Aid to Israel
In his February 28 column in the NYT, Tom Friedman wrote about Israel:
”The economy is blooming, growing in the last quarter of 2006 by almost 8%,” said Sever Plocker of the Yedioth Ahronoth newspaper, who is one of Israel’s top economics writers. ”Foreign direct investment is flowing in at unprecedented rate — $13.4 billion in 2006. The high-tech sector exports are approaching $18 billion, and the stock exchange is at an all-time high. The shekel is stronger than ever, the inflation nonexistent. Interest rates are lower than in U.S. or Britain, the budget deficit less than 1% of G.D.P., and the balance of payments is positive, which means Israel achieved its economic independence and is actually a net creditor to the rest of the world.
”In short, we never had it so good in the economy.”
Yossi Vardi, one of the founding fathers of Israel’s high-tech industry, told me that in the last month alone, four start-ups that he was an investor in were sold: one to Cisco, one Microsoft, and two to Israeli companies. ”In the last nine months I’ve probably invested in at least nine new companies,” added Mr. Vardi, all started by ”kids 25 to 35 years old.”
Meanwhile, the US continues to send billions in “foreign assistance” to Israel, which according to Tom Friedman has one of the most vibrant economies in the world. The following is from a Congressional Research Service report on Israel (page 18):
Israel has been the largest recipient of U.S. foreign aid since 1976. In 1998, Israeli, congressional, and Administration officials agreed to reduce U.S. $1.2 billion in Economic Support Funds (ESF) to zero over ten years, while increasing Foreign Military Financing (FMF) from $1.8 billion to $2.4 billion. The process began in FY1999, with P.L. 105-277, October 21, 1998. Separately from the scheduled ESF cuts, Israeli has received an extra $1.2 billion to fund implementation of the Wye agreement (part of the Israeli-Palestinian peace process) in FY2000, $200 million in anti-terror assistance in FY2002, and $1 billion in FMF in the supplemental appropriations bill for FY2003. P.L. 109-102, November 14, 2005, the Foreign Operations Appropriations Act, 2006, provided $240 million in ESF, $2.28 billion in FMF, and $40 million for the settlement of migrants to Israel. H.R. 5522, the Foreign Operations Appropriations bill, FY2007, passed in the House on June 9, 2006, appropriates $120 million in ESF, $40 million for migration and refugee assistance, and $2.34 billion in FMF (of which $610 million may be spent for defense acquisitions in Israel), for Israel. The Senate has not yet passed a bill….
Congress has legislated other special provisions regarding aid to Israel. Since the 1980s, ESF and FMF have been provided as all grant cash transfers, not designated for particular projects, and have been transferred as a lump sum in the first month of the fiscal year, instead of in periodic increments. Israel is allowed to spend about one-quarter of the military aid for the procurement in Israel of defense articles and services, including research and development, rather than in the United States. Finally, to help Israel out of its economic slump, P.L. 108-11, April 16, 2003, provided $9 billion in loan guarantees over three years, use of which has since been extended to 2008 and may be extended further. As of September 2006, $4.5 billion of the guarantees remain unexpended.
According to State Department budget documents, for 2008 the budget requested $2.4 billion in Foreign Military Financing (FMF) for Israel out of a total budget of $4.536 billion, or about 53% of all of this assistance for the entire world. On the other hand, the budget includes no funds for Israel from the Economic Support Fund, which also totals over $4 billion worldwide.