In 1996, then-Prime Minister Binyamin Netanyahu dropped jaws when he stood before a joint session of the US Congress and declared that Israel intended to wean itself from the billions it received in annual American assistance.
In US spending cuts, there is pain for Israel too
“I believe there can be no greater tribute to America’s long-standing economic aid to Israel than for us to be able to say: We are going to achieve economic independence,” he said. After an uproar, Congress decided instead to convert the economic assistance to military assistance.
This week, Netanyahu may wish he had been more successful.
Unless US President Barack Obama and Congress reach an unlikely agreement by March 1, $85 billion in automatic budget cuts known as “sequestration” will dig into the US government’s spending, a move that threatens to tip the country back into recession and send ripple effects throughout the world.
The cuts, written into law alongside planned tax hikes during a debt ceiling fight in 2011, were intended as an unpalatable enforcement measure that became known as the “fiscal cliff,” which would force Democrats and Republicans to hammer out a deficit reduction plan.
At the start of the year, the parties narrowly averted the cliff, settling on a tax plan, but kicking the cuts down the road for two months to give themselves time to find a solution.
For Israel, the sequester will have both direct and indirect effects. On a very direct level, it will eat into its military assistance.
Though the exact numbers remain unclear because the way the sequester will be carried out hasn’t been set, Israel will lose out from direct military aid and joint programs in the Pentagon.
According to a staffer on the US House Appropriations Committee, if the 5.3 percent aid reduction is applied equally to all recipients of US security assistance, the hit to Israel would be $164.3 million (out of the $3.1b. it receives). The total reduction to US security assistance around the world, he added, would be more than $550m.
The other cuts Israel faces would come from defense spending, which will account for about half of the sequester. According to the House Armed Services Committee, the defense budget will lose $55b. a year beyond already-planned for cuts.
“That would mean an additional $492b. in cuts on top of the $487b. already being implemented,” the Armed Services Committee stated in a release. “In total, over $1 trillion would be cut over the next 10 years.”
That could mean major cuts to joint programs like the Arrow missile defense system and David’s Sling. According to Globes, fully cutting the joint programs would slash $479m., while merely reducing them would slash $300m.
When it comes to Iron Dome, the effects are somewhat indirect. Although Obama has promised funding for the program, the fact that it is not part of the current budget means the sequester won’t directly cut its funding. According to Roll Call, a defense authorization bill passed by the House for 2013 authorized $680m. through 2015 for Iron Dome. The amount it actually receives will be hammered out in future US budget negotiations.
Sequestration could have regional implications as well.
Noting that the State Department and USAid would absorb about $2.6b. in cuts from sequestration, Secretary of State John Kerry warned that “an over $300m. cut to our Foreign Military Financing Account could lead to reductions in military assistance to Israel, Jordan and Egypt, undermining our commitment to their security at such a vital time.”
Egyptian dependence on American financing is one of the few remaining pillars in its peace treaty with Israel, so the whole region would lose out if the US was unable to exert financial clout toward it.
And, of course, Israel will face myriad economic repercussions if its largest single trading partner falls into recession.
“This senseless and arbitrary budget cut could prevent the United States from fulfilling its obligation under the Memorandum of Understanding (MOU), intended to ensure Israel maintains its technological and qualitative military edge.” Rep. Nita Lowey (D-New York) said of the cuts.
“At a time when rockets from Gaza strike Israel and threats from Syria, Iran, Hezbollah and Hamas endanger Israeli civilians, cutting our security assistance is neither smart nor responsible.”
Rep. Steve Israel (D-New York) agreed.
“The across-the-board spending cuts set to go into effect tomorrow are not only bad for our economy, they are also bad for Israel. But they are preventable,” he said. Instead of cutting aid to Israel and damaging the American economy, he continued, “why aren’t we rolling back the $4b. in annual subsidies that we provide to big oil companies in America?”
In 1996, Netanyahu said, “I am convinced that our economic policies will lay the foundation for total self-reliance and great economic strength.”
Today, that must sound pretty nice.