If Americans Knew
April 12, 2013
Updated: August 8, 2014
Learn about the new 10-year $38 billion aid agreement just signed by President Obama.
Israel has a population of approximately 7.8 million, or a million fewer than the state of New Jersey. It is among the world’s most affluent nations, with a per capita income similar to that of the European Union. Israel’s unemployment rate of 5.8% is better than America’s 7.3%, and Israel’s net trade, earnings, and payments is ranked 30th in the world while the US sits in last place at a dismal 193rd.
Yet, Israel receives more of America’s foreign aid budget than any other nation. The US has, in fact, given more aid to Israel than it has to all the countries of sub-Saharan Africa, Latin America, and the Caribbean combined—which have a total population of over a billion people.
And foreign aid is just one component of the staggering cost of our alliance with Israel.
Given the tremendous costs, it is critical to examine why we lavish so much aid on Israel, and whether it is worth Americans’ hard-earned tax dollars. But first, let’s take a look at what our alliance with Israel truly costs.
Before the Iraq War in 2003
Direct Foreign Aid
According to the Congressional Research Service , the amount of official US aid to Israel since its founding in 1948 tops $121 billion (adjusting for inflation, $233.7 billion as of March 2013), and in the past few decades it has been on the order of $3.1 billion per year. (In 2014, for example, this amounted to $8.5 million every single day.)
But this money is only part of the story. For one thing, Israel gets all of its aid money at the start of each year, rather than in quarterly installments like other countries. This is significant: It means that Israel can start earning interest on the money right away – interest paid by the US since Israel invests these funds in US Treasury notes. In addition, because the US government operates at a deficit, it must borrow money in order to give it to Israel and then pay interest on it all year. Together these cost US taxpayers more than $100 million every year.
Israel is also the only recipient of US military aid that is allowed to use a significant portion annually to purchase products made by Israeli companies instead of US companies. (The costs to Americans caused by this unique perk are discussed below.)
In addition, the US gives roughly $1.6 billion per year to Egypt and Jordan in aid packages arranged largely in exchange for peace treaties with Israel. The treaties don’t include justice for Palestinians, and are therefore deeply unpopular with the local populations.
On top of this, the US gives more than $400 million to the Palestinian Authority each year, much of it used to rebuild infrastructure destroyed by Israel and to bolster an economy stifled by the Israeli occupation. This would be unnecessary if Israel were to end the occupation and allow the Palestinians to build a functioning and self-sustaining economy.
Yet, there’s still much more to the story, because parts of US aid to Israel are buried in the budgets of various US agencies, mostly the Department of Defense. For example, since at least 2006, the American Defense budget has included between $202 and $504 million per year for missile defense programs in Israel.
In all, direct US disbursements to Israel are higher than to any other country, even though Israelis only make up 0.1% of the world’s population. On average, Israelis receive 7,000 times more US foreign aid per capita than other people throughout the world, despite the fact that Israel is one of the world’s more affluent nations. And that number rises significantly when one considers disbursements to Egypt, Jordan, and the Palestinian Authority and Defense spending on behalf of Israel.
Additional Ad hoc support for Israel
Dr. Thomas Stauffer, a Harvard economist and Middle East studies professor who twice served in the Executive Office of the President, wrote a comprehensive report about all components of the relationship with Israel’s cost to American taxpayers for the Washington Report on Middle East Affairs in 2003. He wrote:
“Another element is ad hoc support for Israel, which is not part of the formal foreign aid programs. No comprehensive compilation of US support for Israel has been publicly released. Additional known items include loan guarantees… special contracts for Israeli firms, legal and illegal transfers of marketable US military technology, de facto exemption from US trade protection provisions, and discounted sales or free transfers of ‘surplus’ US military equipment. An unquantifiable element is the trade and other aid given to Romania and Russia to facilitate Jewish migration to Israel; this has accumulated to many billions of dollars.”
Israel has often used its privileged access to US military technology against both the US government and US corporate interests. According to the Associated Press in 2002,
“In France, Turkey, The Netherlands and Finland, Israeli companies have edged such U.S. firms as Raytheon, Northrop Grumman and General Atomics out of arms deals worth hundreds of millions of dollars in recent years. The irony, experts say, is that tens of billions of U.S. tax dollars and transfers of American military technology helped create and nurture Israel’s industry, in effect subsidizing a foreign competitor.”
The AP article quoted a vice president at the Aerospace Industries Association of America, who bluntly said, “We give them money to build stuff for themselves and the U.S. taxpayer gets nothing in return.”
Meanwhile, according to the Christian Science Monitor , Israel has also “blocked some major US arms sales, such as F-15 fighter aircraft to Saudi Arabia in the mid-1980s. That cost $40 billion over 10 years.”
Even worse, Israeli weapons “buttress the arsenals of nations such as China that the United States considers strategic competitors, alarming US military planners,” the Associated Press article went on to report. “[In 2001] US surveillance planes flying along China’s coast were threatened by Chinese fighter jets armed with Israeli missiles… Had Chinese fighter pilots been given the order to fire, they could have brought down the US planes with Israeli Python III missiles… US defense chiefs say Israel sold China the missiles without informing the United States.”
Lost jobs, trade, and standing
One of the most devastating indirect costs of the US alliance with Israel was the Arab oil boycott of 1973. The Arab states imposed the boycott in protest of U.S. support of Israel during the 1973 war, in which Arab countries attempted to reclaim lands Israel had invaded and occupied in 1967.
“Washington’s intervention triggered the Arab oil embargo which cost the U.S. doubly: first, due to the oil shortfall, the US lost about $300 billion to $600 billion in GDP; and, second, the US was saddled with another $450 billion in higher oil import costs,” wrote Stauffer in the Washington Report on Middle East Affairs.
Then there’s the cost in lost jobs. “US policy and trade sanctions reduce US exports to the Middle East about $5 billion a year, costing 70,000 or so American jobs,” Stauffer estimates. “Not requiring Israel to use its US aid to buy American goods, as is usual in foreign aid, costs another 125,000 jobs.”
But perhaps the most damaging cost to the US has been its loss of standing in the Arab and Muslim worlds, where US largesse towards Israel as it commits human rights violations provokes deep resentment. “To many of the world’s Muslims, it places the US taxpayer on the Israeli side of its conflicts with Arabs,” observed the Associated Press article.
According to Harvard professor Stephen Walt, “The 9/11 Commission reported that 9/11 plotter Khalid Sheikh Mohammed’s ‘animus toward the United States stemmed not from his experiences there as a student, but rather from his violent disagreement with US foreign policy favoring Israel.’ Other anti-American terrorists—such as Ramzi Yousef, who led the 1993 bombing of the World Trade Center—have offered similar explanations for their anger toward the United States.”
There are many more potential categories of costs that are even more difficult to quantify. All in all, Stauffer estimates that Israel cost the US about $1.6 trillion between 1973 and 2003 alone—more than twice the cost of the Vietnam war.
Costs since Stauffer’s study in 2003
Israel’s cost to American taxpayers has remained high since Stauffer’s 2003 study. The US currently gives Israel an average of $3 billion a year in military aid, under an agreement signed by the Bush administration to transfer $30 billion to Israel over ten years, starting in 2009.
All of the other extras and costs remain and in some cases have increased since 2003. For example, “Despite a tough economic climate and expected US budget cuts—including drastic cuts to the US military budget—US lawmakers will provide $236 million in fiscal 2012 for the Israeli development of three missile defense programs,” reported Israeli newspaper Haaretz.
In addition, the US government “has provided $205 million to support the Iron Dome, manufactured by Israel’s state-owned Raphael Advanced Defense Systems Ltd. The system uses small radar-guided missiles to blow up in midair Katyusha-style rockets with ranges of 3 miles to 45 miles, as well as mortar bombs… Legislation moving through the Republican-controlled US House of Representatives would give Israel additional $680 million for the Iron Dome system through 2015.”
And if, as many experts believe, the US would not have invaded Iraq without intense and sustained pressure from Washington insiders who advocate actively on behalf of Israel, this adds yet another dimension of staggering cost to the equation: “hundreds of billions of dollars, 4,000-plus U.S. and allied fatalities, untold tens of thousands of Iraqi deaths, and many thousands of other US, allied, and Iraqi casualties,” according to retired US foreign service officer Shirl McArthur.
Nobel Prize-winning economist Joseph Stiglitz and Harvard professor Linda Bilmes put the cost of the Iraq War at over $3 trillion, and incalculably more if you take into account the opportunity costs of the resources spent on this unproductive war. For example, higher oil prices due to the war have had a devastating impact on America’s economy, and so have the surging federal debt and the servicing of that debt. Without the war, the 2008 financial crisis almost certainly would not have been as severe, and the Afghanistan war most likely would have been shorter, cheaper, and more effective.
The Israel lobby and partisans are currently gunning for a war with Iran with the same zeal they showed in the run-up to the 2003 invasion of Iraq. By all estimates, the costs of a war with Iran will be much higher than the Iraq war. In addition to the loss of life, analysts predict, for example, that if Iran’s oil production were taken out of the world market, gas prices would rise 25-70 percent.
If the Straits of Hormuz (straits adjacent to Iran through which 20% of the world’s oil production passes on a daily basis) were attacked or blockaded, the cost of oil would skyrocket to a level never seen before, and the economic recession or depression that followed would be nothing short of “apocalyptic,” according to Matthew Yglesias writing for Slate .
Reasons and Consequences
So now we are back to the question of why America continues to pour money into a state that commits daily human rights violations, defies US strategic interests, provokes rage and resentment among billions of people, competes with and crowds out US interests using technology subsidized by US taxpayers, and sells America’s military secrets to its enemies.
The answer is simple and summed up well by professors Stephen Walt and John Mearsheimer in their ground-breaking article in the London Review of Books , “The Israel Lobby,” and their book The Israel Lobby and US Foreign Policy .
“Why has the US been willing to set aside its own security and that of many of its allies in order to advance the interests of another state?” the article asks. “One might assume that the bond between the two countries was based on shared strategic interests or compelling moral imperatives, but neither explanation can account for the remarkable level of material and diplomatic support that the US provides.
“Instead, the thrust of US policy in the region derives almost entirely from domestic politics, and especially the activities of the ‘Israel Lobby.’ Other special-interest groups have managed to skew foreign policy, but no lobby has managed to divert it as far from what the national interest would suggest, while simultaneously convincing Americans that US interests and those of the other country—in this case, Israel—are essentially identical.”
AIPAC, the American Israel Public Affairs Committee, is consistently ranked in the top two most powerful lobbies in Washington. And it is only one arm of the much larger, multi-faceted, and well-financed Israel lobby.
According to Congressman Jim Moran, “AIPAC is very well organized. The members are willing to be very generous with their personal wealth. But it’s a two edged sword. If you cross AIPAC, AIPAC is unforgiving and will destroy you politically. Their means of communications, their ties to certain newspapers and magazines, and individuals in the media are substantial and intimidating. Every [Congress] member knows it’s the best-organized national lobbying force.”
Senator Joseph Lieberman proudly stated, “Any attempt to pressure Israel, to force Israel to the negotiating table by denying Israel support, will not pass in Congress… Congress will act against any attempt to do that.”
It’s true: The US Congress, along with the executive branch, overwhelmingly support virtually any action or wish of the Israeli government, no matter how at odds with US national interest or security, primarily because of the power of the Israel lobby.
Even when two AIPAC employees were indicted on espionage charges in 2005, and it was determined that they had obtained classified US government information illegally and passed it to Israeli agents, the charges were quietly dropped on technicalities. AIPAC fired both employees and issued a statement that they were fired because their actions did not comport with AIPAC standards. One of the fired employees, Steven Rosen, filed a lawsuit for defamation, claiming his actions were, in fact, common practice at AIPAC.
When Israel attempted to sink a U.S. Navy ship, the USS Liberty , in 1967, killing 34 Americans and injuring over 170, it still failed to put a dent in aid to Israel. Indeed, aid quadrupled the following year.
Though Congressmen receive payments and support from the lobby in exchange for their loyalty, the American taxpayer is left footing the bill. As detailed above, the total cost has run from a bare minimum of $121 billion since 1948 (the cost of foreign aid alone) to $1.6 trillion or more, factoring in Defense appropriations, oil crises, the destruction to the USS Liberty (causing the $40 million ship to be scrapped), the heightened risk of terrorism, lost trade and co-opted technology, and countless other factors. If the Iraq war and the increased risk of a war with Iran are factored in, the cost skyrockets even higher.
Critics point out how much brighter our future would be if we had invested these billions or trillions in veteran rehabilitation and care, education, job creation, social security, housing, environmental clean-up and prevention, roads, bridges, health care, and scientific and health research. Or if Americans had simply held onto their tax dollars and used them as they saw fit, in our own economy. If some of the higher estimates are closer to the mark, our support for Israel could easily have covered the $700 billion TARP bailout with a great deal left over for massive stimulus spending and/or tax breaks.
If Israel were using these funds for a good purpose, one could debate whether the price was worth it. But Israel uses most of the money to prolong a 47-year military occupation (which regularly involves gross violations of international law), commit egregious human rights violations, and destroy billions of dollars worth of Palestinian homes and infrastructure (resulting in still more U.S. tax money being sent to Palestinians to rebuild demolished homes, hospitals, and schools), while building illegal, Jewish-only settlements on Palestinian land.
It makes the prospect of peace ever more distant, creates dangerous hostility to the US, placing Americans in peril, and puts the US Congress in violation of the Arms Export Control Act, all for the sake of campaign contributions.
There is no good reason to keep throwing good money after bad in a failed, ill-founded policy. It’s long past time for a fundamental rethinking of the American government’s blank check to Israel.
This report was produced by If Americans Knew analysts, particularly Pamela Olson, a President’s Scholar at Stanford University 1998-2002 with a major in Physics, a minor in Political Science, and 1600 GRE scores. Before coming to IAK, Olson lived and worked in the West Bank; worked as a researcher in Moscow, Siberia, and China; and was a research analyst at the Institute for Defense Analysis. She is the author of Fast Times in Palestine.
This analysis updates the groundbreaking 1998 work by Richard Curtiss, “The Cost of Israel to U.S. Taxpayers,” published in the Washington Report on Middle East Affairs. Mr. Curtiss, following military service in World War II, served for 30 years as a career Foreign Service Officer. He received the U.S. Information Agency’s Superior Honor Award and the Edward R. Murrow award for excellence in Public Diplomacy, USIA’s highest professional recognition. Upon retirement, Mr. Curtiss co-founded and the American Educational Trust, which produces the Washington Report on Middle East Affairs. He is also the author of two books on U.S.-Middle East relations. A more extensive bio can be read here.