From: abas@unix.cis.pitt.edu (Jasem Alhumoud)
Newsgroups: soc.culture.lebanon
Subject: Borrowing Money for Israel?????
Keywords: Money
Date: 8 Apr 92 02:11:42 GMT
Article-I.D.: unix.204553
Organization: Univ. of Pittsburgh, Computing & Information Services





                      Borrowing Money For Israel: Annual
                      Interest Alone Exceeds $3 Billion

                            By Frank Collins


  The double dip recession has now become so grave that the American people
are demanding that President George Bush direct his attention to the sorry
state of the domestic economy. Foreign aid, notoriously unpopular with the
US public in recent years, has become doubly so in this period of economic
distress.

   Even if Congress fails to react to the disquiet about foreign aid, it is
likely that the bloated US grants to Israel in particular will no longer
be exempt from public scrutiny and that they will be looked upon as a bad
congressional choice between responding to domestic fiscal needs and yielding
to AIPAC, the Israel lobby.

   Part of the taxpayers 'resentment against the practice of the federal
government has been sparked by the manner in which Congress appropriates
money, particularly foreign aid. Foreign aid generally is allocated through
"continuing resolutions," without a "yes" or "no" vote on particulars. Key
committee members then allocate 40 percent of the worldwide total of US
bilateral foreign aid to Israel and Egypt. Aid to Egypt climbed to roughly
two-thirds of that to Israel as a result of the US-brokered peace agreement
between the two countries.

   Grants for foreign aid are especially noteworthy because they amount to
giving away borrowed money. The case of Israel over the last 40 years is
the most ASTONISHING. Every dollars given to Israel has been money borrowed
by the US Treasury from private lenders, domestic and foreign. As the
Treasury debts are interest-bearing, the Treasury has had to borrow more
money year by year to pay the interest on the outstanding debts incurred
by grants to Israel, plus interest on the earlier interest.

   By the end of the fiscal year 1990, such US borrowings, starting with
a modest grant to Israel of $100,000 in 1951, totaled $32.111 billion for
the grants themselves, and an additional $21.351 billion in accumulated
interest, for a total of $59.565 billion.

   In FY 1991, annual interest alone on that $59.565 billion cost $3.246
billion at the average Treasury rate of 5.45 percent. Thus the grants made
to Israel for FY 1991, officially reported as $5.256 billion, actually cost
US taxpayers $8.502 billion in FY 1991, when the $3.246 billion in interest
is included.

   This lopsided situation will continue  in FY 1992, when $3.491 billion
in interest will be added to the cost of the FY 1992 grant of $3 billion,
which already has been paid to Israel in the first month of the fiscal year.
This FY 1992 outlay, general details of which are summarized in the table
below, does not include any part of the $10 billion in US loan guarantees
requested by Israel, consideration of which was deferred for 120 days at
the request of President Bush last September.

   If the deficit financing of subsidies to Israel were to continue for 10
more years at the $3 billion minimum rate per year and at five percent
interest, the total debt undertaken by the United States would be $155
billion and the annual interest payment after 10 years would be $10.7 billion,
more than three times the annual grant of $3 billion. This is an annual
total of almost $14 billion, or more than $3,000 per year per Israeli.
With this prospect, it is clear that borrowing ever-increasing amounts of
money to give to Israel on an annual basis for the indefinite future will
be unacceptable to the American public.


              Abridged Listing of Annual Grants to Israel,
                   together with the Cumulative Grants
                    and the Compound Interest on Them.


          Grant*        Average         Annual***      Cumulative     Cumulative
         for given     Treasury**       Interest         Grants        Grants
Fiscal    year         Interest         Payment        to Israel      + Interest
 Year    (million)     Rate (%)         (million)      (million)      (million)
------   ----------    ----------       ----------     ----------     ----------
 1951       0.1         1.83                 0.0              0.1           0.1

 1961      18.3         2.30                63.8            345.3       2,856.4

 1971       2.8         3.64               136.7            437.6       3,893.6

 1981    1,291.0        6.91             1,024.9           8,280.2     17,148.5

 1990    3,028.0        5.75             3,074.1          32,111.4     59,565.4

 1991    5,256.0****    5.45             3,246.3          37,367.4     68,067.7

 1992    3,000(+?)      5.13(est.)       3,491.9          42,623.4     74,739.1

 2001    3,000(+?)      5.0 (?)          7,233.5          67,367.9    154,902.0

   *The data for the grants to Israel were taken from the table in the
    Congressional Research Service Issue Brief, "Israel: Foreign Assistance
    Facts" by Clyde R. Mark, updated September 1991. The figures for the grants
    used in these computations did not include the administrative costs of
    direct loans and US loan guarantees and other indirect costs.
  **The Treasury interest rates were calculated from data in Section 7 of the
    "US Budget 1992" (US GPO).
 ***Calculated from cumulative grants plus interest at end of previous year.
****This included $650 million for Israeli damages from the Gulf war and
    a number of special grants. The Israelis are asking that the annual basic
    grants of $3 billion be now increased to $5 billion.


    US government grants to Israel are unique in that most of the money is
transferred to Israel in advance, within 30 days of the first day of the new
fiscal year, thus enabling the Israeli government to buy short-term US
Treasury bills to be held until the money is needed for Israeli expenses.
Under this arrangement, the United States presently pays interest to Israel
on the short-term bills that Israel holds, while concurrently paying interest
on the $3 billion transferred to Israel last October. At the prevailing rate
of 4.2 percent for six-month Treasury bills, the interest on the advance
payment will amount to an extra $63 million for FY 1992, all pocketed by Israel.
(The accompanying article does not take account of this extraordinary
arrangement in computing the $3.491 billion FY 1992 cost to the Treasury of
interest for outstanding past grants.)


 Frank Collins is a free-lance journalist specializing in the Middle East.


           Jasem (Dr. J.)