Israel, always more equal than other nations in the complex world of U.S. foreign aid, will apparently also come out ahead of others under the Gramm-Rudman-Hollings budget cuts.
The new deficit-reduction act will force the State Department to cut aid programs to every nation by 4.3 percent, and in theory that also applies to Israel. But unlike every other nation, Israel has already received all of its $1.2 billion in economic aid for fiscal year 1986.
That leaves the Reagan administration $51 million short, and it is fretting now over whether to ask Israel for the money back or to squeeze that much out of other nations' totals.
An Israeli Embassy official said yesterday that he had not heard about any U.S. proposal to ask his country to return any money. "I doubt that anyone will ask for the money back. I'm not holding my breath," the official added.
He said Congress "specifically revealed its intentions" by allowing Israel to get its aid funds early, in a provision of the fiscal 1986 foreign aid authorization bill. Israel is unique among U.S. economic aid recipients in receiving its money from Washington in a lump sum at the beginning of the fiscal year, a practice that permits Israel the interest earnings, or "float," on the money.
The official, who asked not to be quoted by name, also said he assumed that the administration wouldn't attempt to reduce $750 million in supplemental economic funds that was approved by Congress for Israel last year but has not yet been disbursed. Those funds were authorized in fiscal 1985 and Gramm-Rudman-Hollings only covers fiscal 1986, he noted.
However, State Department sources said Israel's supplemental funding is the most likely target for retrieving the necessary $51 million. In a complicated process, every nation's budget would first be trimmed equally to make up the $51 million, and then that much of the supplemental money earmarked for Israel would quickly be re-programmed back to the other nations to restore their losses.
Secretary of State George P. Shultz is expected to decide sometime next week whether to ask Israel to return the money, go through the reprogramming exercise or reduce other nations' funding by the required amount.
The decision is complicated because the State Department first must determine how to distribute $1 billion in painful foreign aid cuts that Congress made in Reagan's fiscal 1986 request. Congress earmarked certain parts of its $9.6 billion military and economic aid appropriation for Israel, Egypt and many other nations, so that the cut falls disproportionately on the nations that were not singled out for special treatment. The Gramm-Rudman-Hollings cuts will come on top of those reductions.
State Department officials said a required Gramm-Rudman-Hollings cut of $77.4 million also will be made in the $1.8 billion in military grants Israel is due to receive in fiscal 1986 as part of the overall cuts in military aid. But the Israeli Embassy official said the $1.8 billion figure had been pledged by the administration before it was submitted to Congress.
"The Israeli government feels this was an agreement between the two governments and hopefully it won't be touched," he said.
"It's American law and American money," he added. "All I can say is that we did have an understanding. The U.S. government agreed this was the minimum required for Israel's defense purposes, and, given what's happened in the [Mideast] area lately, that hasn't changed."
A spokesman for the Egyptian Embassy, which is the second largest recipient of foreign aid at $2.1 billion in military and economic assistance, said yesterday that his government hoped its portion would not be cut. "You know there is a certain parity between us and Israel and Israel already got its [economic] money," he said. State Department officials said Egypt's funds would have to be cut under the law.
Unlike Israel, Egypt's $815 million in economic aid is paid out piecemeal for specified projects.
"We really need this money," the spokesman said. "It would be very hard to cut it now."