The Reagan administration, after resolving objections by the Office of Management and Budget to increasing military aid for Israel, plans to ask Congress for approximately $1.9 billion in security assistance for the Jewish state next year, U.S. officials said yesterday.
The officials said that figure was approved by the White House after Secretary of State George P. Shultz reached agreement with OMB Director David A. Stockman on a formula circumventing the budget office's desire to freeze Israeli military aid at the present fiscal-year level of $1.4 billion as part of its drive for budgetary austerity.
U.S. and Israeli negotiators reached tentative agreement in late December on the $1.9 billion figure for the 1986 fiscal year. However, OMB subsequently argued that such a large increase would run counter to its efforts to cut the federal deficit by freezing many programs.
The formal aid request originally submitted by Israel totaled almost $4 billion: $2.1 billion in military assistance and $1.9 billion in economic aid, plus an additional immediate infusion of $800 million to help stem Israel's economic crisis.
Israeli officials said yesterday that Israel last month had submitted a document outlining possible economic and military aid requirements totaling $12 billion over the next three years. The Israeli officials stressed, however, that those portions of the document dealing with the years after 1986 did not constitute a formal request but were "preliminary long-range projections of anticipated future needs" and "almost surely will be subject to revision" depending on how the Israeli government fares in controlling the country's economic crisis.
Despite the enormous size of these actual and anticipated requests, supporters of Israel say they have encountered almost no sentiment on Capitol Hill for significant trims in aid to Israel. But, the officials said, the Israeli requests initially had "a very negative impact" at OMB.
OMB's argument that an increase for Israel would prompt demands for similar treatment by other interest groups was opposed by an internal administration coalition of Shultz, Defense Secretary Caspar W. Weinberger and national security affairs adviser Robert C. McFarlane.
They believe that the increase is necessary to maintain Israel's preeminent military position in the Middle East and to help combat the economic crisis.
According to the officials, the dispute was resolved when Shultz and Stockman agreed on a complicated formula that involves reshuffling some components of the administration's overall foreign aid request and diverting some funds originally earmarked for Export-Import Bank credits to the Israeli aid package.
The officials said that these measures, coupled with the normal adjustments that Congress makes in transposing its so-called "base line" budgetary figures from one fiscal year to the next, will provide sufficient funds to cover the increase. At the same time, the officials added, OMB will be able to argue that the adjusted total foreign aid request in the administration's budget submission for 1986 does not represent any substantial real growth from this year's amount.
In contrast to the military aid, the U.S. response last month to Israel's economic aid request was to promise a fiscal 1986 submission to Congress of $1.2 billion, the same amount that Israel is getting this year. However, the administration deferred a decision on the $800 million emergency request because Shultz was disatisfied with the pace of Israel's efforts to enact a comprehensive economic stabilization program, and served notice on the Israelis that he wants to see more progress.
However, U.S. officials said Shultz believes that his strategy gradually will force the Israelis to take the austerity measures that the administration considers necessary. If they do, the officials added, the United States is prepared to ask Congress for all or most of the $800 million Israeli emergency request.
That, the officials said, will be done in the form of a supplemental request to the fiscal 1985 budget so that it won't affect the 1986 deficit.
To help the Israeli government plan a long-range allocation of its fiscal resources between economic and military requirements, Shultz also offered to make a three-year commitment on U.S. military assistance if the Israelis specify what weapons they want to acquire during that period. So far, however, the Israelis have not agreed because they want a U.S. commitment that their requests can be renegotiated if Saudi Arabia or other Arab states obtain sophisticated new arms that Israel fears could shift the Mideast military balance in the Arabs' favor.