TEL AVIV, Israel, April 2 (UPI) -- Israeli Prime Minister Binyamin Netanyahu has warned Israelis his government needs higher taxes to help pay for anti-missile defense, though he's no doubt counting on U.S. military aid to help him out.

But as the United States has to tighten its own belt and cut defense spending by up to $600 billion, Globes business daily commentator Ran Dagoni cautioned: "U.S. aid to Israel is longer sacred.


"U.S military aid to Israel is no longer a fixed point in relations between the two countries.

"The threat to American aid to Israel (and in fact to every other foreign aid plan) is, of course, a result of the budget noose around Washington's neck."

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There's no sign yet of major cutbacks in U.S. aid, which includes $3 billion a year in military assistance that's vital to Israel's military as it faces the threat of massive missile and rocket bombardment from Iran, Syria, Hezbollah in Lebanon and Palestinians in the Gaza Strip.

But the whole issue of U.S. aid to Israel is gathering steam, for political as well as economic reasons, and is being debated within the United States to a degree not seen for many years.

Walter Pincus of The Washington Post kicked it off Oct. 18 by urging, as Americans have to tighten their belts, a re-evaluation of U.S. assistance to the Jewish state after Netanyahu ordered hefty cuts in Israel's defense spending.

"If Israel can reduce its defense spending because of its domestic economic problems, shouldn't the United States -- which must cut military costs because of its major budget deficit -- consider reducing its aid to Israel?" he asked.

Israel had to introduce budgetary cutbacks to boost social spending after months of street protests across the political spectrum.

The defense budget, which for decades was spared cutbacks, has suffered. Some $850 million, about 5 percent of Israel's approximately $16 billion defense budget, will be cut in 2012 and again in 2013.

This was done even though Netanyahu, who views Iran's nuclear program as an existential threat to the Jewish state, seeks to build up a multilayered anti-missile defense shield.

The United States has contributed heavily to the anti-ballistic Arrow program, designed to intercept Iranian ballistic missiles, since it was launched in 1986. State-owned Israel Aerospace Industries worked with the Boeing Co. to develop the missile.

Development costs ran to nearly $3 billion from 1989-2007 with the United States paying 50-80 percent. Israel pays about $65 million a year.

Arrow has been deployed since 2000 but remains untested in combat.

Another system, Iron Dome built by Rafael Advanced Defense Systems, became operational in April 2011. It's been in action in recent months against short-range Palestinian rockets fired from the Gaza Strip and notched an impressive score of interceptions. But only three batteries have been deployed in the south and defense experts say as many as 26 are needed, at a cost of around $50 million per battery.

That's way past the Defense Ministry's current financial capabilities while it develops more powerful Arrow variants and a third system, David's Sling, also built by Rafael, to combat medium-range missiles.

The United States forked up $205 million in 2011 to underwrite the Iron Dome program.

In March, the U.S. Congress approved the bipartisan Iron Dome Support Act to authorize funds for Netanyahu's government to buy more batteries, if requested.

The administration of President Barack Obama told Israeli officials in January that the United States will recommend Congress approve a three-year extension of loan guarantees to Israel worth $3.8 billion. That was great news for the Israeli government which had expected the extension wouldn't be granted.

The loan guarantees are in addition to the $13 billion in direct aid Israel has received since 2007. That's on top of the $3 billion a year in military aid.

There are deep differences between the hawkish Netanyahu and Obama over the moribund Arab-Palestinian peace process and Netanyahu's threat to launch pre-emptive strikes against Iran's nuclear infrastructure.

These could result in cuts in U.S. aid. But another argument goes that Obama will need to buy off Netanyahu with U.S. aid.

"Bribery is deeply embedded in the U.S.-Israeli relationship," observed John Feffer of Foreign Policy in Focus. "Half of all U.S. overseas military assistance, after all, goes to Israel."