Cultural Revolutions

Making Peace

George Bush's offer of $10 billion in loan guarantees to help Israel resettle Soviet and Ethiopian refugees may or may not have been a brilliant move for American diplomacy and domestic politics. It rewarded Prime Minister Rabin for partially halting settlement construction in the occupied territories and for showing greater flexibility in negotiations. Will it also feed a negative Arab reaction? While designed to ease Bush's problem with Israel's American supporters, did the promise, in fact, help the former President in the election?

Leaving political considerations aside for the moment, what are the implications of the guarantees for chronically deficit American budgets? The press initially gave us only sketchy or contradictory information because there was no official clarity on how the guarantees would be structured. When the measure passed the House, it was treated with equal obscurity—buried in longer articles and lacking details. For guidance I called the State Department and my congressman. He had voted for it, but his staff knew few of the bill's provisions. Here's how I understand what happened.

First, the Congress did not approve $10 billion in guarantees in one lump transfer, but rather $2 billion a year over five years. Are guarantees cost-free as the press suggested? No. Apart from the obligation the United States would incur if Israel defaults, there is a legal requirement that...

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