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]
More information about the Zgrams
mailing list