A Conservative Estimate of Total Direct U.S. Aid to Israel: Almost $114 Billion

By Shirl McArthur

This estimate of total U.S. direct aid to Israel updates the estimate given in the July 2006 issue of the Washington Report on Middle East Affairs. It is an estimate because arriving at an exact figure is not possible, since parts of U.S. aid to Israel are a) buried in the budgets of various U.S. agencies, mostly that of the Defense Department (DOD), or b) in a form not easily quantifiable, such as the early disbursement of aid, giving Israel a direct benefit in interest income and the U.S. Treasury a corresponding loss. Given these caveats, our current estimate of cumulative total direct aid to Israel is $113.8554 billion.

It must be emphasized that this analysis is a conservative, defensible accounting of U.S. direct aid to Israel, NOT of Israel’s cost to the U.S. or the American taxpayer, nor of the benefits to Israel of U.S. aid. The distinction is important, because the indirect or consequential costs suffered by the U.S. as a result of its blind support for Israel exceed by many times the substantial amount of direct aid to Israel. (See, for example, the late Thomas R. Stauffer’s article in the June 2003 Washington Report, “The Costs to American Taxpayers of the Israeli-Palestinian Conflict: $3 Trillion.”)

Especially, this computation does not include the costs resulting from the invasion and occupation of Iraq—hundreds of billions of dollars, 4,000-plus U.S. and allied fatalities, untold tens of thousands of Iraqi deaths, and many thousands of other U.S., allied, and Iraqi casualties—which is almost universally believed in the Arab world to have been undertaken for the benefit of Israel. Among other “indirect or consequential” costs would be the costs of U.S. unilateral economic sanctions on Iran, Iraq, Libya and Syria, the costs to U.S. manufacturers of the Arab boycott, and the costs to U.S. companies and consumers of the 1973 Arab oil embargo and consequent and subsequent soaring oil prices partially as a result of U.S. support for Israel.

Among the real benefits to Israel that are not direct costs to the U.S. taxpayer are the early cash transfer of economic and military aid, in-country spending of a portion of military aid, and loan guarantees. The U.S. gives Israel all of its economic and military aid directly in cash during the first month of the fiscal year, with no accounting required of how the funds are used. Also, in contrast with other countries receiving military aid, who must purchase through the DOD, Israel deals directly with the U.S. companies, with no DOD review. Furthermore, Israel is allowed to spend 26.3 percent of each year’s military aid 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, Israel has become a major world arms exporter; the Congressional Research Service (CRS) reports that in 2006 Israel was the world’s ninth leading supplier of arms worldwide, earning $4.4 billion from defense sales.

Another benefit to Israel are U.S. government loan guarantees. The major loan guarantees have been $600 million for housing between 1972 and 1990; $9.2 billion for Soviet Jewish resettlement between 1992 and 1997; about $5 billion for refinancing military loans commercially; and $9 billion in loan guarantees authorized in FY ’03 and extended to FY ’10. Of that $9 billion, CRS reports that Israel has drawn $4.1 billion through FY ’07. These loans have not—yet—cost the U.S. any money; they are listed on the Treasury Department’s books as “contingent liabilities,” which would be liabilities to the U.S. should Israel default. However, they have been of substantial, tangible benefit to Israel, because they enable Israel to borrow commercially at special terms and favorable interest rates.

Components of Israel Aid

Israel is the largest cumulative recipient of U.S. aid since World War II (not counting the huge sums being spent in Iraq). The $3 billion or so per year that Israel receives from the U.S. amounts to about $500 per Israeli. Most of this money is earmarked in the annual Foreign Operations (foreign aid) appropriations bills, with the three major items being military grants (Foreign Military Financing, or FMF), economic grants (Economic Support Funds, or ESF), and “migration and refugee assistance.” (Refugee assistance originally was intended to help Israel absorb Jewish refugees from the Soviet Union, but this was expanded in 1985 to include all refugees resettling in Israel. In fact, Israel doesn’t differentiate between refugees and other immigrants, so this money is used for all immigrants to Israel.)

Not earmarked but also included in congresssional appropriations bills is Israel’s portion of grants for American Schools and Hospitals Abroad (ASHA) and monies buried in the appropriations for other departments or agencies. These are mostly for so-called “U.S.-Israeli cooperative programs” in defense, agriculture, science, and hi-tech industries.

Before 1998, Israel received annually $1.8 billion in military grants and $1.2 billion in economic grants. Then, beginning in FY ‘99, the two countries agreed to reduce economic grants to Israel by $120 million and increase military grants by $60 million annually over 10 years. FY ’08 is the last year of that agreement, with military grants reaching $2.4 billion (reduced by an across-the-board rescission), and zero economic grants. Then, in August 2007, U.S. and Israeli officials signed a memorandum of understanding for a new 10-year, $30 billion aid package whereby FMF will gradually increase, beginning with $2.55 billion in FY ’09, and average $3 billion per year over the 10-year period.

Methodology

As with previous Washington Report estimates of U.S. aid to Israel, this analysis is based on the annual CRS report, U.S. Foreign Aid to Israel, which uses available and verifiable numbers, primarily from the foreign operations appropriations bills. Although the CRS report does include such things as the old food for peace program, the $1.2 billion from the Wye agreement, the $1 billion in FMF included in the FY ’03 Emergency Supplemental appropriations bill, the subsidy for “refugee resettlement,” and money from the ASHA account, it does not include money from the DOD and other agencies. Nor does it include estimated interest on the early disbursement of aid.

The January 2008 CRS report on aid to Israel shows a total of $101.1908 billion through FY ’07. Table 1, on the previous page, is drawn from the summary table of that report, plus $2.4238 billion from the FY ’08 omnibus appropriations bill and estimates for ASHA and “other” amounts in FY ’08, for a total of $103.6147 billion through FY ’08.

To that has been added $10.2407 billion, as detailed below, for a grand total of $113.8554 billion.

Estimated Amounts Not Included in Table 1: $10.2407 Billion

Defense Department Funds: $7.694 Billion. For previous estimates, a search going back several years was able to identify $6.794 billion from the DOD to Israel through FY ‘06. Adding $450 million from the FY ’07 DOD appropriations and $450 million from the ’08 appropriations gives a total of $7.694 billion. (The FY ’08 appropriations bill earmarks $155.6 million for Israel. However, AIPAC’s Web site reported that the total for earmarked and non-earmarked programs was $450 million—and who would know better than the Israel lobby itself?)

The military aid from the DOD budget is mostly for specific projects. The largest items have been the canceled Lavi attack fighter project, the completed Merkava tank, the ongoing Arrow anti-missile missile project, and several other anti-missile systems, most recently the “David’s Sling” short-range missile defense system. Haaretz reported in June that a senior U.S. defense official has said the U.S. will support and help Israel’s development of the advanced Arrow 3 designed to intercept advanced ballistic missiles. The fact that the U.S. military was not interested in the Lavi or the Merkava for its own use and has said the same thing about the Arrow and the other anti-missile projects would seem to jettison the argument that these are “joint defense projects.” The FY ‘01 appropriations bill also gave Israel a grant of $700 million worth of military equipment, to be drawn down from stocks in Western Europe, and the FY ’05 defense appropriations bill includes a provision authorizing the DOD to transfer an unspecified amount of “surplus” military items from inventory to Israel. In addition, since 1988 Israel has been designated a “major non-NATO ally,” giving it access to U.S. weapons systems at lower prices, and preferential treatment in bidding for U.S. defense contracts.

Interest: $2.089 Billion. Israel receives its U.S. economic and military aid in a lump sum within one month of the new fiscal year or the passage of the appropriations act. Applying one-half of the prevailing interest rate to the aid for each year (on the assumption that the aid monies are drawn down over the course of the year), the July 2006 estimate arrived at a total of $1.991 billion through FY ’06. To that, using an interest rate of 4 percent, is added $50 million for FY ’07 and $48 million for FY ’08, for a cumulative total of $2.089 billion through FY ’08.

Other Grants and Endowments: $457.7 Million. The July 2006 report included $456.7 million in U.S. grants and endowments to U.S.-Israeli scientific and business cooperation organizations. The two largest are the BIRD (Israel-U.S. Binational Research & Development) Foundation and the BARD (Binational Agriculture and Research and Development) Fund. While these are mostly self-sustaining, the BARD Fund gets about $500,000 a year from the Agriculture Department. Adding $0.5 million for each of FY ’07 and ‘08 to the ’06 total gives a new total of $0.457.7 billion.

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

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