Israel should give up US military aid
It would be wise for Israel to take the initiative, before Tea Party Republicans make a move.
There is a precedent. In 1996, Benjamin Netanyahu, in his first term as prime minister, decided the time was ripe to end US civilian aid. "We could not look the Americans in the eye and request support for a developed economy like Israel's," he told me once, "but military aid is another story." And thus it was. Under an agreement signed in 1998, civilian aid was reduced in set tranches, until it disappeared altogether in 2008, and at the same time, military aid was gradually increased. Netanyahu announced the Israeli gesture before Congress, won applause, and chalked up a lot of merit points for Israel in the US.
Switching the emphasis from civilian aid to military aid marked recognition of the continuing friendship between Jerusalem and Washington in the face of the security challenges Israel had to cope with, and also of the substantial contribution that most of the aid money made to generating jobs in those states that produce the weapons of destruction that Israel buys with it. (If anyone wants to call the aid a subsidy to US defense firms, laundered via Israeli banks, good luck to them.)
But although Israel's security challenges have not lessened, but only changed, and perhaps even grown, the Israel of 2011 is not the Israel of 1998, or even of 2008, and the US too is not what it was. Certain political and economic developments, some of which have gathered pace in the past six months, make the US military aid no longer defensible.
Israel is about to become a world gas power. The Mediterranean will fill up the Ministry of Finance's coffers with billions of dollars a year. The IMF praises the strength of the Israeli economy, and the Ministry of Finance expects growth to rise. The US, by contrast, is bleeding red ink. The rating agencies are sounding ugly hints, the IMF preaches, and the Federal authorities and the states are wielding the axe of fiscal cuts. Nearly everything is under the guillotine. The US Department of Defense has announced a cut of $78 billion in its budget, a step not far from cutting the live flesh. Policemen, firemen, and teachers are being laid off. People have died because of health budget cuts.
In the background is the dramatic rise of the Tea Party movement, which runs on the adrenaline of burning aspiration to shrink the government and balance the budget. Dozens of the new Republican legislators in Congress hate the institution of foreign aid, of which Israel, as is well known, is the largest client.
New Republican senator Rand Paul, a Tea Party star, has already informed representatives of AIPAC, the pro-Israeli lobby in Washington, that he and they will have to agree to disagree on aid to Israel. His ability to push legislation through will be limited, because the Republicans are still a minority in the new Senate. But Paul is liable to ignite a public debate on the aid to Israel. He is liable to stress, for example, that Israel is not some starving country, but a global gas giant that continues to rely on US charity. Israel will not profit from a campaign like that.
Doubtless Israel enjoys, and will continue to enjoy, strong support in Congress, but when things are being said about damage to Social Security, for example, legislators are liable to come to the conclusion that their own needy come first.
Netanyahu should therefore repeat his 1996 exercise. A declaration by Israel that it is prepared to forego the military aid will not only be a public relations coup. It will also enable Israel to negotiate the terms on which aid will cease: a gradual reduction over, say, ten years; a US guarantee mechanism that will enable Israel to raise money on the markets at low interest rates in order to procure military equipment; and/or a greater say for Israel on what military items will be stored in the US Army's emergency arms depots in Israel, and more flexible access for Israel to these depots.
Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
- Tel Aviv market report
- Tel Aviv Stock Exchange
- Israeli stocks in NY
- Arbitrage gaps for dual-listed stocks
- Israeli stocks in Europe
- Israeli stocks on other markets
- Tel Aviv 25 options
- Mutual funds
- Current representative shekel rates
- Historical representative shekel rates
- Bank shekel rates
- Shekel/dollar options