estimating the lifetime economic value of the U.S.–Israel relationship

AI-written.

executive summary

my best estimate is that, in cumulative June 2026 dollars, the U.S.–Israel relationship has been approximately break-even for the United States, while being enormously valuable to Israel.

these are cumulative real-dollar estimates, not discounted present values. they estimate changes in national welfare, not gross trade volume, government spending, or GDP.

the central conclusion is that Israel has likely delivered on the order of $400 billion in military, technological, intelligence, commercial, and strategic value to the United States, while the United States has spent roughly $425 billion supporting the relationship. the resulting net position for America is therefore close to zero relative to the uncertainty.

the American ledger

the optimistic and pessimistic cases differ primarily because the strategic value of the alliance is intrinsically difficult to observe.

official aid (~$320 billion)

the easiest component is official assistance.

the Congressional Research Service reports $174.965 billion in nominal U.S. assistance through FY2025. it separately estimates $298 billion in constant 2024 dollars through FY2024. updating and extending that series into June 2026 dollars produces a rough total of $320 billion.[1]

this is a fiscal cost to the United States.

it is not a destruction of $320 billion of bilateral wealth. much of the money purchased weapons produced by American firms using American labor.

those resources still had opportunity costs. arguments that aid is "free because it comes back to America" are economically incorrect.

trade and civilian technology (~$60 billion)

U.S.–Israel goods and services trade reached an estimated $55.0 billion in 2024.[2]

gross trade is not itself economic benefit.

exports require American labor and capital.

imports require American spending.

the relevant quantity is the increase in consumer and producer surplus relative to a world without the relationship.

the U.S. International Trade Commission's 2016 review reproduces a 2003 estimate that U.S. welfare in 2001 was roughly $0.3 billion higher, in 1996 dollars, because of the Israel free trade agreement.[3]

accumulating those gains over decades while allowing for expanding commerce, joint venture activity, pharmaceutical innovation, semiconductors, cybersecurity, agriculture, water technology, and venture investment leads to a central estimate near $60 billion.

defense technology and industrial learning (~$65 billion)

Israel has served simultaneously as

• an unusually demanding military customer,
• a battlefield testing laboratory,
• and a co-developer of numerous defense technologies.

examples include

• active protection systems,
• missile defense,
• avionics,
• targeting pods,
• unmanned systems,
• counter-drone technologies,
• electronic warfare.

many systems first validated operationally in Israel later entered American service.

the LITENING targeting pod is a representative example: LITENING I was developed for the Israeli Air Force by Rafael, Northrop Grumman joined further development in 1995, and later configurations entered broad U.S. service.[4]

this category includes

• industrial scale effects,
• export profits,
• reduced development costs,
• operational validation,
• accelerated innovation.

my central estimate is $65 billion.

intelligence (~$85 billion)

this category is the hardest to value directly.

I decompose it approximately as follows.

perhaps the best-known example was Israel's transfer of a captured MiG-21 to the United States after an Iraqi pilot's defection.

American pilots flew more than one hundred evaluation sorties, fundamentally improving their understanding of the aircraft.[5]

more broadly, Israeli combat experience against Soviet aircraft, tanks, missiles, integrated air defenses, and doctrine materially informed American military thinking after 1967 and especially after 1973.

those lessons contributed to later developments including Active Defense doctrine and eventually AirLand Battle.[6]

today, Israel remains one of America's most valuable regional intelligence partners.

the appropriated American intelligence budget was $101.1 billion in FY2025.[7]

if Israeli contributions increase the effectiveness of that enterprise by even a fraction of one percent over many decades, tens of billions of dollars of value are generated.

I assign zero weight to popular claims that Israel supplied "more intelligence than all NATO allies combined." I have never found a primary source supporting that assertion.

strategic option value (~$180 billion)

this is the largest and most uncertain category.

Israel gave Washington a powerful regional military partner without requiring America itself to permanently station equivalent forces in the region.

examples include

• the 1970 Jordan crisis,
• deterrence against Soviet-backed clients,
• pressure on Syria,
• constraints on Iraq,
• containment of Iran,
• influence on regional proliferation decisions.

during the Jordan crisis, the Nixon administration explicitly considered Israeli air and ground intervention while weighing the risks of direct American intervention.[8]

my central estimate models this approximately as

6 major crises × 10% reduction in expected American intervention × $300 billion intervention cost ≈ $180 billion.

the $300 billion figure is calibrated using historical deployment costs such as Desert Shield and Desert Storm, updated into current dollars.[9]

this category dominates the uncertainty.

if Israel prevented several major American wars, the alliance generated enormous value.

if it instead increased regional instability by approximately equal amounts, much of that value disappears.

the largest identifiable cost: the 1973 oil shock

the Arab oil embargo was imposed explicitly in response to American support for Israel during the Yom Kippur War.[10]

the embargo substantially reduced American output and increased inflation.

the Federal Energy Administration estimated that the embargo and accompanying oil-price increases cost up to $45 billion in contemporary gross national product, including up to $20 billion attributed directly to the embargo. adjusting the larger figure into June 2026 dollars produces a rough $200–250 billion calibration.[10]

assigning all of that loss to Israel would be incorrect.

OPEC policy, preexisting market structure, and broader geopolitical conditions all contributed.

I attribute approximately 25% of the resulting loss to the U.S.–Israel relationship, yielding a central estimate near $60 billion.

additional costs (~$45 billion)

I separately include

• military deployments not captured in aid,
• diplomatic costs,
• intelligence losses from espionage,
• security expenditures,
• reduced flexibility with regional partners.

these are difficult to isolate and are relatively small compared with aid and strategic effects.

the 2026 Iran war

Defense Secretary Pete Hegseth estimated that direct American costs had reached approximately $37.5 billion as of July 21, 2026.[11]

I would not attribute all of those costs to Israel.

the United States has independent interests involving

• Iranian nuclear capabilities,
• Gulf shipping,
• attacks on American personnel,
• regional stability.

a reasonable provisional allocation is

• approximately −$20 billion in attributable cost,
• offset by perhaps +$10–30 billion in intelligence, operational cooperation, and burden sharing.

the long-run consequences for deterrence and proliferation remain unknowable.

accordingly, I leave my lifetime estimate essentially unchanged while widening the uncertainty range.

value to Israel

the relationship is much less ambiguous from Israel's perspective.

the dominant factor is security insurance.

if American support reduced even modestly the probability of catastrophic military defeat over Israel's history, the expected economic value is hundreds of billions of dollars.

exclusions

this report intentionally excludes

• welfare changes experienced by Palestinians, Lebanese, Iranians, or other third parties,
• moral or religious value assigned to preserving a Jewish state,
• speculative attribution of the Iraq war, Afghanistan, or the entire post-9/11 security environment to the alliance.

those are important questions, but they require different counterfactuals.

conclusion

my best estimate is therefore

• cumulative American benefits: approximately $390 billion;
• cumulative American costs: approximately $425 billion;
• net American value: approximately −$35 billion, with uncertainty easily spanning several hundred billion dollars in either direction.

the relationship has almost certainly been enormously positive for Israel.

for the United States, the evidence suggests something much closer to an expensive strategic insurance policy than either an extraordinary bargain or an enormous giveaway.

its sign depends almost entirely on whether one believes Israel prevented more costly American military commitments than it generated.

references

1. Congressional Research Service. U.S. Foreign Aid to Israel (RL33222). Updated through FY2025. https://www.everycrsreport.com/reports/RL33222.html

2. Office of the United States Trade Representative. U.S.–Israel Trade Facts. https://ustr.gov/countries-regions/europe-middle-east/middle-eastnorth-africa/israel

3. U.S. International Trade Commission. Economic Impact of Trade Agreements Implemented Under Trade Authorities Procedures (2016), summarizing the Commission's 2003 retrospective estimate. https://www.usitc.gov/publications/332/pub4614.pdf

4. United States Air Force. LITENING Advanced Targeting Pod Fact Sheet. https://www.af.mil/About-Us/Fact-Sheets/Display/Article/104571/litening-advance-targeting/

5. National Archives. Throw a Nickel on the Grass and Have a Doughnut: Exploitation of the MiG-21. https://unwritten-record.blogs.archives.gov/2022/10/18/throw-a-nickel-on-the-grass-and-have-a-doughnut/

6. Ethan Orwin. Not an Intellectual Exercise: Lessons from U.S.–Israeli Institutional Army Cooperation, 1973–1982. Military Review, Army University Press. https://www.armyupress.army.mil/Journals/Military-Review/English-Edition-Archives/January-February-2020/Orwin-US-Israeli/

7. Office of the Director of National Intelligence. Annual Aggregate U.S. Intelligence Budget. https://www.dni.gov/index.php/what-we-do/ic-budget

8. Office of the Historian, U.S. Department of State. Foreign Relations of the United States, 1969–1976, Volume XXIV: Jordan, September 1970, Document 299. https://history.state.gov/historicaldocuments/frus1969-76v24/d299

9. U.S. Government Accountability Office. Cost of Operation Desert Shield and Desert Storm and Allied Contributions. https://www.gao.gov/products/t-nsiad-91-34

10. Office of the Historian, U.S. Department of State. The 1973 Oil Embargo. https://history.state.gov/milestones/1969-1976/oil-embargo U.S. General Accounting Office. Issues Needing Attention in Developing the Strategic Petroleum Reserve (EMD-77-20). https://www.gao.gov/assets/emd-77-20.pdf

11. Associated Press. Hegseth estimates Iran war has cost $37.5 billion as he defends funding request at fiery hearing. July 21, 2026. https://apnews.com/article/iran-war-hegseth-military-deaths-95-billion-7d158708c3e5385683930f8b839d0344

valuation caveat: several numbers in this report are model-based estimates, not published economic results. the references support the underlying historical facts and calibration points; the valuation itself is my synthesis rather than something directly found in the literature.