JWR contributor, Jonathan S. Tobin, is executive editor of the Connecticut Jewish Ledger.

Kick the habit!

Economic aid is not in Israel's interest

Israeli Finance Minister Ya'akov Ne'eman was just in Washington with a unique brief from his prime minister: Begin discussions on phasing out U.S. economic aid. I say this year wouldn't be too soon. Securing the $3 billion U.S. aid package for Israel has become an annual ritual in Congress. AIPAC, the semi-official lobby of the pro-Israel community, rightly takes pride in gaining ever-larger majorities for the State Department's foreign aid bill.

It should first be recognized that $1.8 of the $3 billion in aid is military aid, much of which stays in this country to pay for U.S. weapons. That goes towards maintaining the qualitative military edge of America's only democratic ally in the Middle East. In return, the U.S. has always received more than its money's worth of strategic help and intelligence sharing from the Israelis.

Military aid to Israel, which is in the strategic interests of both countries, ought to be left untouched, if not increased. U.S. investment in special joint projects such as missile defense (like Israel's Arrow program) ought to be increased. Given the continuing threat from Iraq, those American Jewish liberals who have steadfastly opposed various strategic defense initiatives since the time of Ronald Reagan ought to understand that this is one budget line that should be increased.

The remaining $1.2 billion in annual economic aid received by Israel goes towards paying down debts owed by Israel to the U.S. for weapons which were purchased in decades past. Israel's case for the aid has been strong and it must be emphasized that the U.S. has benefitted greatly from the transaction. Indeed, it is axiomatic that, despite the rhetoric from both the American Jewish community and Israel's enemies here about the power of the pro-Israel lobby in Washington, the aid would never have started, let alone lasted this long, if it were not in the interests of the United States.

Nevertheless, it is high time that Israel began to wean itself from the aid. This is not because, sooner or later, Congress will end it anyway, but because kicking the U.S. aid habit is in Israel's own interest. Even though much of the money given to Israel flows back to U.S. coffers, it has had and continues to have a destructive impact on the Israeli economy.

Contrary to the conventional wisdom that has prevailed in Israel and its friends here, U.S. aid has helped prop up Israel's socialist economic structure that still encumbers the Jewish state. Even as Israel's economy has grown in the past decade, too much of Israel's current prosperity is based on "free" money. Like much of America's aid to the so-called "Third World," countries, rather than promoting responsible financial behavior and free market reform, U.S. money allows inefficient government-dominated economies to continue their old ways rather than to change. Indeed, the aid winds up floating the patronage which is the mother's milk of the current coalition government as well as its predecessors.

Finance Minister Ne'eman's failed battle for cuts in Israel's bloated domestic budget came to grief last year not only because Prime Minister Netanyahu couldn't say no to the various constituencies who had their hands out. Ne'eman's sensible (and much-needed) fiscal restraint was thwarted as much by the psychological effect of the U.S. aid on Israel's psyche as by anything else. If the money is there, politicians (be they Israeli or American) will find ways to spend it.

Israelis have spent a half century taking handouts from Diaspora Jews and the last 25 years taking it from friendly American governments. For much of that time, dire military necessity as well as an economy overburdened by massive immigration forced Israel into a corner where it could be argued there was no alternative to this policy. But as Israel has grown into a more mature and prosperous state, the aid has turned into a crutch which prevents Israel from making the hard choices that a market economy requires of modern states.

Economic aid also serves to strengthen Israel's dependancy on the United States at a time when it is vulnerable to pressure on security issues in the peace process. That is a danger which both major Israeli political parties have long understood. Unfortunately, they have chosen to ignore that because of their appetite for the money and the political power it gives them.

This past week, U.S. Rep. Sam Gejdenson (D-Conn.) proposed during a speech at Trinity College in Hartford that Israel forgo the economic aid in exchange for the U.S. forgiving Israel's debt, which would work out to be, as the congressman put it, "a wash." This proposal, by a congressman who stands to be the ranking Democrat on the House International Affairs Committee next year (assuming he wins re-election) makes a lot of sense. Minister Ne'eman is himself discussing a phased plan which would essentially do the same thing.

Prime Minister Netanyahu promised Congress soon after he was elected in 1996 that he would begin the process of ending the aid. He needs to begin to make good on that pledge not so much for the sake of good relations with the U.S. (always a key consideration for any Israeli leader) but for the sake of Israel's future.

Those who fear that pulling the aid would harm Israel's economy, especially if it hits a bump in the coming years, are wrong. Even if there is a downturn, more U.S. aid will hinder rather than help a recovery because it will serve as an excuse for less fiscal responsibility rather than more.

Even more importantly, at this point in history, Israel needs its economic independence more even the most generous handout. The aid is now part of the problem. Not the solution.

1/25/98: Jews are news, and a fair shake for Israel is hard to find