Cost to the American Taxpayer of the Israeli - Arab Conflict

[Mike Ellis]

Ho ho ho! Ran across this article again the other day, it is a "blast from the past" (2003) but rather nicely supports my argument that the USA's biased support of Israel and Middle Eastern meddling in general have done nothing for us but to inflict ruinous cost on us, in the form of new enemies, flattened wallets, and wasted lives.

This article puts it in perspective for you. Total cost in dollars: More than $3 trillion. - a sizeable chunk of our national debt.

The next time you fill up with $4 a gallon diesel, be sure to tip your hat to the Middle East.

The Costs to American Taxpayers of the Israeli-Palestinian Conflict: $3 Trillion

The Costs to American Taxpayers of the Israeli-Palestinian Conflict: $3 Trillion
By Thomas R. Stauffer

Conflicts in the Middle East have been very costly to the U.S., as well as to the rest of the world. An estimate of the total cost to the U.S. alone of instability and conflict in the region—which emanates from the core, Israeli-Palestinian conflict—amounts to close to $3 trillion, measured in 2002 dollars. This is an amount almost four times greater than the cost of the Vietnam war, also reckoned in 2002 dollars.

Even this figure underestimates the costs because certain classes of expenditure remain unquantified. In particular, no reliable figure is available for the costs of "Project Independence," Washington's lavishly promoted effort to reduce U.S. dependence on oil from the Middle East. That effort, which was subverted early on by diverse local special interests, was designed primarily to insulate Israel from any new "Arab oil weapon" after 1973/74, and may easily have cost $1 trillion. Even though the outlays were rationalized in the interest of "national security," however, they contributed little or nothing to reducing U.S. strategic dependence upon imported oil from the Middle East. Similarly, aid to Israel—and thus the regional total—also is understated, since much is outside of the foreign aid appropriation process or implicit in other programs. Support for Israel comes to $1.8 trillion, including special trade advantages, preferential contracts, or aid buried in other accounts. In addition to the financial outlay, U.S. aid to Israel costs some 275,000 American jobs each year.

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Total identifiable costs come to almost $3 trillion. About 60 percent, well over half, of those costs—about $1.7 trillion—arose from the U.S. defense of Israel, where most of that amount has been incurred since 1973 (see later section and Table Three).

Oil Crises

The largest single element in the costs has been the series of six oil-supply crises since the end of World War II. To date these have cost the U.S. $1.5 trillion (again in 2002 dollars), excluding the additional costs incurred since 2001 during the build-up toward the second war with Iraq. Until 1991, each crisis was triggered by a conflict among two or more Middle Eastern states, usually with the active involvement of at least one extra-regional power. The nature and impact of the oil crises changed over time, becoming more serious and implying greater risk to the oil-consuming world.

The several earlier Mideast oil crises, in 1956 and 1967, actually had relatively little effect on the United States. Indeed, the U.S. profited from exporting surplus oil in 1956 when Mideast supplies—especially of "sterling oil"—were interrupted. The second such crisis, in 1967, did have a longer-term impact. Initially, only the cost of shipping was raised when the Israelis interdicted the Suez Canal. The splitting of oil markets between east and west of Suez, however, was the catalyst for an overall price increase which otherwise would have been unlikely, if not impossible. Several OPEC states were successful in exploiting the closure of the Suez Canal to increase oil prices across the board after 1968. Again, the effect on the U.S. was relatively small, because U.S. oil imports were still at a low level. Nonetheless, those increases between 1970 and 1973 did cost the U.S. some $40 billion (in 2002 dollars).

The period before 1973, therefore, had little effect on U.S. oil costs, and the burden of aid to Israel was modest, so the overall cost of Middle East conflicts remained modest. The major cost prior to 1973, in fact, was support for Turkey as part of Cold War operations to contain the Soviet Union.

This changed with 1973, and costs escalated rapidly thereafter. Starting with the Arab-Israeli war of 1973, the costs to the U.S. of regional crises and aid programs began to increase beyond any original expectations. Since 1973, protection of Israel and subsidies to countries willing to sign peace treaties with Israel, such as Egypt and Jordan, has been the prime driver of U.S. outlays or the trigger for crisis costs. The 1973 war proved to be dear. At a minimum, it cost the U.S. between $750 billion and $1 trillion. This was the price tag for the rescue of Israel when President Richard Nixon agreed to resupply Israel with U.S. arms as it was losing the war against its neighbors. Washington's intervention triggered the Arab oil embargo which cost the U.S. doubly: first, due to the oil shortfall, the US lost about $300 billion to $600 billion in GDP; and, second, the U.S. was saddled with another $450 billion in higher oil import costs.

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