Washington Report on Middle East Affairs, October 2015, pp. 28-30

Congress Watch

A Conservative Estimate of Total U.S. Direct Aid to Israel: Almost $138 Billion

By Shirl McArthur

The Washington Report on Middle East Affairs’ current estimate of cumulative total U.S. direct aid to Israel is $137.638 billion, updating the estimate in the magazine’s Oct./Nov. 2013 issue. It is an estimate because arriving at an exact amount is not possible, since parts of U.S. aid to Israel are buried in the budgets of various U.S. agencies or in a form not easily quantified, such as the early disbursement of aid, giving Israel a direct benefit of interest income and the U.S. Treasury a corresponding loss.

As a conservative, defensible accounting of U.S. direct aid to Israel, this estimate does not include the indirect benefits to Israel resulting from U.S. aid, nor the substantial indirect or consequential cost to the U.S. as a result of its blind support for Israel. Especially, this estimate does not include the costs resulting from the invasion and occupation of Iraq—widely believed in the Arab world, and by many non-Arabs as well, to have been undertaken for the benefit of Israel.

Among the real benefits to Israel that are not a direct cost to the U.S. taxpayer is the provision allowing Israel to spend 26.3 percent of each year’s military aid ($815.3 million in FY ’15) in Israel. No other recipient of U.S. military aid gets this benefit, which has resulted in an increasingly sophisticated Israeli defense industry. As a result, the Stockholm International Peace Research Institute reported that from 2010 to 2014 Israel was the 10th largest arms exporter worldwide. Also, in contrast with other countries receiving military aid, who must purchase through the Department of Defense (DOD), Israel deals directly with U.S. companies, with no DOD review.

Israel also benefits from “cash flow financing,” enabling it to finance multi-year purchases through installment payments, scheduled over a longer time. Israel is using cash flow financing to pay the reported $5.57 billion for the 33 advanced F-35 stealth aircraft scheduled to be delivered between now and 2021. As part of the F-35 deal, the U.S. agreed to purchase about $4 billion worth of equipment from Israeli defense companies.

Loan Guarantees

Another benefit to Israel are the loan guarantees that the U.S. has extended to Israel since 1972. While these have not yet been a cost to the U.S., they have enabled Israel to borrow from commercial sources at more favorable terms and lower interest rates, since the U.S. guarantees payment of the loans should Israel default. To date, Israel has never defaulted on a U.S.-guaranteed loan.

The FY ’03 war supplemental appropriations act authorized $9 billion in loan guarantees over three years. In FY ’05 these were extended until FY ’07, and in ’06 they were extended again through FY ’11, with a “carryover” provision that Israel may draw on unused U.S. guarantees through FY ’12. In 2012 Congress passed the so-called “U.S.-Israel Enhanced Security Cooperation Act of 2012,” which extended the loan guarantee authority until 2015.

The Congressional Research Service (CRS) reported that $3.8 billion in loan guarantee authority remains as of 2015. Israel has not borrowed any funds against these guarantees since FY ’05. In 2012 Haaretz quoted an Israeli official as saying “we consider the loan guarantees as preparation for a rainy day…a safety net for war, natural disaster and economic crisis.”

In June 2013 Defense News reported that Israeli defense officials were considering asking for $5 billion in new loan guarantees to cover the purchase of additional military hardware, but there has been no further reporting about this, so it may not be happening.

Subsidies for Israel’s Colonists and Colonies

A real benefit to Israel that is an unquantifiable cost to the U.S. taxpayer is the private, tax-exempt money, probably hundreds of millions of dollars, that has been collected by charitable U.S Jewish and Christian groups that then send the money to support Israel’s colonists (“settlers”) and colony-related causes, including groups designated by the U.S. as foreign terrorist organizations.

Since every tax-exempt dollar that goes to the colonies represents a loss of, conservatively, 20 cents to the U.S. Treasury, that means the U.S. taxpayer has indirectly subsidized Israel’s colonies to the tune of tens of millions of dollars, or more.

Sequestration

The FY ‘13 “sequestration” of funds for most government agencies and programs resulted in a 7.8 percent reduction in DOD funds for Israel’s missile defense programs, and a 5 percent reduction in all other accounts. The 2013 “Ryan-Murray Bipartisan Budget Act” relaxed the sequestration budget cuts for FY ’14 and FY ’15. But that expires at the end of this September. So, unless Congress acts by Oct. 1, the start of FY ’16 (not a good bet with this incompetent Congress), the sequestration cuts will kick back in.

Components of Israel Aid

As with previous Washington Report estimates of U.S. aid to Israel, this update draws largely from CRS’ latest report on “U.S. Foreign Aid to Israel,” which uses available and verifiable numbers, primarily from the appropriations bills. Table 1 above is from an appendix to that report, plus amounts from the Washington Report’s reporting and research, especially for the column showing interest income to Israel resulting from the early disbursement of aid.

Not counting the huge sums spent in Iraq—nor for the U.S. military intervention in Afghanistan and the current operations in Iraq and Syria to combat ISIS—Israel is the largest cumulative recipient of U.S. aid since World War II. The $3.7 billion or so that Israel receives each year from the U.S. amounts to about $450 per Israeli, including its non-Jewish citizens. The largest amounts have been for military grants (FMF) and economic grants (Economic Support Funds, ESF).

In August 2007 the U.S. and Israel agreed on a new, 10-year, $30 billion aid plan, beginning in FY ’09 and calling for no ESF and incremental annual increases in FMF, reaching $3.1 billion by FY ’13 and remaining at that level through FY ’18. There are several reports of U.S.-Israeli discussions about a new, multi-year agreement continuing military aid beyond 2018. Reports of the amount being discussed range between $3.5 billion and $4.5 billion per year.

Israel is the largest recipient of U.S. FMF funds. The president’s FY ’16 request for Israel of $3.1 billion would amount to about 53 percent of total FMF funding worldwide, and would represent about 20 percent of Israel’s overall defense budget.

A major part of U.S. support for Israel’s defense program is the deployment to Israel in 2008 of the X-Band radar system to detect incoming missiles. Since this system is U.S.-owned and operated (meaning the constant presence on Israeli soil of U.S. troops and defense contractors), its considerable costs are not reflected in these numbers.

Another element of U.S. support for Israel’s defense program is the emergency U.S. stockpile in Israel. Since the 1980s the U.S. has stored military equipment and munitions in Israel for possible use by the U.S. and, with Washington’s permission, by Israel. The stockpile consists of missiles, armored vehicles and artillery ammunition. Officially the equipment belongs to the U.S. military, so its value is also not included in Table 1. During Israel’s 2006 war against Hezbollah the U.S. gave Israel access to the stockpile, and during Israel’s 2014 assault against Gaza the Defense Department allowed Israel to withdraw 120 mm tank rounds and 40 mm illumination rounds. The authorized value of material stored in Israel started at $100 million, but has been raised in increments and now stands at $1.8 billion. Most recently the 2014 “U.S.-Israel Strategic Partnership Act” authorized an additional $200 million for each of FY ’14 and ’15.

“Migration and refugee assistance” is another part of U.S. aid to Israel. This originally was intended to help Israel absorb Jewish refugees from the Soviet Union, but was expanded in 1985 to include “refugees resettling in Israel.” However, since Israel doesn’t differentiate between refugees and other immigrants, this money subsidizes all immigrants to Israel.

Israel also regularly receives grants from the “American Schools and Hospitals Abroad” (ASHA) program. According to USAID, Israeli institutions have received the most ASHA funding in the Middle East.

A significant amount of aid to Israel comes from the DOD budget for “joint defense projects.” Beginning in 2011 the U.S. significantly increased the amounts granted to help support Israel’s multi-level missile defense programs, reaching $729 million in FY ’14 and $620 million in FY ’15. This reporter’s previous estimates identified about $9.295 billion to Israel from the DOD budget through FY ’13, which was reduced by about $32 million with the FY ’13 sequestration. To that has been added amounts for FY ’14 and ’15, as shown in Table 1.

Table 1 also shows the Washington Report’s conservative estimate of Israel’s interest income resulting from the early disbursement of aid. Assuming that Israel’s aid money is drawn down over the course of each year, a 1 percent interest rate is applied to one-half of the aid for FY ’10 through ’15.

The “All Other” column on Table 1 reflects information from the CRS report, plus this magazine’s reporting and research, giving amounts from other U.S. departments and agencies. The two largest U.S.-Israeli scientific organizations are the BIRD Foundation (research and development) and the BARD Fund (agricultural research). The latter receives about $500,000 a year from the Agriculture Department. In addition, in each of FY ’09, ’10 and ’12 through ‘15 Congress appropriated $2 million from the Energy Department for the U.S.-Israeli Energy Cooperation Program. In FY ’11 $300,000 was appropriated. In FY ’10 the Energy Department contributed $3.3 million to the BIRD Foundation for clean energy projects.

For those who wish to look up more details, Table 2 above gives citations for the foreign aid and DOD appropriations bills for the past five years. 


Shirl McArthur is a retired U.S. foreign service officer based in the Washington, DC area.

 

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