NCPA - National Center for Policy Analysis

Has Foreign Aid Been Israel's Crutch?

August 8, 1996

By almost any measure, American foreign aid has failed its objectives, according to many international economists. In fact, U.S. assistance has actually been used to prop up socialist economies. Israel is a particularly apt illustration.

  • America sends Israel $3 billion annually, $1.2 billion of which is marked for economic assistance.
  • Of Israel's $55 billion government budget this year, 6 percent comes from foreign aid.
  • American aid constitutes over 3 percent of Israel's gross domestic product.
  • Although Prime Minister Benjamin Netanyahu has proposed $1.6 billion in budget cuts for next year, U.S. aid is still being used to pay for a large part of Israel's socialist programs.

The new Prime Minister suggested to a joint session of the U.S. Congress that his country no longer needs all of the aid it is getting from us, but Congress is poised to continue sending the full amount when it votes on the foreign operations appropriations bill in September. And pro-Israel lobbyists would actually like to see the level of aid increase.

Following his address to Congress, Mr. Netanyahu reportedly lost enthusiasm for the idea of cuts, saying in private meetings that Israel would not even submit a proposal for aid reduction until fiscal 1999 or 2000.

Critics of aid -- both within and outside Israel -- condemn it for a number of reasons.

  • Last month, the Jerusalem-based Institute for Advanced Political and Security Affairs published two reports concluding that U.S. aid to Israel promotes inefficiency and dependency, thereby undermining national security.
  • Experts say assistance should clearly be linked to economic deregulation, an end to wage indexing and subsidies to favored industries -- reforms the U.S. regularly demands of former communist countries.

Six years ago, Sen. Bob Dole questioned "whether Israel has in place the right kind of market-based policies to make the most effective use of our aid."

Source: E.V. Kontorovich, "Time to Cut Aid to Israel," Wall Street Journal, August 8, 1996.


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