A Bailout For Arms Dealers: US Aid and the Israeli Budget

By Rela Mazali and Jesse Bacon

The US Congress has shamefully abdicated its oversight role in US foreign policy and has become an apologist for the worst policies of the Israeli Government, all the while sending Israel billions of dollars in aid. Fortunately activists are not waiting for the US Congress to act. They are staging their own investigation, a first of its kind event.

The Chicago Hearing is modeled after a Congressional hearing and will be webcast live from a link on the home page. The Chicago Hearing will bring together witnesses to tell seldom-heard stories from Israel-Palestine that raise critical questions about the effects of U.S. policies in the region. Does Israel’s explanation of security legitimize its violations of international law? Does the U.S. government condone Israeli policies and practices that would not be tolerated if replicated in America by the U.S. government?

The Hearing highlights voices of those on the other end of the pipeline of U.S. aid to Israel. Israeli, Palestinian and American witnesses will testify to lives lost, freedoms denied and property destroyed by Israeli policies buttressed by U.S. aid and support. The witnesses will testify to the collateral effects of U.S. policies toward Israel: military and financial aid that totaled over $3 billion in 2009 as well as unconditional diplomatic support for Israel in the United Nations”.

Yotam Amit, one of the organizers, asked New Profile, a feminist, anti-militarist movement in Israel, to provide background information  about the link between US aid and undemocratic aspects of Israeli society. The following piece is based on an ensuing exchange of emails between Amit, Rela Mazali, a founding and active New Profile member (and frequent contributor to The Only Democracy?) and co-editor Jesse Bacon, incorporating excerpts from a seminal study by Israeli sociologist  Shlomo Swirsky, “The Burden of Occupation,” which can be downloaded in full here.

For  years now, groups such as the US Campaign to End the Occupation have been trying to show how US aid reduces US social spending, New Profile works in Israel to make a somewhat analogous argument. While the $3 Billion in official US Aid is vastly more then we give any other country, the impact on Israeli’s spending is obviously much greater.

Based on various studies and, in particular, Shlomo Swirsky’s “The Cost of Occupation,” we suggest that the direct effect is not the repeated slashes in Israeli social spending, but rather a camouflaging of the fact that these slashes are the neoliberal policy of choice benefiting the economic and security elite, under the guise of necessary “security spending.” According to Swirsky,

It can be said that the American administration allowed Israel to conduct its military operations against the Palestinian Authority under highly favorable domestic political conditions. The government was not forced to strain the local capital market or to raise taxes, steps that would have distressed Israel’s more affluent stratum. This is the very stratum that, if faced with the threat of carrying a heavier financial burden, might have been able to press the government to consider changing its policy regarding the occupied Palestinian territories. As early as the first Intifada, the business community was reportedly ‘fed up with the devaluation of the benefits it derived from the occupation and with the increasing burden the occupation imposed on it'(Levy, 2003: 172). Notably, this is the same stratum whose children had evinced a ‘motivational crisis’ regarding their service in the I.D.F. during the first Intifada (see Chapter 6).” p.119

So Israeli’s elites are not being inconvenienced by the Occupation. How can we change that?

The 2003 request for loan guarantees was not the first time Israel had turned to the U.S. for this type of assistance. About a decade earlier, in 1992, during the Rabin administration, Israel asked for American guarantees to fund the absorption of thousands of new immigrants from CIS countries. Then, the American government stipulated that it would grant the request only if Israel froze its settlement activity in the Palestinian territories. In contrast, the guarantees requested in 2003 were not used to promote Israel’s society or economy; they were utilized to fund continuation of the occupation, and they enabled the Israeli government to exempt affluent citizens from picking up the tab.” p. 119.

The 1992 Loan Guarantees are infamous as a source of tension between the US and Israel, with then-president George Bush the Elder threatening to cut them off. Obviously no such threat was made in 2003.

Until the second Intifada … no Israeli government had taken such extreme measures as the Sharon governments, and under normal conditions, it is highly unlikely that any government would have considered recommending such measures, wrapped as packages to be delivered in a flurry to the Knesset for hasty approval. It is hard to imagine such far-reaching steps being taken without the prevailing atmosphere of the Intifada, particularly following the suicide bombings on buses and in restaurants and banquet halls. The combination of ‘military emergency’ and ‘danger of fiscal and financial collapse’ set the stage for the administration to take these drastic steps. … ‘even if we consider this military policy as a given, there were still other routes the government could have taken, such as increasing the capital gains tax; raising income tax for the upper income brackets – or at least not reducing it; imposing a war loan; cutting the salaries of senior government officials, local government officials, and high-ranking military officers; cutting the ‘fat’ in the military budget; or reducing government benefits to well-to-do sectors of the population, among them residents of the Israeli settlements in the Palestinian territories. The option chosen was to make cuts whose main effect was to lower the standard of living of Israel’s middle and lower classes.” p.122

Indeed, a June 2003 article by Akiva Eldar suggested that the US directly interfered with Israeli elections through its loan guarantees supporting the incumbent government which went on to a big victory.

Less then three months ago the Israeli government fell apart over a dispute between Likud and Labor over how the budget pie should be divided on both sides of the Green Line.

(Past Labor Party Prime Minister) Shimon Peres said last week during a campaign speech in Ramat Gan that Israel spent no less than $60 billion on the settlements, which he called ‘fanning the flames of the conflict’ – the equivalent of 20 years American aid. Amram Miztna (Labor Party candidate)  is trying to persuade the voters that the key to their physical and economic security is to be found in disengagement from the territories and the return of most of the settlers to the state of Israel.

And now, less than three weeks before the decision is made on Election Day, the U.S. is telling the Israeli voter that the Likud can preserve security, deepen the occupation and get funding from Uncle Sam.

Before the first word has been spoken in the discussions scheduled for today in Washington about the special aid and loan guarantees, the Israeli public is getting the message that the leader of the free world is pleased with the policies of the Sharon-Eitam (Likud Party) government:”

To conclude, the ‘security threat’ actively perpetuated by successive Israeli governments–through their choices of continued occupation and repeated warfare–has provided an effective smoke screen allowing the extremely swift implementation of radically neoliberal economic policies.  Recurring severe slashes in social budgets result from these policies rather than the needs of ‘national security’. But the official, as well as media, focus on national fear and ‘national security’ has successfully stemmed social unrest and potential protest. Meanwhile, these budget cuts actually feed directly into tax breaks for the highest salaried employees and richest property owners in the market. And the oversize, well heeled ‘security’ apparatus stoking conflict while deflecting social resistance is bolstered annually both by a disproportionate slice of Israel’s own budget and by billions in US aid. These same billions also directly benefit a related interest group within the US, because 75 percent of the funds are earmarked for purchases from US industry. Consequently, it’s no wonder that the aid agreement between the U.S. and Israel has for some years now been changing the ratio of military to civilian aid, increasing the former while incrementally canceling the latter. As journalist Moti Bassok wrote in 2007,”Each year throughout the present agreement civilian aid was reduced by $120 million, while military aid grew $60 million. As of next year, annual U.S. aid will [… be] all military,” forming an integrated enabling component of Israel’s continuing and destructive militarization. It would seem that the economic and political elites of both the US and Israel have vested interests in continuing Israel’s militarization, occupation and choice of warfare. Personally, we believe that it’s left to us as citizens of both these countries to make maintaining those policies too costly for both regimes.

Here’s a short version of Swirski’s report: