ
Since Sept. 11, Americans have
thought of themselves as the target of terrorists, emanating
mainly from the Middle East. It may thus surprise them to learn
that their own actions are in large part responsible for their
problems and resentment in the Middle East. In particular, we
argue that the massive aid flows and armaments transfers to Israel
are largely responsible for the problems between Israelis and
Palestinians today. The repercussions of this conflict reverberate
everywhere in the region to the great detriment of the rights
of the people in the area, but remarkably, also to the detriment
of the US's long-term interests.
Americans by nature tend to look closely
at their government's expenditures, to trim the fat wherever
they can find it--welfare, social security, health care, education
85 all except when it comes to Israel. A valuable exercise for
any American would be to examine the huge handouts given to Israel,
which may reveal shocking facts and motivate them to a take closer
look at what is done in their name. Here is a quick overview
of US aid flows to Israel.
There are open and upfront economic and
military handouts, and the table below lists the official numbers.
Economists say that in the presence of inflation, a dollar yesterday
is worth more than a dollar today, and an adjustment must be
made to obtain meaningful comparable figures over time. It is
highly desirable to express the aid flows in constant 2001 dollars,
so that these figures mean something to us today. Inexplicably,
this simple and standard transformation is never done pertaining
aid flows to Israel--an omission that understates the aid flows.
Now, adjusting the data and expressing it in 2001 constant dollars
shows that the visible aid flows to Israel were $35.7bn over
the past decade, and $143bn since 1967 [note 1]--the date after
which US aid to Israel really took off. The latter stands in
stark contrast with the unadjusted $83bn US aid since 1967 that
is usually quoted.
| US aid to Israel: 1992 -- 2001, and expressed
in constant 2001 USD |
|
USD Billion |
=
|
Year |
Military |
Economic |
Total BN |
adjustment |
Total BN USD |
|
1992 |
1.80 |
1.30 |
3.10 |
1.26 |
3.91 |
|
1993 |
1.80 |
1.30 |
3.10 |
1.23 |
3.80 |
|
1994 |
1.80 |
1.30 |
3.10 |
1.20 |
3.70 |
|
1995 |
1.80 |
1.30 |
3.10 |
1.16 |
3.61 |
|
1996 |
1.80 |
1.35 |
3.15 |
1.13 |
3.55 |
|
1997 |
1.80 |
1.33 |
3.13 |
1.10 |
3.46 |
|
1998 |
1.80 |
1.28 |
3.08 |
1.09 |
3.35 |
|
1999 |
1.86 |
1.15 |
3.01 |
1.06 |
3.20 |
|
2000 |
3.12 |
1.01 |
4.13 |
1.03 |
4.25 |
|
2001 |
1.98 |
0.90 |
2.88 |
1.00 |
2.88 |
|
Total |
|
|
31.78 |
|
35.70 |
|
Inflation adjustment derived from the CPI-U index |
|
Col(5) 3D Col(3) * Inflation Adjustment |
Now, one must put that into perspective.
Take the Jewish population of Israel (5.24m)--the primary beneficiaries
of the aid, and one obtains a $540 per capita benefit just for
2001--four times as much as the touted Tax Cut of 2001 to Americans!
[Note 3] Now, if the hard-working American families ever find
this out, what can one suppose they would think of it? NB: The
calculable aid flows to Israel constitute about 40% of the US's
foreign aid budget (depending on how loans are accounted).
Up to now we have only dealt with the
aid flows that are visible to all Americans--the government's
audit agency, the GAO, will have no problem computing such numbers.
But in addition, one must now account for the long list of hidden
subsidies.
The biggest unofficial additional subsidy
comes in the form of US loans to Israel subsequently forgiven
by an act of Congress. That is, every year Congressmen engage
in an ingratiation-frenzy to show that they are "friends
of Israel," and this often entails forgiving loans. It is
difficult to determine the sums involved, but this practice explains
why Israel is overjoyed to obtain loans--these will eventually
be forgiven in any case. As Stephen Zunes stated, " 85all
past U.S. loans to Israel have eventually been forgiven by Congress,
which has undoubtedly helped Israel's often-touted claim that
they have never defaulted on a U.S. government loan." [note
2]
A few years ago Israelis bombed Lebanon
with American-made F16 fighters. What was remarkable about this
is that the bombs used were "on loan from the US."
It is rather odd to lend anyone a bomb. There are deeply disturbing
implications that an American owned bomb is thrown on Lebanese
people by a third party, but we'll avoid this discussion. The
explanation for this odd arrangement is that the Pentagon budget
is being used to subsidize Israel. Thus, the Pentagon procures
the bombs, and then they are shipped on loan to Israel. This
amounts to a clear additional subsidy, especially if those bombs
are never seen again. The extent of this underhand subsidy can't
be calculated. There are also questions about the "pre-positioned"
armaments to be used by the US military; Israelis can use these
at any time.
The Pentagon budget often includes programs
developed by Israeli defense contractors. Once again, this is
a direct subsidy of Israeli industry. While one may ask whether
the Pentagon obtains any benefit from, an even more pertinent
question is whether US defense technology is compromised by this
practice.
In fact, Israel receives all the latest
military gadgets. Usually these weapons don't carry a price tag,
and it is difficult to determine how much was spent on the military
transfers. It is easy for the US government to manipulate these
figures to "under invoice" military transfers to Israel--again,
hiding the true cost from the US taxpayer. Certainly, Israelis
won't accept the $10,000 military toilet seat, but maybe will
take it for $0.50.
Egypt, the second largest US foreign
aid beneficiary, receives the disbursements on a quarterly basis,
and hundreds of American bureaucrats oversee the use of the funds.
In contrast, the disbursement of aid to Israel is done in a lump
sum once a year, and the funds disappear into the general kitty
with no American auditor in sight. The additional cost to American
taxpayers of disbursing the aid once a year equates to $250m
per year.
Every so often, an American president
will state that aid to Israel will be made conditional on it
not being spent in the Occupied Territories. However, once the
aid is handed over to Israel, then there is absolutely no control
over it. Israelis can always disingenuously claim that the funds
for the settlements come from other accounts--American's gullibility
is always taken for granted.
Countries in Northern Africa have on
occasion requested USAID technicians for various projects. Sometimes
the technician showing up for the project is an Israeli contractor,
or the aid recipient is asked to contact the Israeli company
directly. This is an odd practice, and no other nationals are
used in a similar fashion. Once again, what is at play is an
indirect subsidy to Israel using the foreign aid budget.
Israel has on several occasions obtained
"US loan guarantees" on huge loans that Israel placed
in various markets. If Israel doesn't default on those loans,
then the cost to the taxpayer will be zero. However, the general
accounting practice is to allot for the possibility of default,
and thus costing a portion of those loan guarantees. In the case
of Israel, such a standard practice isn't implemented.
The implications of the loan guarantees
are also enormous. In the early 1990s, Israel received guarantees
on loans of $10bn, and it is currently lobbying for another batch
of $10bn loans guaranteed by the US taxpayer. If in the future
the US decides to become more assertive and perhaps reduce its
economic aid to Israel, then Israel could default on its loans--a
likely possibility. The US would be left with massive bills to
cover the loan guarantees. The loan guarantees further tie in
US policy to Israeli whims, and therefore they should be rejected.
For the same reasons one has to be wary
of the loan guarantees one also has to be wary of the huge issuance
of "Israel bonds" in American markets. Often such bonds
enter the pension funds of ordinary Americans, and thus future
of Israeli and US policy impinge on the welfare of ordinary Americans.
Scrutiny of the policy pertaining to the inclusion of such bonds
in pension funds is something ordinary Americans should be concerned
about.
One often hears that Irving Moskowitz,
the "bingo parlor" magnate, transfers funds from his
California operations to pay for the development of illegal settlements.
In the process, he obtains various US tax advantages because
the funds putatively go to humanitarian projects. Why should
such funds disappear in Israel without paying the requisite US
taxes? At a time when the US gov't is clamping down on numerous
humanitarian organizations operating in the region, it would
seem that projects in the illegally occupied territories should
also be off limits. Once again, it isn't possible to verify the
extent of this abuse.
Jordan recently obtained a preferential
trade agreement with the US. However, the agreement is often
conditional on products being produced in partnership with Israeli
companies. This equates to a low value added assembly in Jordan,
and Israeli companies reaping the bulk of the benefits. Nowhere
else has such a conditionality been applied to US aid or trade
agreements. It costs the US because even more cheap products
pour into the US with lower tariffs. Although the agreement is
meant to aid Jordan, it also benefits Israel. The cost in terms
of Jordanian resentment is always ignored.
On several occasions, the disbursement
of funds to Israel has been delayed. As soon as this happens,
Israelis will clamor to receive the interest due for the days
that the funds weren't in their possession, a preposterous situation.
Assume that you promise someone a handout on a certain date,
and if you delayed, would you pay interest on the handout?
Cuckoos make nice cooing sounds in the
forests. They also deposit their eggs amidst the nests of sparrows.
The cuckoo chick is about three times larger than the sparrow
chicks, and will often drive them from the nest or starve them
out. The mother cowbird will nearly exhaust herself attempting
to feed the demands of the cuckoo in its nest--a parasite that
it doesn't recognize as an alien in its midst, even when it is
bigger than the mother sparrow herself! The parasite gains control
not only of the nest, but also of the mother sparrow that frantically
seeks to feed the parasite.
Israel is America's cuckoo. Massive aid
flows go in ever increasing quantities to the cuckoo, and the
negative aspects of this are evident for all to see. It is increasingly
dangerous for Americans to set foot in the Middle East, the hostility
directed at them originates primarily from Israeli actions in
the area. Few people forget that the bomb dropped on them was
US-made (maybe even US-owned), dropped by a US-made F16, piloted
by an Israeli pilot, and the whole thing made possible by US
funds. We all know that some Middle Eastern hostility has hit
America's home soil. Why Americans should subject themselves
to the whims and demands of the cuckoo remains as one of today's
greatest mysteries. All the justifications proffered for the
aid flows ring increasingly hollow, and raise significant questions
on why this detrimental relationship continues.
It is only when Americans start adding
up all the handouts and adjusting them to inflation that perhaps
they will realize that its relationship with Israel is truly
harmful. Americans may also start costing the resentment and
hatred that Israel has engendered to themselves. A simple step
to change the situation is to determine who is boss, who really
controls the US budget and its foreign policy. The nature of
democracy in America--and elsewhere--depends on this. The peace
of the region, and alas, peace in the rest of the world, depend
on it too.
Paul de Rooij
is an economist living in London. He can be reached at proox@hotmail.com
All items referred to in this article
can be found in various issues of the Washington Report on Middle
East Affairs. Summary: www.wrmea.com/html/us_aid_to_israel.htm
Note 1: There are many issues arising when computing
such numbers, and on valid grounds, several can be justified.
The primary one will be how to account for loans--given that
most of them are subsequently forgiven, it may be valid to equate
them as actual transfers. A more accurate measure would entail
obtaining figures on loans that actually have to be repaid--figures
we don't have. However, the numbers quoted as US aid to Israel
don't include the loans. The figure produced here from 1967 onwards
equates the loans as economic aid--assuming most of those loans
will never be repaid. NB: No adjustment was made for interest
due on loans.
Note 2: www.wrmea.com/html/us_aid_to_israel.htm
Note 3: The Tax Cut of 2001 amounted to about $500 /
family on average. Assuming a family of four on average, the
Israeli above board handout of 2001 was about four times this
amount 85 and that happens every year!
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