Palestinian Authority blames Gaza for deficit mess


Paying for the upkeep of the Gaza Strip while its political rival actively blocks revenues flowing back is taking its toll on the deficit-racked Palestinian Authority.

The Western-backed PA, many of whose top leaders belong to the mainstream Fatah movement, says it has poured around $7 billion into the Gaza Strip since its rival Hamas seized control in 2007, but complains that the Islamist group is stymieing its efforts to balance its books.

A barrage of mutual accusations in recent weeks has driven Hamas and Fatah ever further apart as stalled efforts at reconciliation and economic stagnation have jangled nerves on both sides.

Crippling power cuts in the small coastal enclave have only added to the acrimony and lifted the lid on often opaque Palestinian funding.

The PA says it spends $120 million a month, or more than 40 percent of its whole budget, on salaries and services in Gaza despite being driven out in a brief civil war with Hamas five years ago, anxious to show the world that despite the political divisions, the Palestinians remain one people with a single administrative core.

The PA, which continues to exercise limited self-rule in the Israeli-occupied West Bank, has never recognized Hamas’s rule in the Gaza Strip and still pays wages to former PA personnel in the enclave.

Israel maintains a tight blockade on the Gaza Strip with the help of neighboring Egypt.

“In return Hamas does not pay for any of the needs of the people in Gaza. On the contrary, it sells the medicine that we send for free, and keeps the money,” said Ahmad Assaf, a Fatah spokesperson in the West Bank.

Hamas denies this and says the PA is just funneling foreign donations ear-marked for the Palestinian people.

“Vital sectors like education and health do not get support from them … except for bits and pieces that arrive as donations from some countries,” Hamas spokesperson Sami Abu Zuhri said.

The PA, which relies overwhelmingly on foreign donor aid, mostly from the European Union, the United States and Arab nations, is facing a projected $1.3 billion deficit in 2012.

Although most Western countries shun Hamas over its refusal both to renounce violence and recognize Israel, they let the PA use their aid cash to help the Palestinians in Gaza.

The EU says it contributed 837 million euros ($1.1 billion) to the PA since 2008, 34 percent of which went to the Gaza Strip to cover civil servants’ salaries and pensions.

“According to our information, the Hamas government only pays for the salaries of their employees and for their security apparatus,” said an EU official, who declined to be named.

“We are convinced that we must continue paying this money because we know that if we didn’t the Hamas government would do nothing,” Fatah’s Assaf said.

Hamas has tried to build up its own finances by attracting funds from its own foreign allies, such as Iran, while looking to impose a taxation code of its own on trade and business within Gaza.

But analysts say it too faces a budget crunch and is far from ready to take care of Gaza’s 1.7 million-strong population, some 70 percent of whom live below the poverty line, according to U.N. statistics.

“Hamas wants to portray itself as being independent financially from the PA,” said Naser Abdelkarim, a professor of economics at Birzeit University in the West Bank.

“But that’s a myth. If the PA stops transferring money to the Strip, the reality in Gaza would deteriorate instantly.”

Hamas agrees it wouldn’t pay all the PA salaries, but says that’s because most of the people concerned don’t do any work after Fatah instructed its civil servants not to cooperate.

Another crucial issue for the PA is the taxes it should be collecting from Gaza. It says Hamas and Gazan traders systematically under-report the value of their imports to the Israeli authorities, which collect custom dues on behalf of the PA, costing the PA $400 million in “tax leakage” since 2007.

Palestinian Authority Prime Minister Salam Fayyad said Gaza raised 2 percent of all Palestinian tax returns in 2011 against 28 percent in 2005.

Hamas’s economy minister, Ala al Rafati, admitted the group was withholding some $95 million in custom tax forms that the PA needs in order to collect revenues and would continue to do so until the PA agreed to wire the money straight back to Gaza.

“These invoices have not been sent to Ramallah since the split,” al Rafati told Reuters by telephone from Gaza.

Palestinians’ long-running hope of founding a state incorporating both the West Bank and Gaza, territories divided by Israel, has often papered over feuds between rival factions.

The arguments over finances have come out into the open partly because of a fuel crisis that has left much of the enclave without power for several hours each day since early February, sparked by Egypt’s decision to clamp down on the flow of fuel smuggled into Gaza via a network of tunnels.

Critics of Hamas say it is at fault for the emergency for relying so heavily on cheap, illicit fuel, rather than working with the PA to secure alternative supplies.

The PA says it pays more than $50 million a month to an Israeli energy company that feeds power into Gaza, but Hamas refuses to hand over money from electricity bills.

“We have repeatedly asked Hamas to transfer the money they collect so that we can continue to provide them with fuel. But nothing gets sent,” said Omar Kittaneh, the head of the PA Power Authority.

The PA admits that nothing is going to change fast. As with many of the issues that bedevil Palestinian politics, the two sides are stuck in a rut.

“Contributing a large part of the PA budget to the Gaza Strip has become the status quo and this will not change any time soon,” said PA spokesman Ghassan al Khatib.

Additional reporting by Nidal al-Mughrabi in Gaza; Editing by Crispian Balmer and Sonya Hepinstall

Fiscal conservative ISO tax and spend liberal


GOP platform offers strong support for Israel, veers right domestically


MINNEAPOLIS (JTA)—John McCain’s Jewish supporters characterize him as a Republican maverick who shares his party’s bedrock support for Israel and combating anti-Semitism. Critics dismiss him as the standard-bearer of a staunchly conservative party at odds with the Jewish community on a host of issues.

They’re both right, judging from the platform approved this week at the Republican convention in St. Paul and Minneapolis.

The platform includes a call for an end to all government-funded embryonic stem-cell research and a ban on all abortions—positions that, polls show, are contrary to those of most Jewish voters. Of course, they also do not conform to the views of McCain, who has said that he would revoke President Bush’s restrictions on federal funding for stem-cell research, permit abortions in cases of rape, incest and threats to the life of the mother.

On immigration, McCain, the U.S. senator from Arizona who is the presumptive Republican nominee for president, has pressed for legislation that would provide undocumented workers with a path toward citizenship, but the platform declares: “We oppose amnesty.”

The McCain campaign reportedly decided to avoid significant fights over the platform rather than upset leaders of the party’s conservative base, many of whom have expressed concern over the GOP nominee. His supporters argue that the platform is irrelevant to understanding McCain and that voters will make their decisions based on how they view the candidate.

Texas state Sen. Florence Shapiro, the only Jewish female Republican in her state legislature, said that the platform is “not what guides my everyday” decision-making and doubts voters will be using it to make decisions either.

They will and should be “looking at John McCain and his positions and record,” she said.

Another Jewish delegate from Texas, Houstonian Stuart Mayper, said the strong “pro-life” language in the platform could be a problem for some Jews. But, he quickly added, the platform contains language strongly supportive of Israel that should be attractive to the Jewish community.

Sources familiar with the formation of the platform say the language dealing with Israel and fighting anti-Semitism was drafted in consultation with the American Israel Public Affairs Committee and other Jewish groups.

The platform echoes AIPAC’s position on the Israeli-Palestinian conflict, calling for a two-state solution but placing the onus on the Palestinians to take several key steps and calling on nearby Arab countries to play a more constructive role. It also declares support for “Jerusalem as the undivided capital of Israel and moving the American embassy to that undivided capital of Israel.”

Both McCain and Sen. Barack Obama (D-Ill.), the Democratic nominee, have said that the status of Jerusalem ultimately would be decided in negotiations between the two sides. McCain has pledged to move the embassy to Jerusalem right away—a promise that the Obama campaign rejected, essentially calling it a lie.

The GOP platform calls for the isolation of Hamas and Hezbollah and vows to maintain Israel’s qualitative edge in military technology over its enemies—all positions shared by Obama and McCain.

In several contexts, the platform stresses the need to combat anti-Semitism—on university campuses, in Europe and across the world—and declares that “discrimination against Israel at the U.N. is unacceptable.”

It says that Iran cannot be permitted to obtain nuclear weapons, calls for a “significant increase in political, economic, and diplomatic pressure” on Tehran and insists that the United States “must retain all options” in dealing with the situation.

Without naming Obama, the platform draws a contrast with the Democratic nominee’s previously stated willingness to meet with the Iranian president. It states: “We oppose entering into a presidential-level, unconditional dialogue with the regime in Iran until it takes steps to improve its behavior, particularly with respect to the support of terrorism and suspension of its efforts to enrich uranium.”

Budget Woes


One year ago, Gov. Gray Davis was calling for across-the-board cuts in every state department except the prisons, mass layoffs of workers and huge bites out of most programs for the disadvantaged.

Davis’ budget-slashing plan of January 2003 was ignored by the legislature and pilloried by the media. In the end, Davis failed to meet the fiscal crisis and lost his job because of it. Now, a year later, some critics are saying Gov. Arnold Schwarzenegger’s budget is little more than Davis redux.

In fact, the Schwarzenegger plan represents a significant departure from business as usual, and offers a template for fundamental change in the capitol.

This is not to say that Schwarzenegger’s proposal is free of the familiar. Just as with the Davis plan, it would hurt local service agencies that rely on Medi-Cal. Although the idea is being challenged in court, such service groups face a proposed 10-percent rate cut.

Paul Castro, executive director/CEO of Jewish Family Service of Los Angeles, which serves 60,000 people a year, said $600,000 would be cut to providers of services like the Multipurpose Senior Services Program.

"Seniors stay at home for about half the cost of putting them in a nursing home, so cutting money to this saves on one side of the ledger but costs more on the other side," Castro said.

Molly Forrest, chief executive for the Los Angeles Jewish Home for the Aging, said she coped with last year’s cuts by trimming expenses and increasing private fundraising for the home that serves 800 residents.

"The governments are not prepared to deal with the fact that people are living much longer," said Forrest, whose fundraising is up 7.8 percent.

But for every idea borrowed directly from Davis, Schwarzenegger and his team came up with fresh principles for saving money that have some Sacramento observers buzzing with hope.

Assemblyman Joe Canciamilla, Democrat leader of the Moderate Caucus, a group enjoying new respect, told me, "This budget is a worthy attempt to correct the craziness that has unfolded here. I would cut even more."

Kim Belshe, new secretary of Health and Human Services, says that of the $13 billion explosion in spending since 1999, half came from programs in her department on which there were no cost controls. Unlike Davis, Schwarzenegger "is not proposing wholesale rolling back of programs, but controlling costs while maintaining services to those most in need."

Schwarzenegger intends to wean California’s legislature away from its taste for Cadillac programs that most other states offer as mere Fords. Think of the governor as repo man.

For example, unlike the basic Medicaid programs created by other state legislatures, Sacramento’s legislators decided Medi-Cal should be better than most private health plans. On the taxpayer’s dime, they created a program that even includes free acupuncture, and they offered the plan to many non-poor. One in five Californians qualified. The result was skyrocketing costs that are unsustainable.

State Finance Director Donna Arduin told me all 6.8 million people will still be eligible, to avoid Davis-style slashing. But costs will be controlled. The non-poor "may be asked to contribute toward their care, or the package of benefits they are offered may be modified." The changes will take two years, while California seeks federal approval. Other states already have these controls.

It’s just sensible stuff. But while Schwarzengger pushes for cost reforms, it’s extremely unlikely he will approve new taxes.

A strong anti-tax mood has settled across the nation. A recent poll in California shows voters willing to accept new taxes only on smokers and the rich — two populations that have dwindled so drastically that Chief Legislative Analyst Elizabeth Hill says taxing them would produce only a fraction of the several billion dollars needed to plug the deficit.

Democratic and Republican consultants and strategists tell me that Schwarzenegger and the Republicans won’t bend on taxes unless the governor suffers a big defeat in March.

In March, the governor wants voters to approve a $15 billion bond that refinances $12 billion in legally questionable bonds approved by the Davis-era legislature to finance its overspending last year. That $12 billion is milk that’s already been spilled. However, Schwarzenegger’s package ensures that those bonds are legal, avoiding potential fiscal chaos.

It’s going to be a tough year. Yet the governor has said that everything is on the table, and if alternatives to his cuts can be found, he wants to hear them. Unlike Davis, he has targeted the prisons for massive cutbacks. Worthy programs like the Multipurpose Senior Services Program still have a real chance to make their case, and people like Castro say they intend to do so.

In the end, however, everyone should hope Schwarzenegger gets much of what he is seeking from the Democratic-controlled legislature. It’s true fiscal restraint, but it’s done with decency.


Jill Stewart is a syndicated
political columnist and can be reached at