Washington Report on Middle East Affairs, October 7, 1985, Page 6

Update on Congress

Going All the Way for Israel

By Dennis J. Wamsted

The New Jesse Helms

During the August Congressional recess, Senators Jesse Helms (R-NC) and Chick Hecht (R-NV) paid a private visit to Israel. For Hecht, a long-time supporter of Israel and recipient so far of over $45,000 from pro-Israel PAC's towards his 1988 reelection campaign, the visit was a routine gesture of fealty. But for Helms, once the bugaboo of the Israel lobby, the trip to Jerusalem symbolized one of the most amazing transformations in recent political history.

Less than a year ago, following the 1984 elections and the defeat of former Senate Foreign Relations Committee Chairman Charles Percy (R-IL), Jesse Helms was considered a worrisome cloud on an otherwise generally clear pro-Israel Congressional horizon. Indeed, the Israel lobby had made a Helms defeat one of its top priorities during the elections, channeling almost as much money to Helms' Democratic opponent, former North Carolina Governor James Hunt, as it did to Percy's challenger, former Representative Paul Simon. Helms' victory by a narrow margin sent shock waves throughout the pro-Israel camp. AIPAC and other pro-Israel organizations were concerned that he might decide, as the now ranking Republican on the Senate's Foreign Relations Committee, to take over the committee chair left open by Percy's defeat—despite election year promises that he would remain chairman of the Agriculture Committee, a far more important post in the eyes of his North Carolina constituents. Seemingly, there would have been sufficient cause for AIPAC alarm had Helms continued on his former course in the Foreign Relations Committee. In 1979, following the signing of the Egyptian-Israeli peace treaty, Helms had said that Israel's insistence "upon retaining control" of the West Bank was "the block to a comprehensive settlement of the Arab-Israeli problem." Then, during Israel's 1982 invasion of Lebanon, Helms said flatly: "Ultimately,... we have got to shut down (U.S.-Israeli) relations."

As it turned out, however, the pro-Israel lobby need not have worried. During the 10 months since his narrow escape from political annihilation in the 1984 elections, Helms has become one of Israel's staunchest Congressional defenders. During his recent pilgrimage to Israel, for example, Helms exhorted the American people to "understand that Israel is the only reliable ally we [the United States] have in this region. It is for freedom, against communism and its moral principles are impeccable in every way." At a press conference toward the end of the same trip, he confessed that he was "not much of a compromiser" and that if he were an Israeli politician he would oppose any territorial compromises concerning the occupied Golan Heights, the West Bank—which he pointedly noted that he preferred to call "Judea and Samaria" (the Israeli term for the disputed territory)—or the Gaza Strip. Further, Helms said that once Congress reconvened he would push for the initiation of a defense agreement between Israel and the U.S. similar to the one that now exists between the U.S. and the members of the North Atlantic Treaty Organization. This of course would enable Israel's Congressional supporters to hide military assistance to Israel in the Pentagon's budget, and thus reduce the public's awareness of U.S. economic and military assistance to Israel that now totals more than $1000 per Israeli per year.

And, back to work now in his Senate seat, that's exactly what Jesse Helms is setting out to do. One of the senator's senior aides let drop recently that, although preoccupied for the moment with the details of the 1986 farm bill, Helms would soon begin urging his senatorial colleagues to join with him in pushing the Administration to work for closer U.S.-Israeli military relations. According to the aide, two specific items high on the senator's agenda are more extensive use of Israeli repair and maintenance facilities by U.S. naval and air units stationed in the Mediterranean, and an air base co-financing arrangement with Israel along the same lines as the existing U.S.-N.A.T.O. one. The aide also disclosed that Helms long-term strategy for the development of U.S.-Israel relations would entail Congressional efforts to shift the monies for Israel's yearly U.S. economic and military aid out of the foreign aid budget and into the defense budget, where other N.A.T.O.-related programs now reside. [Such a move, discussed frequently in the past by pro-Israel Congressmen but never proposed, is vehemently opposed by the Reagan Administration. In fact, every previous Administration has opposed it because if economic aid for Israel—which presently comprises about one-third of U.S. foreign aid world-wide—were excluded from the annual foreign aid bill, most observers feel it would be impossible to enact such a politically unpopular bill at all.]

It remains to be seen just what, if anything, Senator Helms actually will accomplish on behalf of Israel. One thing is certain, however. The pro-Israel lobby in the United States has gained another powerful ally in the Senate.

The Campaign to Keep Israel Bonds Tax Clean

In another Middle East-related development, Assistant Secretary of the Treasury Ronald A. Pearlman informed Chairman of the House Ways and Means Committee Dan Rostenkowski (D-IL) in mid-September that, under the Deficit Reduction Act of 1984, the Treasury Department would impute interest on loans made at below market interest rates. This means that even if a loan is made at only 4 percent interest, for example, the Treasury Department will tax the loan as if it had been made at the going federal rate of 10.69 percent, thereby raising the lender's effective tax liability. Such a clarification should not have been surprising. It was the intention of the Act, which seeks to close loopholes in tax laws in order to increase revenues collected by the U.S. government. What was intriguing, however, was that, according to the Treasury Department's interpretation of the Act, purchasers of Israel Bonds would be among those investors taxed at the higher rate. Israel bonds currently yield just 4 percent for their buyers.

Even more interesting was the reaction of Congress, and the Treasury Department itself to this disclosure. The ink was barely dry on Pearlman's letter when Senator Pete Wilson (R-CA), whose 1982 Republican primary campaign against Paul (Pete) McCloskey made repeated, heavy-handed fund-raising appeals to pro-Israel donors in California, and Representative Charles B. Rangel (D-NY), a member of the Congressional Black Caucus, stepped forward with legislation of their own designed to exempt Israel Bonds from any tax penalties. In the course of introducing his amendment, Rangel—a member of the House Ways and Means Committee that originally drafted the 1984 Deficit Reduction Act—stated, without further elaboration: "It was clearly not the intent of Congress to impair the marketability of Israel Bonds." [Last year, $102 million worth of 4 percent-yielding Israel Bonds were sold in the United States, with an additional $62 million worth sold to date this year.] For his part, Wilson noted: "Under [the new] rules, no one will be able to afford the tax consequences of buying Israel Bonds." The coup de grace for this particular venture into deficit reduction came, however, when Pearlman—after duly noting that the law, unless amended, "clearly requires" penalties against buyers of Israel Bonds since the Act took effect last year—offered Congress the Treasury Department's help if it wanted to draft an amendment to the Act.

With the Treasury Department virtually apologizing for having ruled that Israel Bonds, like other undervalued loans, should be taxed at their fair market value, it is all but certain that before Congress recesses for the year a bill exempting Israel Bonds from the 1984 Deficit Reduction Act will be on President Reagan's desk. Don Bezahler, an attorney for Israel Bonds in New York, defended such an exemption, saying that buyers of these bonds accept the lower rates "because they have a feeling for the state of Israel" and want to help finance the country's roads, harbors and other public works. One cannot help but wonder whether Treasury and the Congress would cast such a benevolent eye upon "Jordan Bonds"—or "Any Land Bonds," for that matter. 


Dennis J. Wamsted, of Washington D.C., has lived and studied in the Middle East and writes frequently on it.