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JERUSALEM, Israel — The role of the United States as the largest single donor to both Israel and the Palestinians was thrown into sharp relief last November when the Israeli government rejected 20 U.S. F35 Joint Strike Fighter jets worth $2.75 billion in return for extending a West Bank settlement freeze by 90 days.

The offer — some called it a “bribe” — of military material equal in value to nearly an entire year’s worth of U.S. aid to Israel, renewed questions about the purpose of U.S. aid in the region and whether it might be more effectively deployed to better serve American strategic interests.

Israel receives more U.S. foreign aid than any other country, now around $3 billion every year. It is used only for military purposes — Israel voluntarily gave up U.S. civil aid more than a decade ago. Seventy percent of the aid is earmarked for purchases from U.S. companies.

According to the State Department’s latest budget justification for foreign operations, “U.S. assistance will help ensure that Israel maintains its qualitative military edge over potential threats, and prevent a shift in the security balance of the region. U.S. assistance is also aimed at ensuring for Israel the security it requires to make concessions necessary for comprehensive regional peace.”

This alliance is expressed in regular joint military training exercises, intelligence-sharing, a free trade agreement between the two countries, regular White House visits by Israeli leaders and frequent top-level consultations at all levels of government and the military.

In a secret cable setting the scene for a visit to Israel by Deputy Secretary of State James B. Steinberg in November 2009, published by WikiLeaks, James B. Cunningham, the U.S. Ambassador in Tel Aviv, reported that “Israelis from the prime minister on down to the average citizen are deeply appreciative of the strong security and mil-mil cooperation with the U.S. The U.S.-Israeli security relationship remains strong … The United States remains committed to Israel's Qualitative Military Edge.”

The United States, meanwhile, is also the single largest donor to the Palestinian Authority — a point underlined by Secretary of State Hillary Clinton when she pointed out recently that wealthy Arab states had failed to honor millions of dollars in pledges to the Palestinians made at donor conferences. In 2010 the United States earmarked $500 million in direct assistance and a further $228 million for Palestinian refugees through the United Nations.

“U.S. aid is important in terms of size and also in political importance,” a Palestinian Authority official told GlobalPost, speaking on condition of anonymity. “The money that we receive from the U.S. is almost 30 percent of the donor aid that comes to Palestine.”

The official welcomed U.S. President Barack Obama’s tougher policy on settlement building and his efforts to push Israel to conclude a peace deal, but said it seemed hampered by the “domestic complications” of being firm with Israel.

“The American administration is pushing with all of its strength to try to reach a settlement and basically achieve some progress at the political level. Unfortunately all of these efforts have been unsuccessful so far, but we continue to be hopeful,” the official said.

After the F35 debacle in November, Andrew Sullivan suggested in the Huffington Post that it was time to end the aid “because a) Israel doesn't need it and b) we need the money and c) it doesn't seem sensible to me to keep rewarding an ally that refuses to offer minimal cooperation.”

“It's time for the U.S. to assert its own interests and goals,” Sullivan argued.

Sam Bahour, a Palestinian-American businessman who relocated from Ohio to Ramallah to help build the Palestinian economy, said U.S. aid is simply “underwriting the occupation.”

“Instead of putting the burden of cost of being an occupier on the lap of the Israelis, they are underwriting them and allowing the Israelis to perpetuate occupation, almost cost free,” Bahour told GlobalPost.

“The U.S. national interest is to end the occupation. They’ve said it’s in the U.S. national interest to have a Palestinian state. So what are they waiting for to use their leverage — financial as well as others — to make that happen?”

But New Jersey Congressman Steve Rothman said, “the argument that American military aid to Israel is damaging to the United States is not only erroneous, it hurts the national security interests of this country and threatens the survival of Israel.”

Israeli leaders say U.S. aid to Israel should be seen as the most effective part of the U.S. defense budget.

“Since Israel is the most dependable and strongest ally of the U.S. here in this very unpredictable region, we save America a lot of troops and material,” Danny Ayalon, Israel’s deputy foreign minister, told GlobalPost, adding that $3 billion was about 2 percent of U.S. military spending in Afghanistan, Iraq and Pakistan.

“To serve the same interests and objectives of the U.S. in the region without Israel would either have been impossible or it would have taken enormous resources, multiplying U.S. aid to Israel by one hundred times or more. The return on the investment in Israel is very evident and very big,” Ayalon said.

Critics of Israel have long argued that it is time the United States used the aid money to greater diplomatic effect.

But Gerald Steinberg, professor of politics at Bar-Ilan University, said U.S. presidents since John F. Kennedy — who threatened to stop all financial transfers in 1963 over Israel’s refusal to permit inspection of its nuclear program — have learned that financial threats will not budge Israeli governments on vital policies.

“For core issues, the threat to withhold U.S. aid will only make Israel more reluctant to take risks and increase the sense of Israeli isolation,” Steinberg told GlobalPost.

“The only way that Israel is going to be convinced to take security risks like withdrawal is by convincing Israel that those risks are offset, that Israel’s security is guaranteed. That will make Israel more willing to take the risks on the ground that will advance the peace process.”