Monday, June 19, 2006

Should the US donate billions of dollars to Israel?

I think the US has better things to do with its money - but prove me wrong if you like.

6 Comments:

Anonymous "anti-Angie" said...

First off, let's get some facts on the table re pre-1974 times. Between 1946 and 1971, the US provided Israel with an average of about $60 million a year, a total of $1.5 billion. By comparison, the Arab states received nearly three times as much aid, $4.4 billion, or $170 million per year. Of the total, Israel received only $162 million in military aid, all in the form of loans as credit sales. The bulk of the economic aid was also loaned to Israel.

OK, I'll count the reasons for you.

1. The US has received de facto savings in return. For example, thanks to Israel’s preemptive action in 1981 on Iraq's nuclear facilities, the US didn't have to deal with the frightening cost of the existence an Iraqi nuclear bomb. In other words, Israel saved the US money on defense expenditure.

2. In exchange for U.S. aid, Israel is required to buy stuff from the U.S. (mostly military), thus lining the pockets of the military industrial complex. Israel is only allowed to spend about one quarter of the military aid on its own purchases.

3. Most of the sum given in grant economic aid goes for the repayment of past loans anyway.

4. The US gets valuable R&D for free from Israel in return.
The Binational Industrial Research and Development Foundation (BIRD) was established in 1977. Both the US and Israel provided equal contributions to create a $110 million endowment that funds joint US-Israel teams in the development and subsequent commercialization of innovative, nondefense technological products from which both the Israeli and US companies have derived benefits commensurate with the investments and risks. Most grant recipients are small businesses involved with software, instrumentation, communications, medical devices and semiconductors. Since its inception, BIRD has funded more than 400 joint high-tech R&D projects. Products developed from these ventures have generated sales of more than $4.5 billion, tax revenues of more than $200 million in the US alone and created an estimated 20,000 American jobs.

5. The aid provides the US a lever with which to influence policy in Israel. For example, the US has been able to prevent Israel from signing weapons deals with China that would have jeopardized US interests and caused it to have to contend with an upgrade in Chinese military hardware.

6. Israel has been sharing military and other technologies with the US that they wouldn’t otherwise have given the US.

7. Israel is the US' most reliable ally in the region, all scoffing notwithstanding.


Now, let's put the foreign aid to Israel in perspective:

1. The US has been spending about $2 billion annually on Egypt since 1979 due to Carter's undertaking in the Camp David peace Accord. It's not fair to blame this expenditure on Israel, because the US decided it must come across as impartial in budgetary allocations toward both parties. It's not Israel that holds a gun to the US' head forcing it to continue the assistance to Egypt ad infinitum.

2. 1/2-$1 billion are given to Jordan annually, too.

3. The US spent well over a $1 billion on aid to the PA from 1994 till 2005, virtually all of which went right down the drain and never fulfilled any of its expected purposes.

What has the US gotten in return from these 3 Arab entities apart from some intangible diplomatic quite?

4. The US has expended $200 billion and counting on Iraq. Nobody can tell for sure whether most of those sums will have justified themselves in the long run.

10:40 AM  
Blogger Genius said...

> The US has received de facto savings in return.

Israel is already an ally of the USA as is Australia or Sth Korea the US doesn’t have to be the looser in the relationship paying for the security of the world - if they follow that strategy they will in the end over extending themselves.

As to Israel in particular Israel already has the capacity to defeat the Arab states if required. If hte Us is paying for them to be the lightning rod the US is in a sense still paying for protection it has already paid off years ago.

Besides, if anything Israel seems to drive an arms race (e.g. Egypt or Iraq or Iran and all their anti Israel posturing). It seems better for the Arab states to be divided and squabbling against each other rather than united against Israel. (although this is a debatable call I guess)

And it doesn’t seem like a good strategy to rely on Israel to do America’s dirty work in the Middle East. (you can't be sure how it will pan out)

> In exchange for U.S. aid, Israel is required to buy stuff from the U.S.

That just means you are making a slightly smaller donation than the money suggests. (because you get a bit back in taxes and so forth)

> Most of the sum given in grant economic aid goes for the repayment of past loans anyway.

Surely the US would expect Israel to pay back its loans regardless of whether it receives aid or not. I wish my bank gave me aid to pay back loans!
besides interest on loans is related to the net present value of money. if you dont get more back than you leant then you loose.

> The US gets valuable R&D for free from Israel in return.

As a good capitalist I would hope they would pay for that research at the appropriate rate - if you try to do this in a round about way you are asking for corruption and inefficiency (I accept there is some potential for this to be a good investment but it unlikely to be an optimal one).

> The aid provides the US a lever with which to influence policy in Israel.

The US already has lots of levers. If israel decides to get on USA's bad side they would be making a bad move.

> For example, the US has been able to prevent Israel from signing weapons deals with China

This raises the problem of Israel being a bit of a loose cannon when it comes to weapons proliferation, Ie maybe we should just tell them to be happy with their 200 odd nukes. It also implies the MIC is selling weapons that are a little TOO good.

> Israel has been sharing military and other technologies with the US that they wouldn’t otherwise have given the US.

The US is still their friend, and if push comes to shove should be on their side - but friends don’t have to pay other friends huge sums of money to stay friends. Maybe Israel should pay the US protection money.

> Israel is the US' most reliable ally in the region, all scoffing notwithstanding.

Yes of course - I don’t think the US should be paying anyone else money either (except maybe for specific bribes to achieve specific things)

> It's not fair to blame this expenditure on Israel

I agree. No point blaming israel - if I was blaming israel then I'd be suggesting economic or political sanctions.

I dont think paying both sides in a "war" is a good idea - it just prolongs the war and costs you more and more money.

> The US has expended $200 billion and counting on Iraq.

I think this is another example of spending money without a clear plan on how to get a return on the investment.

2:05 AM  
Anonymous "anti-Angie" said...

"Yes of course - I don’t think the US should be paying anyone else money either (except maybe for specific bribes to achieve specific things)"

Giving up the revenues generated by the Sinai oil fields wasn't an easy step for Israel to take. The forfeiture was probably facilitated by the US agreeing to "bribe" Israel with a much increased rate of annual foreign aid. Maybe the US should have made the UN or the World Monetary Fund pick up the bill, but the situation is now a fait accompli, though I agree it's still not too late for the US to coerce such a int'l body into paying the yearly "bribes" instead.

As for another passage you wrote,

"This raises the problem of Israel being a bit of a loose cannon when it comes to weapons proliferation, Ie maybe we should just tell them to be happy with their 200 odd nukes. It also implies the MIC is selling weapons that are a little TOO good."

Russia could have been called a loose cannon on various occasions too. I don't think your statements are objective. Your statements beg the question of why you've taken the official US view on this issue, irrespective if you're in the right or wrong. Your two latter statements are even more egregious than the first.

Truth be told -- and I iterated this on SF-IMC almost 3 years ago -- I'm all for letting Israel sink or swim cut off from US foreign aid entirely. I'd advocate a gradual phasing out of this foreign aid. But at the same time the US should gradually phase out foreign aid to all other countries. If you only consider Israel a bad investment with no return on it but do not think similarly about other countries aided annually by the US, then you're guilty of double standards at the very least. Having read your opening paragraph, you do seem to believe the US shouldn't be extending foreign aid to any country to help it carry the burden of security costs.

One burning issue is the extensive military technology assistance the US has been providing some Arab countries with, e.g Egypt and Saudi Arabia. The latter is still in a state of war with Israel and although the former is bound by a peace treaty with Israel, one can never know when a coup d'etat occurs and topples the current regime that might proceed to breach the peace accord gravely in a way that presents a clear and present danger to Israel. It follows that so long as the US engages in such conduct, it must at the very least keep on extending to Israel the military aid it does. The source of this problem is the US, or the State Dep. more precisely. Hope you acknowledge this and hold the US responsible for this sort of catch 22.

11:36 AM  
Blogger Genius said...

> But at the same time the US should gradually phase out foreign aid to all other countries.

Well we are in agreement then.

> Russia could have been called a loose cannon on various occasions too.

maybe they are/were.

> foreign aid to any country to help it carry the burden of security costs.

Certainly not yearly donations anyway.

> Hope you acknowledge this and hold the US responsible for this sort of catch 22.

thats why it is the US that has to get themselves out of it. The US seems to be funding both sides in a war...

I also note, as you probably already know, that if push comes to shove I wouldn't want to be standing on the same side as Hamas or anyone like that.

3:55 AM  
Anonymous Anonymous said...

Israel's seven universities produce a higher number of engineers and scientists per capita than any other nation.

1:33 PM  
Blogger Genius said...

Israelis and Koreans and maybe "hong kongese" will tend to become engineers and scientists no matter where you put them...

Not sure what that means from a policy perspective though.

3:02 AM  

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