How much of your tax dollars are going to Israel and Ukraine

0:00Support for this podcast and the following message come from Recorded Future. In cybersecurity, the biggest risk isn't what you see, it's what you miss. Recorded future. bringing clarity to the signals that matter most to your business. Recorded future. Know what matters. Act first. This is Planet Money from NPR. There's been a lot of disagreement in Congress and in the country about how the U.S. has and whether the U.S. should continue to financially support the wars in Ukraine and Gaza. And the objections to these two wars, for people who have them, are different. For Ukraine, some taxpayers don't think the U.S.

0:42should be giving any money to fight off Russia's invasion. For Gaza, some taxpayers have concerns about how they might be funding weapons that have been used to kill civilians. They're saying that more than 30 ,000 people have been killed, that hundreds of thousands are facing starvation, and they want to know how their tax dollars contribute to all of this. And in general, they are questioning how the U.S. spends taxpayer money on foreign military operations and war. So that is what we're going to look at today. Hello and welcome to Planet Money. I'm Sarah Gonzalez. And I'm Alexi Horowitz-Gazi.

1:18Today on the show, we attempt to figure out the average U.S. taxpayer's role in funding these wars. Now, obviously, these wars are about much, much more than the money that is going to them. Yeah, these wars are much bigger than any accounting we could do. We know that. But in attempting to do this math, you do get this window into the role of our tax dollars on foreign assistance, how the U.S. sells weapons to other countries, and how we all contribute in ways we might not expect.

1:54This message comes from WaterAid, whose mission is to change the world through water. Imagine walking miles every day to collect water because your home has no taps, toilets, or clean water. That's the reality for one in four people worldwide. Your support can help change the future for them because WaterAid believes everything, health, food, opportunity, starts with water. Donate to WaterAid and your gift will be matched, going twice as far to bring clean water to everyone, everywhere. Donate at wateraid.org slash podcast. OK, to figure out how much individual taxpayers are contributing to Ukraine and Israel for these wars, we have to start with how much money the U.S.

2:37is sending to these countries as a whole, which gets complicated because the money that the U.S. sends to other countries goes out under many different categories of foreign assistance. Foreign assistance is your biggest, like, most broad description of how we're sending money to other countries. This is Alison McManus. She manages the National Security and International Policy Department at the Center for American Progress. It's a nonpartisan think tank, but they tend to advocate for progressive foreign policies. Now, within foreign assistance, you'd have security assistance. You'll have economic assistance.

3:14You could have humanitarian assistance. Allison and her team follow all of the U.S. money that goes to assisting Ukraine and Israel. Then we're also going to look at weapon sales. This is actually when we see weapons going out the door, if you will, which is right now, I mean, a pretty big topic of consideration, given that there are two wars that are going on right now, one in Ukraine and one in Gaza, in both of which the U.S. has sold weapons that are being used in these conflicts. One form of assistance to other countries is foreign military financing. And that money is all about weapon sales.

3:53So foreign military financing means money for buying U.S. weapons and that's it. U.S. money for buying U.S. weapons. That's right. Some of it can be used for training programs. You could use it for fuel. It doesn't have to be a weapon, but it's U.S. money for U.S. weapons, defense articles, defense services. Yeah, countries who get U.S. foreign military financing most of the time use that money to buy U.S.-made weapons. So weapons from Boeing or Lockheed Martin or, you know, any other American defense manufacturer. The U.S. doesn't tend to give another country U.S. taxpayer money for them to then go out and buy French military weapons, though they do make exceptions.

4:40Israel does have an official agreement with the U.S. that allows them to buy some weapons made in Israel, too. Now, whenever there's going to be a sale of U.S. weapons to any country, the Department of Defense and the State Department notify Congress. And if the potential weapon sale is over a certain amount of money, Congress gets a few days to review the sale, raise any concerns. Otherwise, it goes forward. And Allison tracks all of those weapons sales notices, too, because she is like piecing together all of the different ways that U.S. money and U.S. weapons are going to, in this case, Ukraine and Israel.

5:15So we are going to go with their math and how they are looking at all of this. Allison says we know how much money Ukraine and Israel have received in all since these wars started. A little bit of background. Israel has gotten money from the U.S. every year for decades, regardless of whether there's a war. Basically, since Israel's founding in the 1940s, the U.S. has given Israel a couple hundred billion dollars in military aid in all because the U.S. has determined that Israel is a strategic partner in the Middle East and that it is in the United States' interest to invest in Israel's defense.

5:50Right now, the agreement is that Israel gets a set amount of money from the U.S. each year. So, yeah, there is a 10-year memorandum of understanding between Israel and the United States that says Israel is going to get$3.3 billion in foreign military financing every year. $3.3 billion for weapons. Plus another$500 million for a very specific program, which is missile defense, called the Iron Dome. This is what Israel uses to defend against rockets that might be shot into Israeli territory. In all, Israel is getting$38 billion from the U.S. over 10 years. So since the Israel-Hamas war started, the U.S.

6:32has given Israel about$3.8 billion. That is one year's worth of aid. It makes up less than 0.1 % of the total U.S. federal budget. Since the war in Ukraine started, the U.S. has given Ukraine$115 billion. That is two years' worth of aid. So let's just say about$60 billion a year, which is about 1 % of the federal budget for each year. So Ukraine has gotten significantly more money recently. And Allison says more than half of that money was for weapons and defense and training. But a lot of the money also went to economic assistance to Ukraine and some humanitarian assistance. And now, just to put these figures into context, Allison says$115 billion, which is what went to Ukraine over two years, is about what the federal government has spent on highways over the same period.

7:24$3.8 billion, which is what went to Israel in a year, is more than the U.S. spends on veteran homelessness prevention. But for Allison, really any comparison feels inappropriate. I think when it comes to procurement of deadly weapons, there is significance there beyond the dollar amount. Sending bombs and fighter jets to foreign countries to be used ostensibly in conflict. I mean, that's really weighty and really somber. Yeah, how do you compare deadly weapons or life-saving humanitarian aid to anything? But, you know, now that we have a sense of the whole numbers that have gone to these two countries, we can figure out the per-person price tag of what the U.S.

8:12is sending these two countries. We just need to know how many taxpayers there are in the U.S. Except, surprisingly, we don't really know exactly how many taxpayers there are. We know how many individual tax returns are filed, but some married people file jointly, so that would give us the wrong number. The best the Center for American Progress can think to do is to use the number of adults in the U.S., you know, potential theoretical taxpayers. They estimate there are 268 million adults in the U.S. So you just do some admittedly basic oversimplified math. Just divide the total amount of money given to Ukraine or the total amount of money given to Israel by 268 million adults.

8:54But wait, because it's actually more complicated than that. You have to remember that corporations are also paying taxes. Yes. Oversimplifying problem number one, the U.S. doesn't get all of its revenue from our individual income taxes. So if we did the math that way, it would be an overestimate because there's also the corporate taxes part of this, right? The Center for American Progress says individual income taxes make up around 77 percent of the tax money the government takes in that it can actually spend however it wants. So we're not including taxes that the government has to use on Medicare and Social Security.

9:31And what that means is if the U.S. sent$115 billion in aid to Ukraine. We'll say individual taxpayers may pay 77 % of that. And then we'll divide that by the number of potential taxpayers. We get$330 over the past two years. So$165 per person each year. $165 per person per year for Ukraine. That is how much the average theoretical taxpayer contributed. If we apply that same logic to the assistance to Israel... Now we're looking at$11.25 per adult. $11.25 for Israel. That is how much the average theoretical taxpayer has contributed since the war in Gaza started. But also because of that 10-year agreement, it's what the average taxpayer contributes to Israel every year.

10:26Now, of course, you could have paid much less than that, like if you're retired and you don't earn any income, or if you're a college student who doesn't make enough money. And if you're single with no kids making good money, you could have paid much more than that. So yes, this is oversimplified, but it is at least an attempt at figuring out the per-person contribution. So, I mean, are we, okay, did we do the math? Does that number feel satisfying or meaningful to you? No. The per-person price tag is not the best way to look at this. We can kind of fudge things to come up with a number, but even then, any number might feel really big or really small to somebody, depending on whether or not they think that it's justified to spend even a single penny in either of these conflicts.

11:10Yeah, it's just not really about the dollar value. It's about how you feel about your own money going to something that you might morally oppose. In fact, some taxpayers are considering not paying their taxes at all this year as a form of protest because they do not want to contribute to war spending. But even if you manage to withhold your income tax dollars, there are other ways that we are taxed that may still contribute to these wars. Like every time you buy tobacco or fuel or airline tickets, for example, there is a tax on that called an excise tax, which the government can also spend on war.

11:44But also, Allison says, thinking about war spending just in terms of taxes and taxes only is another oversimplification. The numbers we came up with, the$165 per person and the$11.25 per person, aren't really real because they are based on this idea that everything we sent to Ukraine and everything we sent to Israel came from tax revenue. And that's just not the case. The revenue that goes in is not necessarily connected to how the government is actually budgeting. What we're paying in taxes just does not have to match what we spend. So that whole exercise is sort of irrelevant. It's irrelevant because of one big elephant in the room, which is deficit spending.

12:31We spend more than we bring in as a country. Yes. Oversimplifying problem number two, we don't just spend the taxes we raise. We also spend money we don't have. We deficit spend. For example, when the U.S. gave that emergency aid to Ukraine, no one was looking at the coffers to see what money we had based on what we all pay in taxes. Yeah, no, the government just sent Ukraine whatever it wanted to send them. No one printed more money for it. No programs within the U.S. got cut to fund this. No one raised our taxes. We just increased our deficits. So we just borrowed more money and made our deficit a little bit bigger.

13:11Yes, we're borrowing more money into the future. And sure, you could say that we as taxpayers may feel the effects of borrowing more and growing the deficit. Borrowing money can come at a cost, like when we have to pay interest on all that borrowing. But it is incredibly hard to know right now what that will actually cost individual taxpayers. So if we didn't deficit spend, maybe then you could assign a dollar figure, like a per-person dollar figure, that actually did feel meaningful. But deficit spending just like messes up the whole concept of this exercise. Exactly. If this were money in equals money out, that's an equation that we could work with.

13:53But money in does not equal money out. For Allison, deficit spending, corporate taxes, excise taxes, they all really complicate this per-person calculation. That's a really difficult, if not impossible, calculation to make. It's something that we've thought quite a bit about and recognize that there's just no good way to break it down. And it is especially difficult to break it down when you factor in the way that the U.S. sells weapons to other countries and how the money for weapons is even used. That's after the break.

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15:22That's why you need LinkedIn ads. You can target your buyers by job title, company, role, seniority, and skills. All the professionals you need to reach in one place. Get a$250 credit on your next campaign so you can try it yourself. Just go to linkedin.com slash NPR pod. That's linkedin.com slash NPR POD. Terms and conditions apply only on LinkedIn ads. So the money that has gone to Israel and Ukraine has come from a mix of individual income taxes, corporate taxes, deficit spending. Now we are going to look at how the money for weapons in particular is actually spent. First, we're going to establish how a country buys weapons from the United States.

16:06Take Egypt. Egypt is usually the second largest receiver after Israel of U.S. money explicitly for buying weapons. The U.S. gave Egypt$1.2 billion for weapons last year. So let's say Egypt wants to buy F-35 fighter jets. So the F-35 is one of the most expensive, sophisticated fighter jets that the U.S. produces. It's produced by Lockheed Martin. Like how expensive? $100 to$110 million. For one fighter jet? For one fighter jet. Let's say Egypt wanted to buy 20 of these fighter jets. That would cost like$2 billion, right? But the U.S. only gave Egypt$1.2 billion for weapons. So if the Department of Defense and State Department even decided that they wanted to sell this technology to Egypt, Egypt generally would have to make up the difference.

17:00— Allison says one interesting thing to note about all this is that when the U.S. gives any other country money for weapons, the U.S. doesn't actually hand over cash. The money is kept in a U.S. Federal Reserve bank account, and the U.S. just kind of deducts from it. And Allison says countries don't have to spend everything the U.S. gives them the year that they get it. A country could just sit on the money and use it at a later time, which is why if you try to draw a line between money that Congress appropriates for weapons for one country and how much money worth of weapons that country actually purchased that year, the math doesn't add up.

17:36That's why if we look at a$1.2 billion foreign military financing appropriation for Egypt or, you know, the$3.3 billion foreign military financing for Israel, when we're looking at the sales, it's not necessarily going to match up to, oh, in that given year, we see Egypt spent$1.2 billion and Israel spent$3.3 billion. Egypt may end up buying weapons that go beyond the 1.2 billion and it's going to make up some of that difference. Or they could spend less than that in a given year and then spend more the following year. And by the way, the U.S. isn't just selling weapons to countries that it appropriates weapons money to.

18:15The U.S. sells weapons to a lot of different countries. The government is pretty protective about what kinds of military technology it allows other countries to have. But, you know, if Saudi Arabia or India or Canada wants to buy military weapons from the U.S., the government will sell to them, too. Allison says most of the weapons manufactured in the U.S. are for the U.S. military, but that weapons manufacturers are definitely lobbying and competing for those foreign weapons contracts, too. And one of the reasons the U.S. chooses to sell weapons to other countries is this. If one country wants to attack another country, but that country has sophisticated U.S.

18:53military weapons, maybe they don't get attacked. For the U.S., selling weapons to other countries is part of a global security and defense strategy. The idea is that it can deter wars and maybe prevent the U.S. from sending U.S. soldiers to those wars. When the U.S. was sending emergency weapons to Ukraine, for example, it was actually depleting its own weapons stockpile. So the Department of Defense was at the same time getting more money to replenish its weapons stockpile. Now, getting back to figuring out how much money is actually flowing from the U.S. to Ukraine and Israel, there is one final exception to this system that Allison says changes the calculation.

19:35It has to do with these two special arrangements that Israel has with the U.S. for buying weapons. For basically every country in the world, if they get a billion dollars from the United States to buy weapons, it is truly just a billion dollars. What's different with Israel is that for Israel, if they're getting$3.3 billion, they'll have that$3.3 billion plus whatever interest is earned. The money the U.S. appropriates for Israel is different because the money goes into an interest-bearing account with the U.S. Federal Reserve Bank. So Israel can earn interest on its foreign military financing.

20:12Why? What's the history or backstory there? That has to do with the unique and exceptional relationship that the U.S. has had with Israel and the United States investment in Israeli defense in ways that we just don't have with any other country. Actually, Egypt can also earn interest on the money the U.S. gives them for weapons. And both of these countries basically have this deal because the amount of money the U.S. gives them is so large that the U.S. government thinks it just makes sense for them to be able to get interest on it. The interest helps grow the money. What kind of interest are we talking about with a$3.3 billion bank account?

20:52We don't know. We don't know how much remains in that bank account and we don't know what the interest agreements are. So the point there is just like$3.3 billion is not actually$3.3 billion. $3.3 billion may not actually be and is highly unlikely to actually be in any given year$3.3 billion. Mm-hmm. Mm-hmm. The other special thing Israel can do is it can borrow into the future, meaning Israel could say, OK, we only get$3.3 billion plus interest every year for weapons, but we want to buy, I don't know,$6 billion worth of weapons. They can just pay the U.S. later, put it on a tab. The country of Jordan actually can also borrow into the future and put weapons on a tab.

21:38And Egypt used to be able to do this as well, but President Obama got rid of that. And here's how you can think about borrowing into the future. Basically, every country who wants to buy weapons from the United States is using like a debit card. They need to have all of the money up front. Israel and Jordan have like a credit card for weapons. They basically promise to pay a weapons manufacturer. And if they don't pay, it's on the U.S. government. This borrowing into the future thing is called cash flow financing. And as part of this cash flow financing deal, Israel can also defer payments for some weapons, specifically those expensive F-35 fighter jets.

22:18In this case, there's a consortium of banks led by Citibank that will step in. They say, OK, we'll pay Lockheed Martin. Citibank pays them up front and then the U.S. government will pay Citibank back with the funds that it set aside for Israel's foreign military financing based on the schedule that the U.S. has negotiated and agreed upon with the Israelis. And the reason why this deal exists is because the banks know that the U.S. government has this memorandum of understanding where we're going to give them$3.3 billion every year on the dot and can give them more if we want to. Exactly. I mean, the banks will get, you know, they have a guarantee that they're going to be paid back.

22:59We should say Citibank is a sponsor of NPR. For Alison, the point of making all these distinctions is this. Because Israel accrues interest and because Israel can borrow money for weapons, it is just inaccurate to say that only$3.3 billion worth of weapons is going to Israel each year. Which means that the per-person contribution to Israel is likely just not$11.25 a year. Right now, Congress is debating a new round of assistance to Ukraine and Israel. The Senate already approved a package. An additional$14 billion would go to Israel. $9 billion would go to humanitarian assistance to Ukraine, Gaza, the West Bank, and other populations caught in conflict zones.

23:43And an additional$60 billion is for Ukraine. But actually,$20 billion of the Ukraine money is for replenishing the United States' weapons stockpile. The House has yet to schedule a vote on this aid package.

24:02We did a lot of research for this episode. You can check out our episode notes for links to some of the reports. We also spoke to so many people for this episode, like Mira Resnick at the State Department. So thank you to her. On the next Planet Money, how one Missouri lawyer took on one of the most powerful professional organizations in the country, the National Association of Realtors. When I started looking into it, I thought, wait a minute, they're the largest lobbyist in the country. bigger than Big Pharma, bigger than the Chamber of Commerce, than the NRA, than all of these organizations, and the answer is yes.

24:39We've got the behind-the-scenes story of the giant lawsuit that could transform how houses are bought and sold in America. Today's episode was produced by Sam Yellow Horse Kessler with help from Emma Peasley and James Sneed. It was edited by Jess Jang and fact-checked by Sierra Juarez. It was engineered by Robert Rodriguez with an assist from Josh Newell. Alex Goldmark is our executive producer. Special thanks to Daniel Estrin, Mark Katkopf, Rund Abdel-Fattah, and Uri Berliner. Thanks also to Hila Watkins, Mohamed Melach, Rima Kreis, and Leila Dos. I'm Sarah Gonzalez. And I'm Alexi Horowitz-Ghazi.

25:15This is NPR. Thanks for listening.

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