Several months ago there was much discussion whether loan guarantees in the amount of $10 billion should be granted to Israel for settlement of Soviet Jews. Because of disagreement on housing starts in Judea/Samaria (the "West Bank"), it was decided to postpone the matter. Now, with a new government in Israel, understanding on this point has been reached and the loan guarantees have been granted. But still, we should ask ourselves: Are these loan guarantees good for the United States? Were we right in granting them?
What are the facts?
What is the purpose of the loan guarantees? For many years it has been one of the major purposes of the U.S. policy to persuade the former Soviet Union to allow free emigration of its citizens. Now that this lofty goal has finally been attained, the Jews of the country, its most endangered minority, have opted in large numbers to leave. A good number have chosen to come to the United States (our country has only a limited quota for them). The great majority have chosen Israel as their now homeland. So far, about 400,000 have come; a total of 1 million to 1.5 million are expected over the next five years.
Israel has a population of 4 or 5 million. The expected immigration is equivalent to an increase of 50-75 million in the United States more than the population of our three or four most populous states. These people arrive virtually penniless in Israel. All have to be fed, clothed, housed, education has to be provided, jobs have to be found, and infrastructure has to be created to accommodate this huge influx. It has been and will continue to be an unprecedented humanitarian endeavor. The United States can take pride in being an active participant in it.
What will the loan guarantees cost the United States? Misinformation about the loan guarantees abounds. The guarantees are just that guarantees, not loans or grants from the United States. It is equivalent to co-signing a note for a friend. No money will be transferred to Israel from the United States Treasury. There will be some "scoring." But the ultimate cost to the United States will be zero.
In its 44-year history, Israel has never defaulted on a loan. The credit guarantees will not increase the U.S. deficit, nor will they affect domestic programs in any way. The United States routinely grants such loan guarantees. Iraq was granted a $5 billion guarantee just a few months before the outbreak of the Gulf War; about $600 billion in domestic guarantees and direct loans are expected to be granted by the U.S. within the next five years.
What's in it for the United States? The loan guarantees are essentially a humanitarian undertaking, without cost to the United States. But there will be substantial tangible and measurable benefits for the United States. Economic activity in Israel, as a result of this immigration, is projected to cause a surge of $170 billion in imports over the next five years, at least $30 billion of which is projected to be purchased in the United States. In addition, the U.S. taxpayer will benefit to the tune of several billion dollars from the servicing of the debt, most of which will be placed with U.S. banks. About 70% of the approximately 250,000 housing units required to shelter the immigrants will be purchased in the United States, at a cost of not less than l45 billion. All of this will create tens of thousands of new U.S. jobs and will most favorably impact on the U.S. foreign trade balance.
Israel's record as a major non-NATO ally is unique in a world of uncertainty and shifting alliances. Our national interest is served in strengthening this ally and in assisting it in the absorption of what may be as many as a million new immigrants. These immigrants will further strengthen the only democracy in the Middle East politically, economically and militarily, and thus make even more valuable this outpost of Western civilization in an area in which the United States has such a vital stake. The United States can take great credit for the exodus of Jews from the former Soviet Union to Israel. We have assumed the moral obligation to see that migration to succeed. The loan guarantees will not cost us anything; on the contrary, they will be of great economic benefit to the United States.
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Gerardo Joffe, President