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April 14, 2017

The Real Cost of Aid to Israel

U.S. support goes far beyond the official numbers


By Philip Giraldi

Source :  The American Conservative

The American Israel Public Affairs Committee (AIPAC) concluded its annual
conference late last month, triggering the usual debate in various alternative media
outlets. Why does so much U.S. taxpayer money go to a small and not particularly
useful client state that has a vibrant European-level economy and is already a
regional military colossus?

Those who support the cash flow argue that Israel is threatened, most notably by Iran;
they claim the assistance, which has been largely but not completely used to buy
American-made weapons, is required to maintain a qualitative edge over the country’s
potential enemies. Those who oppose the aid would counter that the Iranian threat is
largely an Israeli and Saudi Arabian invention, used to justify continued American
support for the national-security policies of both countries. And they would add that
Tel Aviv is more than able to defend itself and pay for its own military establishment.

In truth, American aid to Israel is something like a pot of gold that keeps on giving.
Both sides in the discussion would probably agree that the domestic Israel Lobby has
been instrumental in sustaining the high level of aid, though they would undoubtedly
disagree over whether that is a good or bad thing. The operation of “The Lobby,”
generally regarded as the most powerful voice on foreign policy in Washington, led
Professors Stephen Walt and John Mearsheimer to ask, “Why has the U.S. been
willing to set aside its own security … in order to advance the interests of another
state? [No] explanation can account for the remarkable level of material and
diplomatic support that the U.S. provides.” They observed that “Other special interest
groups have managed to skew foreign policy, but no lobby has managed to divert it
as far from what the national interest would suggest, while simultaneously convincing
Americans that U.S. interests and those of the other country—in this case, Israel—are
essentially identical.”

Since the foundation of the state of Israel in 1948, it has been “the largest cumulative
recipient of U.S. foreign assistance since World War II,”  according to the
Congressional Research Service. The United States has provided Israel with $233.7
billion in adjusted for inflation aid between 1948 through the end of 2012, reports
Haaretz. Current discussions center on the Obama administration’s memo of
understanding with Israel that promised it $38 billion in military assistance over the
next 10 years, a considerable sum but nevertheless a total that is far less than what is
actually received annually from the United States Treasury and from other American
sources.

Senator Lindsey Graham (R-S.C.), speaking in the most recent legislative discussion
over Israeli aid, stated that the $38 billion should be regarded as a floor, and that
Congress should approve additional funds for Israeli defense as needed. It has, in
fact, done so. At its most recent meeting, AIPAC announced the latest windfall from
America, applauding “the U.S. House of Representatives for significantly bolstering its
support of U.S.-Israel missile defense cooperation in the FY 2017 defense
appropriations bill. The House appropriated $600.7 million for U.S.-Israel missile
defense programs.” And there is a long history of such special funding for Israeli-
connected projects. The Iron Dome missile-defense system was largely funded by the
United States, to the tune of more than $1 billion. In the 1980s, the Israeli Lavi jet-
fighter development program was funded by Washington, costing $2 billion to the U.S.
taxpayer before it was terminated over technical and other problems, part of $5.45
billion in Pentagon funding of various Israeli weapons projects through 2002.

The admittedly unreliable former Congressman James Traficant once claimed that
“Israel gets $15 billion per year from the American taxpayers.” Indeed, how Israel gets
money from the United States is actually quite complex and not very transparent to
the American public, going well beyond the check for $3.8 billion handed over at the
beginning of the fiscal year on October 1. Even that check, uniquely given to aid
recipient Israel as one lump sum on the first day of the year, is manipulated to
produce extra revenue. It is normally immediately redeposited with the U.S. Treasury,
which then, because it operates on a deficit, borrows the money to pay interest on it
as the Israelis draw it down. That interest payment costs the American taxpayer an
estimated $100 million more per year. Israel has also been adept at using “loan
guarantees,” an issue that may have contributed to the downfall of President George
H.W. Bush. The reality is that the loans, totaling $42 billion, are never repaid by Israel,
meaning that the United States Treasury picks up the tab on principle and interest, a
form of additional assistance. The Bush-era loan amounted to $10 billion.

Department of Defense co-production projects, preferential contracting, “scrapping”
or “surplusing” of usable equipment that is then turned over to the Israel Defense
Forces (IDF), as well as the forward deployment of military hardware to an Israeli-run
base in Israel (used to support local military operations), are considerable benefits to
Tel Aviv’s bottom line. Much of this assistance is hidden from view.

In 1992, AIPAC President James Steiner bragged how he “got almost a billion dollars
in other goodies [in negotiations with Secretary of State Jim Baker] that people don’t
even know about.” In September 2012, Israel’s former commander-in-chief, Gen. Gabi
Ashkenazi, admitted at a conference that between 2009 and 2012 American
taxpayers had paid for more of his country’s defense budget than had Israeli
taxpayers. Those numbers have been disputed, but the fact remains that a
considerable portion of the Israeli military spending comes from the United States. It
currently is more than 20 percent of the total $16 billion budget, not counting special
appropriations.

Through tax exemptions, the U.S. government also subsidizes the coordinated effort
to provide additional assistance to Israel. No other lobbying effort to promote the
interests of a foreign country benefits in like fashion, and, indeed, most similar groups
are required to register under the Foreign Agents Registration Act of 1938, as former
National Security Advisor Michael Flynn has learned to his chagrin regarding Turkey.

Most organizations and foundations that might reasonably be considered active parts
of the Israel Lobby are generally registered with the Department of the Treasury as
501(c)3 tax-exempt educational foundations. Grant Smith, speaking at a conference
on the U.S. and Israel on March 24, explained how the broader Israel Lobby uses this
legal framework:

   Key U.S. organizations include the American Israel Public Affairs Committee
(AIPAC), the American Jewish Committee (AJC), the Zionist Organization of America
(ZOA) and the Anti-Defamation League (ADL). Hundreds more, including a small
number of evangelical Christian organizations, play a role within a vast ecosystem that
demands unconditional U.S. support for Israel. In the year 2012 the nonprofit wing of
the Israel lobby raised $3.7 billion in revenue. They are on track to reach $6.3 billion
by 2020. Collectively they employed 14,000 and claimed 350,000 volunteers.

The $3.7 billion raised in 2012 was largely tax exempt and it does not include the
billions in private donations that go directly to Israel, as well as the billions in
contributions that are regarded as covered by “religious exemptions” for groups that
don’t file at all. There are also contributions sent straight to various Israeli-based
foundations that are themselves often registered as charities. The Forward magazine
investigated 3,600 Jewish tax-exempt charitable foundations in 2014 and determined
that they had net assets of $26 billion, $12–14 billion in annual revenue, and “focuse
[d] the largest share of [their] donor dollars on Israel.” That share amounted to 38
percent of total income. The Forward adds that it is “an apparatus that benefits
massively from the U.S. federal government and many state and local governments, in
the form of hundreds of millions of dollars in government grants, billions in tax-
deductible donations and billions more in program fees paid for with government
funds.”

Some pro-Israel foundations are in-your-face about their goals. The Friends of the
Israel Defense Forces, which “Support[s] the wellbeing and education needs of Israel’
s brave soldiers,” is a registered tax-exempt charity that conducts fundraisers
throughout the United States. Money being fungible, some American Jews have been
surprised to learn that the donations that they had presumed were going to what they
regard as charitable causes in Israel have instead wound up in expanding the illegal
settlements on the West Bank, an objective that they might not support. It was
recently reported that Donald Trump’s son-in-law and advisor Jared Kushner has a
family foundation that has made donations to Israel, including funding of West Bank
settlements, which is illegal under U.S. law.

Israel also benefits in other ways, frequently due to legislative action by Congress. It
enjoys free and even preferential trade status with the United States and runs a $9
billion trade surplus per annum. Its companies and parastatal organizations can,
without any restrictions, bid on U.S. defense and homeland-security projects—a
privilege normally only granted to NATO partners—which has given it dominance in
some U.S. law-enforcement, telecommunications, and travel-security sectors. Its
involvement in the development and use of classified military technologies developed
by U.S. arms producers has sometimes led to claims that Israel has adopted and
adapted—or even stolen—proprietary information and then used it to develop its own
arms industry, which is now ranked sixth in the world by volume of sales. Ironically, U.
S. taxpayers have subsidized an Israeli industry that then competes directly with
American companies, producing a loss of jobs in the United States.

There has also been considerable collateral damage derived from the relationship
with Israel, including the Arab Oil embargo and possibly even some blame for the
ruinous cost of Iraq, which many believe to have been fought in part for Israel. But
even without that war, the U.S.-Israeli bilateral relationship has been an expensive
proposition for Americans. Whether Israel is a strategic liability or not, or whether its
complicated geostrategic situation merits virtually unquestioning support from the
United States, the reality is that it has a lopsided relationship with Washington. This
has long been and continues to be largely paid for by the United States taxpayer, who
is not as well off as he once was.

The U.S.-Israel relationship is yet another instance where the perceived needs of an
American “ally” take precedence over genuine national interests. Tens of billions of
dollars need not necessarily be spent to placate a wealthy foreign country and its
powerful domestic lobby. Indeed, other options to employ the money closer to home—
in the form of schools, highways, and hospitals—may become increasingly attractive
to American voters.

Philip Giraldi, a former CIA officer, is executive director of the Council for the National
Interest.