Does Israel Need US Aid to Fight Hamas?

Will $17.6 Billion from Congress Make a Difference?

This week, the House will consider $17.6 billion in supplemental funding to support Israel’s war effort. But now that we are 120 days into Israel’s Operation Swords of Iron, it is worth asking whether Israel needs this aid. Opponents and proponents of the aid have offered articulate moral arguments on behalf of their respective positions. I hope to supplement that debate by looking at the issue from an economic and budgetary perspective.

Much of the requested funding was for Israel’s missile defense systems. This seemed necessary because Hamas was launching numerous rockets towards Israel. Most were intercepted by the Iron Dome system, preventing deaths, injuries, and property destruction on Israeli territory. Iron Dome’s interceptor missiles have to be replaced for the system to remain fully capable.

But the urgency of replacing Iron Dome interceptors to defend against attacks from Gaza has declined markedly since October. And, as the accompanying chart shows, only a few hundred missiles have been fired from Gaza since the end of November. Hamas and other militant groups may have exhausted their supplies, their launch operations have been disrupted by IDF operations, and Israeli forces have destroyed over 700 rocket launchers in Gaza since the start of the operation.

Source: Updates from the Meir Amit Intelligence and Terrorism Information Center

As Operation Swords of Iron progresses, the likelihood of significant rocket launches from Gaza will continue to decline, reducing the need for Israel to replenish its stocks. But if Hezbollah enters the war, Israel will need more interceptor missiles to minimize casualties and losses from that organization’s well-equipped forces in Lebanon.

Aside from replenishing Patriot missile stocks, Biden requested aid to support Israel’s offensive against Hamas in Gaza. But now that offensive has reached an advanced stage. Israel has been able to destroy much of Hamas infrastructure and kill a large proportion of its fighters without American funding.

Secretary of State Anthony Blinken authorized two weapons transfers to Israel to support its ground operations in December. But Israel was obliged to pay about $250 million for these weapons since Congress had yet to approve military aid.

If Israel could pay for these weapons, could it pay for other elements included in the proposed $17.6 billion military aid package? There is reason to believe so.

Unlike Ukraine, another country which would receive more military aid under Biden’s proposed supplemental, Israel is a relatively affluent country. According to recent IMF estimates, Ukraine’s Gross Domestic Product (GDP) per capita is $5,530, while Israel’s GDP per capita is $54,060—almost ten times more, and above that of Western nations such as France and the United Kingdom.

Compared to Gaza, Israel is a richer, more populous, and far better equipped, so it is unsurprising that it is subduing the Palestinian territory without foreign funding. That said, its budgetary resources are not unlimited.

In 2023, the Israeli government collected $117.6 billion, spent $138.3 billion and incurred a budget deficit of $20.8 billion. Of its 2023 spending, $6.6 billion went to Operation Swords of Iron (amounts were originally reports in Israeli shekels; I converted those to dollars at a rate of 3.73).

Current budget projections show that Israel plans to spend another $33.5 billion on war operations on the assumption that they continue through the end of March. This is a large amount, but the Israeli government can accommodate it by cutting other spending, raising taxes, and borrowing.

Israel’s Debt/GDP ratio is only around 63% which is much lower than that of the United States at roughly 120%. Since the Biden supplemental does not have matching revenue, Congressional approval would increase US debt to assist another country facing a lower debt burden.

Finally, it is worth considering that the scope of Israel’s military operation are discretionary. The stated goal of eliminating Hamas seems impossible, especially since Hamas members are not limited to the territory of Gaza. So, the ultimate result will be a serious degrading of Hamas’ capabilities. Depending how one defines “serious degrading”, the objective could be regarded as already achieved or could take years to accomplish.

If Israel receives more US military aid, its financial incentive to wind down the conflict will be reduced. By instead requiring the Israeli government to fully fund its own war, we oblige it to more fully internalize the costs of its security decisions.

Marc Joffe is a policy analyst specializing in financial issues. He has previously contributed articles on peace issues to antiwar.com and other publications.