As the country reviews its spending on defense and foreign assistance, it is time to examine the funding the United States provides to Israel.

Let me put it another way: Nine days ago, the Israeli cabinet reacted to months of demonstrations against the high cost of living there and agreed to raise taxes on corporations and people with high incomes ($130,000 a year). It also approved cutting more than $850 million, or about 5 percent, from its roughly $16 billion defense budget in each of the next two years.

If Israel can reduce its defense spending because of its domestic economic problems, shouldn't the United States - which must cut military costs because of its major budget deficit - consider reducing its aid to Israel?

First, a review of what the American taxpayer provides to Israel.

In late March 2003, just days after the invasion of Iraq, President George W. Bush requested the approval of $4.7 billion in military assistance for more than 20 countries that had contributed to the conflict or the broader fight against terrorism. Israel, Jordan, Egypt, Afghanistan, Pakistan and Turkey were on that list.

A major share of the money, $1 billion, went to Israel, "on top of the $2.7 billion regular fiscal year 2003 assistance and $9 billion in economic loans guaranteed by the U.S. government over the next three years," according to a 2003 study by the Congressional Research Service (CRS).

Then in 2007, the Bush administration worked out an agreement to raise the annual military aid grant, which had grown to $2.5 billion, incrementally over the next 10 years. This year, it has reached just over $3 billion. That is almost half of all such military assistance that Washington gives out each year and represents about 18 percent of the Israeli defense budget.

In addition, the military funding for Israel is handled differently than it is for other countries. Israel's $3 billion is put almost immediately into an interest-bearing account with the Federal Reserve Bank. The interest, collected by Israel on its military aid balance, is used to pay down debt from earlier Israeli non-guaranteed loans from the United States.

Another unique aspect of the assistance package is that about 25 percent of it can be used to buy arms from Israeli companies. No other country has that privilege, according to a September 2010 CRS report.

The U.S. purchases subsidize the Israeli arms business, but Washington maintains a veto over sales of Israeli weapons that may contain U.S. technology.

Look for a minute at the bizarre formula that has become an element of U.S.-Israel military aid, the so-called qualitative military edge (QME). Enshrined in congressional legislation, it requires certification that any proposed arms sale to any other country in the Middle East "will not adversely affect Israel's qualitative military edge over military threats to Israel."

In 2009 meetings with defense officials in Israel, Undersecretary of State Ellen Tauscher "reiterated the United States' strong commitment" to the formula and "expressed appreciation" for Israel's willingness to work with newly created "QME working groups," according to a cable of her meetings that was released by WikiLeaks.

The formula has an obvious problem. Because some neighboring countries, such as Saudi Arabia and Egypt, are U.S. allies but also considered threats by Israel, arms provided to them automatically mean that better weapons must go to Israel. The result is a U.S.-generated arms race.

For example, the threat to both countries from Iran led the Saudis in 2010 to begin negotiations to purchase advanced F-15 fighters. In turn, Israel - using $2.75 billion in American military assistance - has been allowed to buy 20 of the new F-35 fifth-generation stealth fighters being developed by the United States and eight other nations.

Another military program, called U.S. War Reserves Stocks for Allies, begun in the 1980s, allows the United States to store arms and equipment on Israeli bases for use in wartime. In the 1990s, the arrangement was expanded to allow Israel to use the weapons, but only with U.S. permission. During the 2006 war against Hezbollah in Lebanon, the United States gave permission for Israel to use stored cluster artillery shells to counter rocket attacks. The use drew international complaints because the rockets struck civilian rather than military areas.

The initial limit was $100 million worth of stored missiles, armored vehicles and artillery munitions, but that has increased over time. It reached $800 million in 2010, $1 billion this year and by 2012, it is expected to grow to $1.2 billion.

Since the mid-1990s, the United States and Israel have been co-developing missile defense systems designed to meet threats from short-range rockets as well as longer-range ballistic missiles. All of the systems involved have gained support from Congress, which frequently earmarks additional funding for Israeli weaponry.

For example, the House and the Senate added $129.6 million to the $106.1 million the Obama administration had in the fiscal 2012 budget for these programs. In the 2011 bill, Congress added $205 million for the Iron Dome system, which defends against short-range rockets and mortars. That was on top of $200 million the administration sought for the U.S. contribution to other cooperative missile-defense systems.

Among reductions now being discussed in Israel is a delay in purchasing more Iron Dome systems beyond those to be paid for by the United States' $205 million. In addition, the Israeli military may freeze its spending on other missile defense systems, the very ones for which Congress approved additional funding this year.

The question for the Obama administration, Congress and, in the end, perhaps the American public, is: Given present economic problems, should the United States supply the money to make up for reductions the Israelis are making in their own defense budget?

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Walter Pincus reports on intelligence, defense and foreign policy for The Washingon Post. He first came to the paper in 1966 and has covered numerous subjects, including nuclear weapons and arms control, politics and congressional investigations. He was among Post reporters awarded the 2002 Pulitzer Prize for national reporting. Among many other honors were the 1977 George Polk Award for articles exposing the neutron warhead, a 1981 Emmy from writing a CBS documenntary on strategic nuclear weapons, and most recently the 2010 Arthur Ross Award from the American Academy for Diplomacy for columns on foreign policy. 

Source: Washington Post

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