Israel prepares to take aid hit as US enacts budget cuts

After weeks of debates that proved fruitless, U.S. President Barack Obama was forced to sign off on an $85 billion federal budget cut. And Jerusalem is concerned that U.S. defense aid to Israel will be hit as a result.

The signed budget cut is one of a number of proposed "sequestration cuts" to the U.S. budget, and is expected to slow down the U.S. economy to a limited extent. It constitutes 2.2 percent of the $3.8 trillion total budget of the U.S. for 2013. The cut will be implemented over several months. But while the cut's effects are limited, the U.S. workforce is still expected to shrink by 750,000 jobs.

In his weekly radio address, Obama said the current budget problems in Congress could be resolved.

"These cuts are not smart. They will hurt our economy [and] cost us jobs, and Congress can turn them off at any time, as soon as both sides are willing to compromise," he said.

As a result of the announced cuts, oil prices fell 1.5% over the weekend.

The cuts will directly affect the U.S. defense budget, though purportedly the U.S. foreign defense aid and missile defense (the Arrow and Iron Dome systems) budgets were not marked for trimming. Given the wide scope of the new cuts, it is possible that U.S. aid to Israel will be cut. Foreign aid to Israel currently stands at $3.15 billion. A worst-case scenario would be a $500 million dollar cut from that budget.

Finance Minister Yuval Steinitz addressed the reports on Sunday. "The economic difficulties in the U.S. worry us. I hope they do not hurt us. It's important to remember that the only country in the last three years that succeeded in swimming against the current and had growth and a decrease in unemployment was Israel. The global economic outlook is very tough and therefore we must act responsibly and boldly and work hard to preserve the Israeli economy and Israeli citizens. For these very reasons we need a strong and stable government."

"As the United States' closest ally in the Middle East," Israeli Ambassador to the U.S. Michael Oren said on Friday.

"Israel understands the complex budgetary challenges the Americans face. We are ready to carry our share of the burden, while trying to maintain the same projects that are essential to the security of the State of Israel, among them the Iron Dome."

Joint staff work is said to be underway to determine the consequences of the U.S. budget cuts. Aside from the annual aid given to the Israeli Defense Ministry, Congress approved hundreds of millions of dollars in aid to Israel for purchasing Iron Dome batteries and continuing development of missile defense systems for higher altitude projectiles such as the David's Sling system, intended to intercept medium range rockets, and the Arrow missile defense system, designed to shoot down intercontinental ballistic missiles.

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