Washington Report on Middle East Affairs, December/January 1991/92, Page 33

Special Report

Borrowing Money For Israel: Annual Interest Alone Exceeds $3 Billion

By Frank Collins

The double dip recession has now become so grave that the American people are demanding that President George Bush direct his attention to the sorry state of the domestic economy. Foreign aid, notoriously unpopular with the US public in recent years, has become doubly so in this period of economic distress.

Even if Congress fails to react to the disquiet about foreign aid, it is likely that the bloated US grants to Israel in particular will no longer be exempt from public scrutiny and that they will be looked upon as a bad congressional choice between responding to domestic fiscal needs and yielding to AIPAC, the Israeli lobby.

Part of the taxpayers' resentment against the practices of the federal government has been sparked by the manner in which Congress appropriates money, particularly foreign aid. Foreign aid generally is allocated through "continuing resolutions," without a ''yes" or ''no" vote on particulars. Key committee members then allocate 40 percent of the worldwide total of US bilateral foreign aid to Israel and Egypt. Aid to Egypt climbed to roughly two-thirds of that to Israel as a result of the US-brokered peace agreement between the two countries.

Grants for foreign aid are especially noteworthy because they amount to giving away borrowed money. The case of Israel over the last 40 years is the most astonishing. Every dollar given to Israel has been money borrowed by the US Treasury from private lenders, domestic and foreign. As the Treasury debts are interest-bearing, the Treasury has' had to borrow more money year by year to pay the interest on the outstanding debts incurred by the grants to Israel, plus interest on the earlier interest.

By the end of the fiscal year 1990, such US borrowings, starting with a modest grant to Israel of $ 100,000 in 1951, totaled $32.111 billion for the grants themselves, and an additional $21.351 billion in accumulated interest, for a total of $59.565 billion.

In FY 1991, annual interest alone on that $59.565 billion cost $3.246 billion at the average Treasury rate of 5.45 percent. Thus the grants made to Israel for FY 1991, officially reported as $5.256 billion, actually cost US taxpayers $8.502 billion in FY 1991, when the $3.246 billion in interest is included.

This lopsided situation will continue in FY 1992, when $3.491 billion in interest will be added to the cost of the FY 1992 grant of $3 billion, which already has been paid to Israel in the first month of the fiscal year. This FY 1992 outlay, general details of which are summarized in the table below, does not include any part of the $10 billion in US loan guarantees requested by Israel, consideration of which was deferred for 120 days at the request of President Bush last September.

If the deficit financing of subsidies to Israel were to continue for 10 more years at the $3 billion minimum rate per year and at five percent interest, the total debt undertaken by the United States would be $155 billion and the annual interest payment after 10 years would be $10.7 billion, more than three times the annual grant of $3 billion. This is an annual total of almost $14 billion, or more than $3,000 per year per Israeli. With this prospect, it is clear that borrowing ever-increasing amounts of money to give to Israel on an annual basis for the indefinite future will be unacceptable to the American public.

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