ZGram - 7/19/2003 - "A billion here, a billion there...who's counting?"

zgrams at zgrams.zundelsite.org zgrams at zgrams.zundelsite.org
Sat Jul 19 19:41:50 EDT 2003




ZGram - Where Truth is Destiny:  Now more than ever!

July 19, 2003

Good Morning from the Zundelsite:

The title of this summary, "How much does America pay for supporting 
the Israelis?" ought to be re-stated:  "WHY does America support the 
Israelis?"  Can anybody guess?

[START]

The DailyStar - 03/07/2003

Alfred Lilienthal posed the question of what the cost of supporting 
Israel was to the US 40 years ago, when the price tag for Americans 
was low. Today the answer is knowable and daunting - the figure comes 
to at least $1.6 trillion through the end of 2002. That is some three 
times the much-publicized cost of the Vietnam War (all figures are 
expressed in current dollars, corrected for inflation). The overall 
cost to the US of all aspects of conflicts in the Middle East is even 
higher - more than $2.6 trillion. But the multi-dimensioned costs of 
supporting and protecting Israel make up nearly two-thirds of the 
total.

Direct aid to Israel, as reported in the US budget, is but the tip of 
a very much larger iceberg. Since 1978 the annual figure has hovered 
around $3 billion per year, partly military "loans" and partly 
economic or budgetary support. It has added up. That cumulative cost, 
even though it is only part of the whole story, is $250 billion. 
Theoretically Israel was to have repaid much of the money, but the 
loans were forgiven when Israel could not pay, so that technically 
Israel has never defaulted, even though the monies were never repaid.

Increasingly, however, official US aid has been hidden or redefined. 
Camouflage has been necessary. The budgeted aid loomed embarrassingly 
large as part of total US foreign aid. Increasing the figure would 
have made it even more conspicuous. There were already adverse 
comments and criticism, from Congressmen and also from black leaders 
who contrasted US largesse to high-income Israelis with skimpier 
programs for US blacks. Thus, more and more of the aid was concealed 
in other accounts. For example, Kissinger arranged that the US build 
and fill a strategic oil stockpile for Israel - this cost about $3 
billion - but the appropriation was classified as a "prepositioning" 
project for the US Department of Defense, and thus buried in its 
budget. "Loan guarantees" are a new device for hiding aid. Israel 
borrows from third parties - the first tranche was $10 billion - and 
the US guarantees the loan. Even before the intifada undermined 
Israel's economy, there was little prospect that it could repay the 
loans, but the burden on the US taxpayer was deferred for years and 
therefore never recognized. An additional $9 billion in such 
guarantees is now in process.

Other devices evolved. Israel was permitted to "purchase" US weaponry 
which was deemed to be surplus at very large discounts, some of which 
the Israelis sold on to Iran at much higher prices. US companies have 
been forced to buy Israeli goods - thanks to the activities of close 
collaborators such as Douglas Feith and Richard Perle, who controlled 
the key offices in the Defense Department. US firms resent these 
obligations - US jobs are lost - but are cowed into silence. The 
annual burden may well exceed $3 billion - details are very sensitive 
and thus kept secret. Under the Free Trade Agreement Israel is 
allowed to export to the US freely, even though US exports to Israel 
are very much constrained. That trade-aid deficit, a loss to the US, 
now hovers around $9 billion per year.

Private Jewish aid from the US has contributed another $50-plus 
billion to the burden. Much of this is a "tax expenditure," because 
the donations are tax deductible in the US, but the whole amount is a 
deadweight cost to the US economy, since Israel tends to use aid 
money not to purchase from the US, but, instead, buys from the EU. 
The donations stem overwhelmingly from the loyal diaspora in the US, 
but many of the Israel bonds are held by public and union pension 
funds, who were pressured into buying the bonds in spite of the 
fiduciary restrictions against such low-grade investments.

Indirect "official" aid is also large, in the sense that US aid to 
Egypt and Jordan is the price the US pays for both countries' peace 
treaties with Israel. This is protection money. The US Congress 
justifies that budgeted aid in terms of their compliance with the 
agreements, and both Egypt and Jordan have been given to understand 
that the flow of US aid can and will be terminated if they are not 
sufficiently docile. Turkey, too, now comes under this category, 
although the US has forced other donors to share - unwillingly - by 
using its political influence in the International Monetary Fund and 
the International Bank for Reconstruction and Development to grant 
large loans. Other items are the US' share in peacekeeping operations 
or conditional support for regimes in Central Asia or Latin America, 
which is tied to their backing Israel in the UN or their contracting 
with Israeli firms - a form of export subsidy by the US for Israel.

There is a long and elusive history of this form of aid. A bizarre 
instance was the $3 billion-$5 billion in US aid to the Romanian 
dictator Ceausescu in the 1980s, which financed emigration of 
Romanian Jews to Israel. Ceausescu's appalling despotism was 
discovered in the US media only after the bargain was complete and 
most of the Jews had left.

Two further large elements in the cost are "consequential" - i.e., 
they were incurred because of US support for Israel, but are not 
support to Israel as such. Together they cost the US more than $1 
trillion. The first component is the high cost of the 1973 
Arab-Israeli war. The second is the very expensive program which the 
US undertook in order to protect Israel from a second use of the 
"Arab oil weapon." Both started in October of 1973 Israel was in 
danger of losing the war with its neighbors. President Nixon rescued 
the Israelis with a massive airlift of US equipment and materiel. 
However, the Arab riposte cost the US dearly. Arab oil producers 
countered with an oil embargo. Oil imports into the US dropped 
precipitately - the resulting sharp recession cost the US over $500 
billion in lost GDP and another $500 billion or so in the form of 
higher oil prices. That double whammy was unleashed by the crisis and 
the embargo.

Lastly, "Project Independence" was launched. Terrified by the success 
of the Arab embargo, Israelis and American Jews embarked upon a 
nearly hysterical campaign to subsidize almost every conceivable form 
of energy or conservation in order to reduce US oil imports and to 
reduce Israel's vulnerability to Arab pressure upon the US. Cost - 
borne by the US - was no object. The project was spectacularly 
expensive, but not otherwise strategically fruitful. Massive, hidden 
subsidies were contrived, but little effect resulted from at least 
$500 billion in extra costs. Today the US imports more than twice as 
much oil as it did in 1973, and the economy, in spite of those 
outlays, is more vulnerable. Only the $150 billion spent for the 
strategic petroleum reserve offers such protection for the Israelis 
against another Arab oil weapon.

The price tag for US support of Israel has already been high - in 
terms of direct, indirect, and consequential costs, as well as 
hundreds of thousands of lost US jobs. The newest bill for post-Sept. 
11 costs may dwarf those to date - depending on the real cause of the 
new terrorism. Is anti-American terrorism the consequence of US 
support for Israel? Americans are left to wonder. But if one 
recognizes that correlation, then the costs to the US of the latest 
Arab counterattacks will prove to be even greater than those of the 
oil embargo 30 years ago. Conflict in the Middle East and protecting 
Israel has become very expensive for the US - and indeed for all 
concerned.

=====

Tom Stauffer is a former nuclear engineer and a specialist in Middle 
Eastern energy economics. He wrote this commentary for The Daily Star

[END]


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