Why Cutting Off Aid To The Palestinians Is A Bad Idea

After Palestine was upgraded to a non-member observer state at the United Nations, members of both houses of Congress proposed legislation responding to the Palestinians’ U.N. statehood bid by cutting off American aid. However, cutting off aid would harm the prospects for peace and immiserate thousands of Palestinians.

Rep. Ileana Ros-Lehtinen (R-FL) (who has done this before) was the first to call for defunding, followed shortly by two measures in the Senate. The proposals are essentially non-starters as they would also take away massive amounts of money from the U.N., a move Senate Democrats would most likely not allow to move forward.

A fourth proposal, amendment 3203 to the National Defense Authorization Act (NDAA), would only remove United States aid to the Palestinians in case any Palestinian authority brings a case at the International Criminal Court (a potential consequence of the U.N. upgrade). Regardless of whether or not one thinks the United States should seek to deter the Palestinians from going to the ICC, the blanket, automatic aid cutoff proposed in SA 3203 could have potentially devastating consequences. As CAP’s Matt Duss explains, diplomatic and financial support for the Palestinian Authority is a critical tool for bolstering the moderate Palestinian leadership vis-a-vis their hardline Hamas rivals:

U.S. policymakers and legislators should consider the words of several former Israeli officials who have come out in support of the Palestinian bid, including former Prime Minister Ehud Olmert, who said in a recent interview that “the Palestinian request from the United Nations is congruent with the basic concept of the two-state solution. Therefore, I see no reason to oppose it.” Writing in Foreign Policy this week, former deputy Israeli defense minister Ephraim Sneh warned that efforts to punish Abbas and the Palestinian Authority over the U.N. bid — which would likely redound to the benefit of Abbas’ more hardline rivals in Hamas— “would be a shot not in the foot but in the liver — Israel’s.”

Threatening aid in retaliation for the widely popular U.N. bid would undermine the moderate leadership’s argument that diplomacy with Israel, and not force, is the best way to advance the Palestinian national cause. Passing SA 3203 would undermine America’s main goal in the Israeli-Palestinian conflict — furthering a peace process towards a two-state solution.

It could also shatter the fragile Palestinian economy. Though Palestinian growth has averaged a massive 7.7 percent in recent years, that growth has been fueled by foreign economic assistance. Without foreign aid, the Palestinian Authority would be unable to pay for services and development projects, which is why the World Bank believes “it is imperative” that “donors maintain their support to the PA’s budget.” This situation is unfortunately likely to continue for the forseeable future, as the continued occupation makes sustainable, non-aid fueled growth difficult. Since the U.S. provides an enormous amount of non-military aid to the PA, and aid is already slowing down, further cuts could do serious harm to Palestinian economy, endangering both vulnerable Palestinians and the legitimacy of the moderate, economically-focused Fatah leadership.

Perhaps for these reasons, the White House is not supporting any sort of “punishment” for the Palestinian bid at the United Nations.