Joel Bainerman is the publisher of Tel Aviv Business, a monthly report on Israeli business and economic affairs, and a writer on Middle East economic and political issues. He lives in Beit Shemesh, Israel.

U.S. government aid to Israel is in dispute now as never before. In part, this has to do with the perception that Israel’s security needs have diminished, what with the end of Soviet help for Israel’s enemies and with advances in the peace process. It also results from the budget pressures that are causing U.S. politicians to cut back on a variety of long-established and popular programs. The new Congress’s skepticism toward welfare applies not just to the indigent in urban America but also to foreign states.

Israeli leaders have sought reassurance that these factors will not lead to a reduction in aid. When Israel’s Prime Minister Yitzhak Rabin was in the United States to address the American Israel Public Affairs Committee (AIPAC) Policy Conference in May 1995, he won a pledge from President Bill Clinton to “protect bilateral assistance to Israel.”¹ And while Senate Foreign Relations Committee chairman Jesse Helms (Republican of North Carolina) condemns foreign aid in general, he makes an exception for aid to Israel.

But another dynamic is also at work. A number of important voices among those concerned about Israel’s welfare are saying that perpetual U.S. financial aid to Israel may not be a good thing. In January 1994, Yossi Beilin, Israel’s deputy foreign minister, told a gathering of the Women’s International Zionist Organization that Israel may no longer need diaspora Jewry’s contributions: “If our economic situation is better than in many of your countries, how can we go on asking for your charity?”² Zalman Shoval, a former Israeli ambassador to the United States and a leading figure in the Likud party, recently told an American audience that Israel should suggest through its own initiative that the United States gradually phase out civilian economic aid. This skepticism is a positive development, in part because it goes beyond the old, sterile points raised by those trying to hurt Israel by denying it assistance; and in part because it returns the issue of aid to a practical discussion of benefits and losses.

While aid flows into Israel from many countries other than the United States, for simplicity’s sake we will look only at the American case, including both its governmental and private dimensions.

THE AID RELATIONSHIP

U.S. government aid. From 1948 to 1993, U.S. military and economic aid to Israel amounted to approximately $37 billion, of which $26 billion was in grants and $11 billion in loans.³ In 1994, Israel received $1.8 billion in military credits and $1.2 billion in economic aid, or 26 percent of the $11.5 billion total U.S. foreign aid bill.⁴ To put this in perspective, in fiscal year 1995, Egypt, the other major aid recipient, received $2.2 billion, of which $1.3 billion was military aid and $0.9 billion was economic aid.

Israel began receiving large amounts of economic assistance in the mid-1970s, when the United States started financing arms purchases through loans rather than the cash sales that had been the norm up until that point. Aid took a large leap upwards after Israel agreed to withdrawals in the Sinai: after the Camp David agreement with Egypt, an arrangement was informally but effectively codified into a fixed $3 billion a year (inflation has reduced the real value of this aid by about half since 1979).

U.S. military and economic aid each have rather distinct motivation and procedures. During the cold war, the U.S. government sent military aid primarily to countries where it had military bases (such as Greece, Turkey, Portugal, and the Philippines), or to countries facing Soviet-backed enemies, be they internal (for example, El Salvador) or external (including Israel). With the end of the cold war, the rationale for military aid has become less clear.

Economic aid has a variety of purposes, including disaster and hunger relief, promotion of democracy and market reforms, and support for Middle East peace. Most economic aid pays for projects either carried out directly by U.S. government agencies (usually the Agency for International Development) or by international and nongovernmental agencies to which the United States makes cash payments (for example, the World Bank). A small part of the money is paid out in cash to the recipient governments; confusingly, some of these cash payments at times have been included as military aid and some as economic aid, though in reality all are more similar to economic aid.

Israel is the only country to receive nearly all of its economic aid in the form of a cash payment. Until recently, that cash payment was more or less equal to the amount of debt service the Israeli government owed the U.S. government. As the debt has declined from the high levels incurred when Israel had such a large weapons-purchase bill and paid for those weapons with loans, the cash aid has become larger than the debt service due.

Diaspora Jewish aid. American Jews and other nongovernment sources provided $17 billion to Israel in the forty-five years between its founding and 1993. Jews in the diaspora also send aid to Israeli institutions, such as the Jewish Agency, universities, hospitals, and other nonprofit organizations. According to Bank of Israel and Jewish Agency statistics, diaspora Jewry donated $1.4 billion to Israeli nonprofit organizations in 1994,⁵ of which American Jews contributed some two-thirds. Diaspora Jews also provide loans to the Israeli government, mostly in the form of Israel Bonds.

IS IT HELPING OR HURTING?

Within Israel, economists disagree on the utility of all this money from abroad. While the conventional wisdom sees it as beneficial, a growing number of analysts dissent from this view, recognizing that economic dependence on foreign sources creates problems. This is progress, for just a few years ago, the possibility that external aid could be detrimental to Israel was not brought up in polite conversation.

U.S. grants. The argument in favor notes the utility of foreign aid in helping the government reduce its deficit, balance its budget, and stabilize its economy. “Had it not been for U.S. aid,” notes Professor Zvi Sussman of the School of Economics at Tel Aviv University,

Sussman adds: “The $1.5 billion in emergency aid allocated to Israel in the mid-1980s was responsible for helping to stabilize the Israeli economy and stifle hyperinflation.”⁶

In fact, this may be an exaggeration. The primary factor in bringing inflation under control was the government’s policy of drastically curtailing the purchasing power of the Israeli consumer and reducing the government deficit. A domestic political consensus in Israel in favor of changing long-established disastrous policies had much more to do with the economic reforms of the mid-1980s than did the carrot offered by U.S. aid.

A small group of commentators is skeptical of aid, believing that it is not just useless but has a detrimental effect. They include Daniel Doron of the Israel Center for Social and Economic Progress, Robert Loewenberg of the Institute for Advanced Strategic and Political Studies in Jerusalem, Steven Plaut of Haifa University, Alvin Rabushka of the Hoover Institution, and Tom Bethell of The American Spectator. Ezra Sohar, one of the earliest critics of U.S. aid to Israel and author of several books on the problems of Israel’s socioeconomic system, is the grandfather of this movement.⁷

Arnon Gafny, who served as governor of the Bank of Israel in 1976-1981, points out that foreign aid has caused Israel to suffer from what economists call the “Dutch Disease,” a generous but temporary gift (such as oil or external aid) that brings short-term benefits but impairs a country’s long-term competitiveness.⁸

Moshe Syrquin of Bar-Ilan University in Tel Aviv finds that the Israeli economy was doing quite well before 1973, when U.S. aid was minimal. As aid increased, the state of the economy worsened, manifesting itself in a slowdown in growth of output and productivity, a shift in the use of resources from investment to consumption, and a high level of government expenditure. At least in the Israeli context, he concludes, foreign assistance permitted discrepancies in the economy to continue, for it permitted reforms to be postponed.⁹ However, it cannot be proven by Syrquin, nor any other economist, that the nosedive in Israel’s growth rate in the 1970s resulted from the increase of U.S. aid. Most Western economies experienced similar decreases in growth rates due to the rise in oil prices. Also, when Israel’s security burden rose significantly after the Yom Kippur War, heavy spending drained funds that otherwise could have financed economic growth.

It is very difficult to prove that a rich country’s bestowing bilateral aid on a poorer one actually helps the poorer economy. Sohar notes that the lions’ share of U.S. aid to Israel in the 1970s consisted of loans to purchase military equipment. “The end result should have been known from the start,” says Sohar. “There is logic in borrowing to build a factory with the anticipation of repaying the loan out of profits. But in the case of armaments, it is obvious that there cannot be any profits.”¹⁰

The American government saw the threat posed to Israel’s economic welfare, and in 1986, the Congress passed an amendment to the Foreign Aid Law ensuring that economic aid to Israel would at least equal the annual amount due from the principal and interest on the debt (at that time approximately $10 billion). Sohar contends that the “economic” component of the aid package was designed to rectify this past misjudgment on the part of Washington and Jerusalem. Under these rules, 75 percent of the $1.8 billion in military grants Israel receives must be used to purchase defense equipment from U.S. firms (for most other countries, the ratio is close to or equal to 100 percent).

In fact, American defense and aerospace firms reap substantial benefits from U.S. aid to Israel, for it guarantees them a $1.35 billion captive market each year. Out of $1.8 billion in grants, then, Israel receives about $450 million in cash that can be converted into Israeli currency and used either to purchase Israeli-made military products or develop weapons (such as the Arrow anti-missile system). Steven L. Spiegel, a professor at the University of California in Los Angeles, points out that Israel performs invaluable services by testing and developing weapon systems for the United States, improving American-made equipment, and providing crucial intelligence information.¹¹ Moreover, Spiegel argues that Israel’s use of American-made arms not only saves the United States money but earns it more: For example, after Israel’s much advertised successes with U.S. weaponry in the 1969-70 War of Attrition and the 1982 war in Lebanon, U.S. arms sales worldwide in 1972-82 nearly tripled, from about $6.8 to $19.6 billion in constant 1982 dollars.¹² And while of course it does not wish for wars to occur, the United States gains valuable information by seeing its arms perform against those of Israel’s enemies, lessons that “cannot be purchased, developed, or simulated.”¹³

Another reason for aid to Israel has to do with U.S. politics: foreign aid is perhaps the least popular budget item in Congress but Israel is easily the most popular recipient of funds. Its presence makes it possible to pass a bill.

U.S. loan guarantees. After the Kuwait war, Housing Minister Ariel Sharon spent the $400 million in U.S. loan guarantees to Israel on apartments for new immigrants in the Galilee and Negev, and offered financial guarantees to contractors owned by Likud supporters for any unsold units. His ministry spent perhaps twice as much on the dwellings as it should have. Worse yet, Sharon’s ideological conviction that new immigrants should live in outlying rural areas (within the pre-1967 borders), such as the Galilee and Negev, led him to situate nearly 50 percent of the construction contracts there. Staying one step ahead of the bureaucrats, the newcomers realized that with no adequate commuter rail system, job prospects in these areas would be extremely limited. As a result, only 7 percent of the immigrants settled there. Mountains of unsold homes will cost billions and eventually be paid for by the Israeli taxpayer.¹⁴ Without the funds at Sharon’s disposal, these costly mistakes couldn’t have been made.

Not learning from this precedent, the Israeli government decided in September 1991 formally to request a $10 billion loan guarantee to help in the absorption of new Russian immigrants. It did so on the basis of a detailed April 1991 study by the Bank of Israel dealing with the financial requirements of absorbing Russian immigrants. The American Jewish community then made strenuous efforts to win these loans, with success. The U.S.-guaranteed loans are at lower interest rates and for longer maturities than commercial loans would be, but they not exactly soft: the terms are 7.3 percent interest, with a 3.5 percent risk-factor premium, over a thirty-year period. Compared to U.S. military aid, of which just $450 million in cash is available for spending by politicians, the $2 billion in annual loans is a huge amount, and it has already had a great impact on Israel’s economy. Unfortunately, that impact is largely harmful, for the loan guarantees are increasing Israel’s debt without solving the problem of finding employment for Russian immigrants.

With a sharp decrease in the number of Jews coming to Israel from the former Soviet Union (only 70,000 Russian Jews came to Israel in 1993, down considerably from the projected 200,000 when the loan guarantees were first requested), money for immigrant absorption is plentiful. In fact, the Israeli cabinet voted in August 1993 to transfer $225 million of immigrant funds to other activities. The Israeli government has also requested that Congress be allowed to increase the one-third limit of the $10 billion that can be allocated to reduce the national budget deficit and to repay expensive short-term internal debt.

Because of their high cost, Israel’s business sector hasn’t been too interested in taking advantage of these loans. In 1994, only one (government-owned) company, the Israel Electric Corporation, agreed to use a portion of them. Bezek, Israel’s national communications company, decided against taking any of the money because management believes it could borrow the same amount for shorter terms--dollar-linked loans at 4.5-5 percent a year, without the burden of having to carry them for 30 years. Nor are Israel’s banks interested in the money. David Friedman, general manager of Bank Leumi, says that “there is no problem for Israeli banks today to attain foreign currency and most factories have no trouble raising money for investment. Considering today’s conditions, there is no need to import capital.”¹⁵

Israel’s economy produces enough tax revenue to fund most of its infrastructure needs, so borrowing from foreign sources merely produces a situation in which the government has no immediate use for the money and thus seeks to channel it into other areas, such as reducing the budget deficit or loaning it to banks, which in turn can offer more loans for cars and homes and thus hike consumption. Indeed, much of the money has gone into the state banking system and come out in the form of consumer credit. From January to September 1994, consumer credit rose from 44.5 billion shekels to 52.8 billion shekels,¹⁶ an increase of nearly $3 billion--curiously close to the $3.5 billion that Israel had raised to that date from the loan guarantees.

Of course, the $10 billion being a loan, it will have to be repaid. Unless it is invested wisely and increases the size of Israel’s economy, it could very easily saddle Israel with a debt burden without increasing proportionately Israel’s ability to repay.

There’s another problem too. Loan guarantees, like aid, chip away at Israel’s sovereignty. “The State Department is not above broadly hinting to Israel that, `If you don’t behave, economic aid might be cancelled,’” Sohar says. Worse, according to a confidential report leaked in May 1993 by disgruntled Finance Ministry officials, Israel agreed, as a condition to receive the loan guarantees, that it would report all expenditures in the Occupied Territories to Washington, not just those connected to U.S. funding. This includes every public shekel spent on infrastructure, such as water, sewage, schools, and roads. It also includes reporting on private investment in homes and businesses. Opposition leaders responded to the report by claiming that Rabin’s concessions had effectively turned Israel into a banana republic.

DIASPORA JEWISH AID

While giving money to Israel is perhaps the most central aspect of Jewish life in America, sensitivities around this question mean that public discussion of the donations’ efficacy rarely takes place. This discussion, however, is long overdue. Do unilateral transfers of money from diaspora Jews really help the Israeli economy? What would happen to the Israeli economy if world Jewry stopped sending these funds to Israel?

United Jewish Appeal/Jewish Agency. American Jews give about $550 million a year to the United Jewish Appeal (UJA), which then turns the money over to the Jewish Agency in Israel. At that point, diaspora Jews lose virtually all say over how their money is spent. Donors tend to think of their UJA donations as charity, but that’s not the case. Israel is not a poor country and not in need of charity. Per capita income now reaches $16,000, making Israelis only slightly less prosperous than the average Western European. With a gross domestic product at $65 billion, the country could--if managed properly--pay all its bills, even its high defense tab, without foreign donations. Nor does the UJA money help Israel’s poor. Israel has an extensive welfare program that provides adequately for its poor (a subject rarely discussed in fundraising circles for fear of jeopardizing the whole effort), and the Jewish Agency gives out none of its funds as welfare. Rather, it uses these to support educational programs, new settlements, religious institutions, and the absorption of new immigrants.

Few outsiders know how the Jewish Agency actually spends its money, for it does not itemize how much it applies to administration -- a particularly sore point thanks to the celebrated case of Simcha Dinitz, Jewish Agency chairman in 1988-94. His activities are worth reviewing, for they reveal that much is wrong. According to evidence submitted in an affidavit by Ranana Gutman, the Jewish Agency’s comptroller, Dinitz used the agency’s American Express card for his personal expenses. In the period April-November 1991 alone, he misallocated $26,753. He apparently had a good time, for example flying to Italy for three days and running up a bill of $3,048, not including his air flight and allotted expenses. Soon after, he flew to New York for three days and added $4,573 to “his” credit card. In 1991, Dinitz took eighteen trips abroad, overspending his allotted expense account by $87,191. A hint of how much Dinitz overspent was the demand by the comptroller that he return $23,000 to the agency. To soften the implications, the agency is retroactively calling this amount repayment on a loan.

Despite attempts by the Jewish Agency and Prime Minister Rabin to minimize the fallout from Dinitz’s alleged misuse of funds, Dinitz finally went to trial in September 1994 on charges of misuse of public trust. One of the witnesses at the trial, Jewish Agency official Nadav Shukrun, pointed out that financial crimes were widespread at the agency. “Everyone received inflated travel expenses. This was the accepted norm,” Shukrun testified.¹⁷ Indeed, he appears to be right. Following leads opened up by the Dinitz case, the Israel police are now investigating a number of as yet unnamed agency officials: a department head who received $300,000 after he had retired with a pension and was later further rewarded by the agency with a trip around the world; a member of the agency’s Workers Committee who controlled an educational institute and divided much of the school’s budget among his sons, plus the purchase of four luxury apartments; and the director general of another department who quit the agency in disgust over matters not yet disclosed and was rewarded with a lucrative emissary position in return for his silence.

These cases are not unique but part of an endemic pattern. Donations to the Jewish Agency waste resources, for so much is eaten up by the bureaucracy. Worse, this institution contributes to the stifling control by politicians of the lives of Israeli citizens and new immigrants. Political parties in Israel exploit the Jewish Agency by rewarding those who are owed a political debt by the party with high-paying jobs there. In this way, the Jewish Agency helps keep alive all that is wrong in the Israeli political system. Rather than doing good, the agency inflicts significant harm by keeping third-rate politicians around longer than would be the case if there were no Jewish Agency.

Does Israel need a quasi-public agency to provide services to the Israeli public that they already receive from one government ministry or another: education, settlement, immigrant absorption? Every other country seems to get along just fine without a local variant of the Jewish Agency, and Israel could too. There is simply no need for a Jewish Agency.

To this, some might reply that such fundraising in the United States benefits the givers, letting ordinary Jews feel more Jewish. That’s a dubious argument to begin with, but even if there is some truth to it, surely the well-being of Israel’s economy should not be sacrificed for the sake of the diaspora’s ethnic awareness.

Israel Bonds. The purchase of Israel Bonds is often portrayed as “investing in Israel’s future,” but a more apt slogan would be “building a bigger debt for Israel.”

For many years after its founding by Prime Minister David Ben-Gurion in September 1950, the Israel Bonds organization was a key source of investment capital for the development of Israel’s economic infrastructure. While in those early years the funds raised were earmarked for a special development budget, today they are channeled into the regular state budget and tossed into the national budget to be spent by the individual ministries. There is no mechanism to determine whether these funds are allocated to semi-productive investments, such as roads and telephone lines (it could be argued that these expenditures should be paid for from taxes on gasoline and out of profits of Bezek, Israel’s communications company), or to fuel government and public consumption. In fact, the funds are often used to finance government activity rather than promote economic growth. So long as money raised via Israel Bonds is simply handed over to the government, bond owners and the Israeli public cannot determine if the money has been put to good use.

Since the early 1950s, Israel Bonds have raised nearly $13 billion. Proceeds from these sales rose from $400 million in 1971 to $1.2 billion in 1992. In 1993, more than $1.167 billion worth of Israel Bonds were sold, an increase of 18 percent over the previous year and nearly 300 percent from 1984. In 1994, $992 million was raised by Israel Bonds. These days, about a billion dollars worth of bonds are sold each year. Of course, this money has to be repaid. To do this, the Israeli taxpayer must come up with the money to repay the interest and principal, which comes in the form of higher taxes and, consequently, slower economic growth. The government currently owes bondholders $6.153 billion (including interest), which totals one-third of Israel’s $18.57 billion foreign debt.¹⁸

In 1992, Israel Bonds were sold at a rate of 7.5 to 8 percent interest, when the prime rate in the United States for similar-type, five-year government-backed bonds was 5.25 percent. The Finance Ministry finally recognized the problem, and in 1993 reduced the rate of interest to 6.5 percent, a savings of more than $60 million. Shitrit points out that Israel could mobilize the same amount of funds by borrowing from foreign commercial banks and save nearly $200 million annually. “I would prefer that people stop buying Israel Bonds,” he says. “It does not help the State of Israel.”¹⁹ The irony, according to Shitrit and Edri, is that many bonds today are not purchased by Jews interested in helping Israel but by international banks, financial institutions, American municipalities, and pension funds. At a 6.5 percent rate of interest, it is considered by many U.S. bond traders “a very good piece of paper.”

This reality is slowly dawning on Israeli policy makers. Despite the claim by Foreign Ministry officials that Israel Bonds are an important source of ongoing capital to the Jewish state, the Knesset Finance Committee is currently debating a motion to cancel the sale of Israel Bonds. According to the sponsors of the motion, Knesset members Rafi Edri of Labor and Meir Shitrit of Likud, the mobilizing of Israel Bonds costs the State of Israel $73 million a year in interest payments and $40 million in administration expenses.

POLICY RECOMMENDATIONS

Israel’s supporters should understand that Israel need not depend on foreign aid. The moment the faucet is shut, Israeli leaders will take constructive actions, such as cutting the national budget and selling off state-owned assets. They will have to cut off government-provided mortgages to homeowners (a function that should be provided by banks), which costs nearly $1 billion a year. The $2.5 billion in government subsidies to politically connected organizations, such as the kibbutzim, the Histadrut (Israel’s federation of labor unions), and the Kupat Cholim sick fund, will have to end. Such action would, for example, improve the chances of reform in Israel’s politicized, inefficient water-distribution system, in which subsidies play an important part.²⁰ These useful changes will not be made, however, as long as the yearly overdrafts are paid by others.

Furthermore, the moment there are fewer fiefdoms to battle over, there will be less resistance to reforming the decrepit electoral system. Contrary to what most observers of the Israeli scene believe, political change will follow economic reform, not vice-versa. Aid given with no strings attached and without a commitment to true economic reform serves no purpose.

U.S. government aid. There are alternatives to the status quo. One would be for the United States to cancel Israel’s debt (just as it cancelled Egypt’s debt). This would greatly reduce the rationale for the $1.2 billion in civilian aid to Israel. Israel’s no longer being the number-one recipient of U.S. foreign aid would also deprive the State Department of a means to manipulate Israeli decision making with threats (“Do what we say or we’ll cancel this gift”). Further, aid is welfare and welfare demeans, for states as well as for individuals.

As for harm done to certain sectors of the economy because of a loss of aid, the most productive areas, namely, industry and the private sector, do not receive aid money anyway. It is therefore doubtful whether Israel’s productive economy would feel any harmful short- or long-term economic effects. In a word, Israel would not only survive the loss of U.S. aid but its economy would benefit.

Diaspora Jewish aid. Moneys raised by the UJA should remain in America for Jewish social, educational, and religious needs. This would give the American Jewish community more for its money, while depriving Israeli politicians of a the Jewish Agency as a dumping ground for the party faithful. The Jewish Agency should simply be shut down.

Israel Bonds is the most harmful component of foreign assistance to Israel, and the current system must be changed if these funds are going to serve, rather than stifle, economic growth in Israel. There’s no reason why proceeds from Israel Bonds could not be commercially invested in Israeli industry. If Jews abroad want to help Israel, they should strengthen the capital base and help expand the production and marketing activities of Israel’s private-sector companies. This would also create jobs for new immigrants. With accountability built into the equation, the capital raised by American Jews would go further and contribute greatly to Israel’s long-term economic growth.

If American and diaspora Jews still wish to give charitably to Israel, they should avoid politicians and bloated bureaucracies and give directly to such worthwhile projects as hospitals, universities, and religious institutions, all of which have a wonderful influence on the daily life of Israelis. In the long term, however, both the U.S. government and diaspora Jewry should look beyond the old aid relationship and think about a true partnership with Israel. To the extent it is based on mutual respect and benefit rather than cash, it will have stronger and deeper bases.

CONCLUSION

In the debate over U.S. aid to Israel, politics has always taken precedence over economics: supporters of Israel in the United States see money as a means to express commitment to Israel. But this is a mistake. Aid should be assessed in terms of its economic impact, not political intentions. The well-being of Israel’s economy must take precedence over gestures to strengthen the U.S.-Israel relationship. Unless Israel’s supporters see the wealth-generating capability of the Israeli people and their thriving industries, the Jewish state will remain relegated to economic and political dependency, no matter how high its per capita GDP or how large its economy.

If American politicians are ever to stop using U.S. aid to Israel to demonstrate their support for the U.S.-Israel bond, American Jewish organizations have to stop asking them to prove themselves in this way. Jewish organizations, starting with AIPAC, have plenty of other concerns when it comes to Israel, so they won’t be at a loss for work. They can devote more attention to ensuring Israeli access to top-of-the-line military equipment, to U.S. diplomatic support in the peace process, and the further extention of the Free Trade Zone.

There is another complication: those who wish Israel ill invariably call for a cut-off of aid, so this approach has an anti-Israel feel to it. But Israelis and their friends must not let this antagonism cloud their own judgment. Those who wish Israel ill believe foreign aid useful to Israel; and they argue it should be cut off on the basis of some unpleasantry (alleged human rights violations, disagreement over some aspect of the peace process). But I am arguing for a very different approach, one that reduces Israel’s dependence on outside assistance in a constructive fashion, without harming its security or welfare.

Speaking as an Israeli, I am sure there are many others like me who are waiting for the day when we will able to demand that our politicians tell Washington, “Thanks, but no thanks.”

¹ Near East Report, May 15, 1995.
² The New York Times, Feb. 1, 1994.
³ Figures compiled from documents in the General State Archives, Central Bureau of Statistics, Jerusalem.
⁴ “Expenditure of U.S. Foreign Aid,” Treasury Report to Congress (Washington, D.C.: U.S. Government Printing Office, 1993).
⁵ The Jerusalem Report, Dec. 15, 1994.
⁶ Interview with author, Oct. 1994.
⁷ See Ezra Sohar, Israel’s Dilemma: Why Israel Is Falling Apart and How to Put It Back Together (New York: Shapolsky Publishers, 1989).
⁸ Shelot Al Hasiud Hutz Al la Hameshek Israeli (Tel Aviv: International Economic Institute, 1988).
⁹ Ibid.
¹⁰ Interview with author, Oct. 1994.
¹¹ Steven L. Spiegel, “U.S. Relations with Israel: The Military Benefits,” in Daniel Pipes, ed., Sandstorm (Lanham, Md.: University Press of America, 1993), pp. 309-44.
¹² Foreign Military Sales, Foreign Military Construction Sales, and Military Assistance Facts, as of September 1981, Data Management Division, Comptroller, Defense Security Assistance Agency, Washington, D.C., 1981, pp. 1-2, cited in ibid., p. 340.
¹³ Spiegel, “U.S. Relations with Israel,” p. 313.
¹⁴ Joel Bainerman, “Shock Treatment,” The National Review, Apr. 13, 1992.
¹⁵ The Wall Street Journal, Apr. 19, 1994.
¹⁶ Ha’aretz, Oct. 3, 1994.
¹⁷ The Jerusalem Post, Oct. 3, 1994.
¹⁸ Knesset debate, Apr. 4, 1993.
¹⁹ INSIDE ISRAEL, Apr. 1993.
²⁰ Howard Cohen and Steven Plaut, “Quenching the Levant’s Thirst,” Middle East Quarterly, Mar. 1995, p. 40.