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Israel Receives Millions Less in U.S. Aid, at Least for Now

November 2, 1989
See Original Daily Bulletin From This Date

Israel received $1.13 billion in economic aid from the United States on Tuesday, $70 million less than it has received in the past few years.

The reduced figure is largely due to across-the-board budget cuts mandated by President Bush on Oct. 16, when Congress failed to bring total spending for the 1990 fiscal year in line with the Gramm-Rudman-Hollings deficit-reduction law.

Douglas Bloomfield, a Washington lobbyist and former legislative director of the American Israel Public Affairs Committee, said it is “very likely, but not guaranteed,” that $63.6 million of the $70 million will be restored.

The $63.6 million cut was mandated under the deficit-reduction law, which required that non-defense programs be cut by 5.3 percent.

But pro-Israel lobbyists said Israel will almost certainly not be able to restore $6.5 million that Congress shaved off in across-the-board cuts of its own. Of that money, $5 million was used to expand the government’s drug interdiction campaign and $1.5 million was used to continue the Peace Corps program.

To reverse Bush’s across-the-board “sequestration” of federal programs, Congress would have to cut the deficit to about $100 billion in its 1990 deficit reconciliation bill. Passage of that bill is being delayed for various reasons, including wrangling over a cut in the capital gains tax.

If Congress comes up with the cuts, the few billion dollars in across-the-board cuts that already have been made could be restored, bringing the deficit close to $110 billion, and in line with Gramm-Rudman-Hollings target.


Reacting to the cuts, an Israeli Embassy official said Wednesday, “It’s reality.”

“We understand that the U.S. government is under severe constraints,” he said, adding that Israel is “very grateful” for the funds not cut.

The Israeli official said that the economic aid is used to repay Israel’s debts from U.S. loans received during various Israeli-Arab wars and in foreign aid prior to 1984, when Israel’s foreign aid was converted from loans to grants.

That debt is now owed mainly to private U.S. banks, under a 1987 debt-refinancing law that converted high-interest government loans into lower-interest private loans.

The Israeli official said his government owes the United States “a lot of money,” estimated at $10 billion, with its annual debt repayments to private U.S. banks being “a little higher” than $1.2 billion.

Israel, unlike other countries, is required by Congress to receive its economic aid within the first month of the new fiscal year, said Bloom-field. That is because lawmakers realized in the early 1980s that Israel was borrowing at high interest rates from private banks in Israel to repay its U.S. foreign aid and war debts, Bloom-field said.

Having an “early disposal” of Israel’s economic aid is a way for Congress to avoid “sending your friends deeper into debt,” he added.

Bloomfield said the Bush administration avoided sending Israel “threats and warnings” by sending it the money at this time, even though Congress has yet to approve the 1990 foreign aid appropriations bill, which includes the $3 billion in aid to Israel.

By providing the money now, the United States sent Israel a “positive signal,” rather than “trying to use foreign aid as leverage over Israel for something else,” he added.


As is the case with its economic aid, Israel’s $1.8 billion in U.S. military aid is also being cut, by $104 million, mainly to meet deficit-reduction targets. Israel uses the money to purchase U.S. weapons systems from the Pentagon.

One pro-Israel lobbyist here speculated that Israel would likely make up most of the gap by using Israeli taxpayer money to fund U.S. weapons systems.

Israel “cannot afford to really stretch (weapons procurement) out” because of “pure economics,” the lobbyist said. The costs of procuring weapons increases per unit, depending how fast and how many are being built.

The lobbyist added that Israel might free up $100 million by reducing its military operation and maintenance budget and spending less on troops.

An Israeli Embassy official would not speculate on how Israel would try to offset cuts in U.S. military aid.

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