Behind the Headlines: Pro-israel Activists Gearing Up for Battle over Loan Guarantees

The lobbying campaign for and against extending Israel $10 billion in U.S. government-guaranteed loans is gearing up for a September showdown.

An official at the Israeli Embassy here said his government is planning next month to make a formal request for U.S. backing for the loans, which would be released to Israel by American banks in $2 billion installments over five years.

Israel will use the loans to help resettle hundreds of thousands of immigrants from the Soviet Union, Ethiopia and other nations.

The United States and Israel would co-sign the loans, so that Israel could obtain more favorable terms. If Israel tried to obtain the loans itself, they would likely be due in five to 10 years. The repayment period for U.S. government-guaranteed loans is 20 to 25 years.

The formal request will be made sometime after Labor Day. On Sept. 12, two days after Congress returns from its summer recess, hundreds of Jewish activists are expected to descend on Capitol Hill to lobby for swift approval of the U.S. loan guarantees.

The lobbying effort, dubbed the National Leadership Action Day, is being jointly coordinated by the National Jewish Community Relations Advisory Council and the National Conference on Soviet Jewry, within the framework of a special task force on loan guarantees set up by the Conference of Presidents of Major American Jewish Organizations.

The Jewish activists are likely to find a sympathetic ear. In July, seven senators, including some not often recognized as pro-Israel, spoke on the Senate floor in favor of the loan guarantees.

NO STRINGS ATTACHED

Those who spoke or inserted favorable remarks into the Congressional Record included one Democrat, Sen. Christopher Dodd of Connecticut, and six Republicans: Sens. Dan Coats of Indiana, Larry Craig and Steve Symms of Idaho, Charles Grassley of Iowa, Orrin Hatch of Utah and John McCain of Arizona. Hatch organized the colloquy with assistance from pro-Israel groups.

At this point, the pro-Israel community has focused on “really educating our own community first so that they understand what is involved,” said Shoshana Cardin, chairman of the Conference of Presidents.

Around the country, Jewish organizations have been mobilizing their local membership to meet with and write letters to members of the Senate and House of Representatives. Many meetings are taking place close to home with members of Congress during the August recess.

Cardin said that the Bush administration has indicated it considers the impending request to be humanitarian and will not condition it on Israeli acceptance of any peace proposals or a change in its settlement policy in the West Bank.

“The administration has publicly stated that there is no linkage, and we take the administration’s word,” she said.

Israel’s hope is that the administration will lend its support to the loan guarantees, because “members of Congress would feel more comfortable if the administration would start the whole rolling of the thing,” the embassy official said.

But regardless of the administration’s views, Israel will ask Congress to take immediate action on the guarantees in light of the time pressures of the U.S. budget cycle, the official indicated.

With the new U.S. fiscal year starting Oct. 1, any new budgetary outlay for the year needs to be approved as part of the package of authorization and appropriation bills that are enacted in September. If Israel waited until October, “it would lose a budgetary year,” the official said.

MILLIONS MUST BE FOUND IN BUDGET

The amount of money that Congress would need to set aside in the budget to cover any possible Israeli default on the loans would be between $40 million and $140 million per year, or a total of $200 million to $700 million over the five-year span, officials said.

The amount, which would be determined by the executive branch’s Office of Management and Budget, would cover any short-term Israeli failure to repay the loans, the Israeli official explained.

The OMB figure is important because last year’s landmark federal budget agreement requires every new “non-emergency” congressional dollar spent to be offset by a dollar cut elsewhere in the budget.

To meet that constraint, the money covering the guarantees might be obtained from within the U.S. foreign aid budget, pro-Israel sources said.

But should there be problems with making the cuts from other U.S. government programs, the Israeli government has a fallback position, the Jewish Telegraphic Agency has learned.

It would involve Israel giving back to the United States a portion of the loan money it receives to cover the U.S. guarantees.

Depending on the amount that the OMB sets, the money could be “taken from the loan” itself, the embassy official said.

Pro-Arab groups have also been busy weighing in on the loan issue. The Washington-based Council for the National Interest wants Congress to use the loan guarantees method to help rebuild U.S. infrastructure, rather than assist Israel.

The council is also disputing the contention of pro-Israel activists that Israel would be able to repay the loans based on its projected economic growth of 7 to 9 percent per year. The council claimed Israel’s annual economic growth has averaged only 2.7 percent over the last 10 years.

Bank of Israel figures supplied by the Israeli Embassy show that Israel’s economy grew by 3.3 percent per year from 1980 to 1990.

‘LEGITIMATE REQUEST’ FOR AID

Pro-Israel activists are also pointing out that of the more than 80 nations borrowing from the United States, only two, Israel and Norway, have never missed a payment.

Nevertheless, the Arab American Institute argues, in its August Action Program and Resource Guide, that it is “inevitable that U.S. taxpayers will end up paying” for the loans.

The institute cited the Cranston Amendment of 1985, which states that annual U.S. aid to Israel cannot fall below what Israel owes the United States in scheduled repayment of debts.

But pro-Israel sources said that since Israel would owe the money to U.S. banks, rather than the government, the amendment would not apply.

Cardin said the pro-Israel community “should always be concerned when we see that what is a legitimate request for assistance would be used by others to make political statements or issues.”