Move to Reduce Interest on Israeli Debts is Abandoned in the Senate

A move to reduce the interest on existing Israeli debts to the U.S. was abandoned last week in the Senate as too costly in the light of budgetary constraints. In a joint statement, Sens. Daniel Inouye (D. Hi.) and Robert Kasten (R. Wis.), who sponsored the bill, said they were withdrawing it in spite of “widespread support” because they were unable to resolve technical questions raised by the budget committee.

Approved by the Senate Appropriations Committee in October, the bill would have reduced Israel’s annual interest to five percent, saving the financially pressed Jewish State billions of dollars over the next several years. Many of the loans made to Israel since the 1973 War — amounting to nearly $10 billion — carry a current annual interest rate of approximately 10 to 11 percent.

The proposed legislation had apparently met with reservations not only from within the Senate, but from among pro-Israel activists, who questioned the wisdom of further taxing the U.S. budget when cuts are being implemented elsewhere. Some lobbyists at the American Israel Public Affairs Committee (AIPAC) reportedly feared that passage of the bill could backfire by fostering resentment over the effective appropriations of further American tax dollars to help the Jewish State.

As Congress was considering an aid package for Israel last spring, for example, the National Association of Arab Americans placed radio advertisements playing up the theme of American’s being asked to sacrifice while Israel was raking in the U.S. taxpayer’s money. Congress ultimately approved the $3 billion aid package for 1986, plus $1.5 billion in emergency economic assistance.

Recently, however AIPAC’s executive director, Thomas Dine, came out publicly in support of the Kasten-Inouye bill, while acknowledging that the issue “is a toughie.” There have been talks of revising the bill in a way that would spread out the effects over a longer period of time, such as applying the interest reduction only to military loans for the first year. But staff members at the offices of Kasten and Inouye said the Senators were unable to work out an agreement with the Budget Committee.

In their statement last week, the two Senators said they have concluded that pushing the bill would be inappropriate “at this time,” suggesting they would take it up at a later date. One informed source said he had reason to believe that the issue is still very much alive and could be brought up again in the near future.