The Cost of Friendship

By Robert T. Zintl

It may be the least popular item in the budget. Yet despite withering reductions in domestic programs, funding for foreign aid has risen from $5 billion to more than $18 billion since Ronald Reagan took office. Under heavy pressure to hold down spending, the Administration this week is proposing to freeze the total amount of aid for next year. But its fiscal 1986 budget includes hefty rises in military assistance to Egypt and Israel; added to that will be an undetermined amount to meet Israel's unresolved request for more economic aid. To accommodate these increases, at least $1 billion will have to be cut from economic aid to other countries.

Israel is already America's biggest foreign-aid client. This year it received $1.2 billion in economic assistance and $1.4 billion in direct military aid. But faced with a 445% annual inflation rate and dwindling foreign-exchange reserves, the new government of Prime Minister Shimon Peres estimates it will need $4.1 billion in U.S. military and economic aid for fiscal 1986 (a $1.5 billion increase), and some $8 billion more in the following two years. Peres, in turn, promises harsh economic austerity measures that will nearly double Israel's unemployment rate, to 8%, and force real wages down to their 1982 level.

Israeli Defense Minister Yitzhak Rabin came to Washington last week to lobby for the military-aid portion of Israel's request (see WORLD). At a midweek meeting in the White House, he said that Israel is "taking real risks" by cutting its own defense spending to $2.6 billion, a twelve-year low. Reagan promised Rabin an additional $400 million in military assistance next year --about half of what the Israelis asked for. But Administration officials, led by Secretary of State George Shultz, want to hold off deciding on economic-assistance levels until Prime Minister Peres proves he is serious about his austerity program.

Since the 1978 Camp David agreement, the U.S. has guaranteed Israel and Egypt comparable amounts of aid, and Egyptian President Hosni Mubarak is due in Washington next month to ask for a boost from the current $2 billion to $3.2 billion. Egypt's parity with Israel is considered an important indicator of American commitment to moderate Arab states, as are proposed U.S. arms sales to those countries. Saudi Arabia is scheduled to buy 40 more American F-15 fighter jets, along with missiles and tanks, a sale the Administration intended to announce during King Fahd's visit to Washington next week. But after Rabin argued that the planes would shift the region's military balance, the State Department announced a postponement and a "comprehensive review" of all arms sales to the Middle East.

Israel and Egypt account for a third of U.S. foreign aid, and their requests for increases will force the State Department to make painful choices in cutting back aid to other countries. Reagan's Administration has steadily emphasized military assistance. Last year El Salvador, Honduras, Costa Rica and Guatemala received a total of $297 million in military aid, and this year the President intends to ask Congress for an extra $150 million for El Salvador. Central America is expected to continue to receive a large portion of the military-aid allotment. The White House also wants Congress to nearly double the $9 million for Peru to help it fend off guerrilla insurgents. Spain, Portugal, Turkey and the Philippines, which are host to U.S. bases, get a high priority for military aid; assistance to the Philippines will jump from $45 million to a proposed $100 million to help it fight a growing rebel movement.

Most likely to be sacrificed is money for economic assistance to underdeveloped nations--even though in the long run such humanitarian developmental aid is likely to pay the greatest dividends for the U.S.

With reporting by Johanna McGeary/Washington