The State Department, seeking to ease congressional impatience over the Reagan administration's failure to act on Israel's request for $1.4 billion in emergency economic aid, is expected to ask Congress this week to resist calls for action on the funds without an administration request.
U.S. officials and congressional sources said the plea will be made Tuesday at closed meetings of two key House subcommittees by William Schneider Jr., undersecretary of state for security affairs, and Herbert Stein, a former chairman of the Council of Economic Advisers who has been advising Secretary of State George P. Shultz on the Israeli aid problem.
They are expected to tell subcommittee members that Stein, who recently visited Israel, has reached informal agreement with Prime Minister Shimon Peres on 10 "benchmark" measures to bring the inflation-ravaged Israeli economy under tighter budgetary and financial control.
But they also will argue that if the United States prematurely approves a massive infusion of aid, Israel's coalition government might decide it does not have to make the political decisions necessary for the "benchmark" steps. If that happens, they will contend, Israel's economic difficulties will worsen and U.S. assistance will not help in achieving structural reforms the administration believes are necessary to restore Israel to financial health.
These arguments are to be made behind closed doors to the House Appropriations subcommittee on foreign operations and the House Foreign Affairs subcommittee on Europe and the Middle East on the day the Foreign Affairs Committee is scheduled to begin marking up a foreign aid bill for fiscal 1986.
Israel's supporters are expected to argue that if the administration does not submit a formal request during the markup, the committee should proceed unilaterally to provide the $1.4 billion over a two-year period. Their plan calls for the first $800 million to be made available immediately as a supplement to this year's budget, with the balance to be disbursed in fiscal 1986.
There has been increasing friction between Congress and the administration over what Israel's supporters charge is an attempt to use the emergency aid as a lever to impose a U.S.-fostered austerity program. Rep. Jack Kemp (R-N.Y.) has charged the administration was treating Israel "like a Third World country is treated by the International Monetary Fund."
In response, Shultz criticized some of the Peres government's fiscal measures as counterproductive. Although he agreed to continue fiscal 1986 economic aid to Israel at this year's $1.2 billion level, he said the emergency request "is a more difficult issue" and refused to say when it would be acted upon.
Shultz is known to have been influenced by W. Allen Wallis, his undersecretary for economic affairs and one of those who contend U.S. aid will be ineffective unless Israel adopts strong austerity measures.
Sources said Stein reported to Shultz that he had received a "very positive impression" of the Peres government's seriousness in tackling the economic situation. Stein also reportedly said U.S. expectations had been "unrealistic" and Washington should make its judgments about timing emergency aid on the basis of Israel's movement toward the "benchmark" measures.
The sources stressed the "benchmarks" do not require Israel to take such IMF-type actions as cutting its budget by fixed amounts as a condition for aid.
One of the moves, legislation barring overspending of budget limits, has been approved by Israel's parliament and the others, involving matters like a more restrictive monetary policy, are expected to be implemented shortly.
Schneider and Stein are expected to say Tuesday that the administration is prepared to watch Israeli actions closely and, if progress on the "benchmarks" appears satisfactory, to submit the emergency aid request shortly after Congress returns from its April recess.