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
“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.
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
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.
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
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
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
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
Sequestration could have regional implications as
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.”
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
“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
“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?”
1996, Netanyahu said, “I am convinced that our economic policies will lay the
foundation for total self-reliance and great economic strength.”
that must sound pretty nice.
Relevant to your professional network? Please share on Linkedin