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NOTE: I am happy to note that General Yoav Gallant, former Israeli Defense Minister, joins us to provide this analysis. — RDM
by General Yoav Gallant
October 16, 2026
Heading into the midterms, almost every American politician asked about Israel faces the same question: Should the United States continue aid to Israel? Or should it be cut, conditioned, or used as leverage to advance American priorities?
This question comes amid rumors that a forthcoming U.S.-Israel memorandum of understanding will curb U.S. aid to Israel.
No matter where you fall on this issue, almost everyone seems to agree on the premise that American support for Israel is a donation, and that the only remaining question is how generous the benefactor should be.
But that premise is wrong. It has been wrong for a long time. And because it is wrong, the debate built on top of it misrepresents to the American people what their money has actually been doing for the past half-century.
I served as Israel’s minister of defense during the most difficult period in our modern history: the seven-front war that began on October 7, 2023. In that first year of war, I sat across the table from American counterparts to discuss our relationship. And I watched, on the battlefield, what American and Israeli capabilities look like when they are combined against a common enemy.
Here is what the U.S.-Israel relationship actually is — and what it is not.
Under the current memorandum of understanding between the two countries, the United States provides Israel $3.8 billion annually, of which $3.3 billion is foreign military financing (FMF) and $500 million is cooperative missile defense. American political discourse treats this as foreign aid, grouping it with disaster relief and humanitarian assistance and calling it a subsidy or a gift. The description misidentifies the transaction.
What Does U.S. Aid Buy?
Foreign military financing is not merely a transfer of money to Israel. It is a defense procurement arrangement under which Israel receives the dollars on paper and then must spend them on American-made defense equipment, produced on American soil, by American workers, in American congressional districts. By 2028, nearly every FMF dollar will be required to be spent in the United States. The checks are written in Jerusalem, but the jobs are in Arkansas, Alabama, Texas, Arizona, and Connecticut.
This is an investment in American industrial capability, denominated in American manufacturing output. Investments are measured by their return, and the return on this one is well documented.
When American dollars pay for F-15s, F-35s, and the other U.S.-made systems that Israel buys, Israel’s own defense budget is freed up for homegrown research and development of Israeli technology that Americans benefit from. This “aid” does not simply transfer money. It allows Israel to invest its own resources in domestic R&D at a scale no other ally can match, with the urgency of a country that has continuously stood under fire for nearly 80 years. No other Western country has had to accumulate that kind of combat experience over that span of time.
As a result, the systems that come out of that R&D process get tested under combat conditions. By the time they mature, they have been validated against the most demanding threat environments in the world. Israel then gives American forces finished products, ready for deployment.
This directly benefits the United States. For example:
Trophy, the active protection system now fielded on American Abrams tanks across multiple armored brigades, was developed in Israel using Israeli resources, combat-proven on Israeli Merkava tanks, and only then procured by the U.S. Army after American commanders concluded no equivalent American system existed.
The helmet-mounted display that defines the F-35’s pilot interface, supplied through a joint venture between Israel’s Elbit Systems and the American firm Collins Aerospace, equips every F-35 produced anywhere in the world. During both the June 2025 and February 2026 operations against Iran, Israeli air defenses helped protect American bases across the Gulf, and Israeli intelligence and electronic warfare contributed to combined operations that would otherwise have required additional American deployments.
The American taxpayer rarely hears about these returns, because the political debate is conducted at the level of the headline number. But U.S. aid to Israel is not charity. American dollars flow into American factories; American assistance frees Israeli capital for innovation; and American forces eventually receive Israeli-developed capabilities refined in real combat.
In short, American dollars are paying for R&D, from one of the greatest tech centers on Earth.
Not Aid: An Investment
If you are still not convinced this is a good investment, set the U.S. government aside for a moment and ask the question any private investor would ask: Would you invest in Israel right now?
If you look at public data, the answer is obvious. In 2025, the Tel Aviv Stock Exchange’s flagship index rose roughly 50 percent, after rising almost 30 percent in 2024. It has been the best-performing major stock market in the world for two consecutive years. Foreign institutional holdings in Tel Aviv equities have reached a record $19 billion, more than double the prewar level. In March, Google paid $32 billion for a single Israeli cybersecurity company, the largest acquisition in its history.
In 2020, Nvidia paid $6.9 billion for an Israeli technology firm called Mellanox, a specialist in high-speed networking. That acquisition cost roughly 1.8 times the total amount of money the United States transfers to Israel annually. But it paid off: Mellanox’s technology became instrumental to the entire AI data center revolution, while Nvidia’s networking division generated nearly $11 billion in revenue in a single recent quarter, exceeding the entire purchase price. Over the same period, Nvidia’s market capitalization rose from $93 billion to more than $5 trillion.
This is one American company making one investment in one Israeli company. The monetary value of the bet was equivalent to more than a year of American aid to Israel. The returns reshaped an industry.
All of this happened while Israel has faced multifront wars, European arms embargoes, credit-rating downgrades, and the most sustained international campaign to diplomatically isolate it in a generation. But capital does not move with slogans; it moves with facts. Every major institutional investor in the world, looking at the same evidence available to Washington, is increasing its allocation to Israel. Washington is the only one debating an exit.
There’s no denying that $3.8 billion is a significant amount of money, and the security assistance Israel receives from the United States matters to Israel. But the budgetary share has changed. In the past, U.S. aid was a significant share of Israeli GDP. Today, measured against an Israeli economy approaching $720 billion, it represents about half a percent. The Israeli shekel appreciated 14 percent against the dollar in 2025 alone, its strongest level in three decades. Yes, the aid still matters in budgetary terms, but the relative share is much smaller than it once was. Meanwhile, the shared benefit, what each country gains from the partnership, has grown only more important.
Can the Deal Be Made Better? Yes.
As I’ve long argued, the time has come to update the system.
The original U.S.-Israel relationship was between a global superpower and a small, determined country at the start of its journey. Today, Israel is still small. But it is also a defense partner that fights alongside American forces, an arms exporter to dozens of allied nations, and a creator of technologies that the whole world buys. Israeli defense exports reached $14.8 billion in 2024 — their fourth consecutive record year — placing the country among the top 10 arms exporters in the world.
This is no longer the relationship the original aid framework was designed to manage.
American security assistance to Israel is, in effect, already an investment in joint developments. I proposed formalizing this evolution when I was Israel’s minister of defense, and I am proposing it again now. Here’s what it would look like:
Over the next quarter-century, U.S. military aid to Israel should be gradually reduced, while clearly labeled joint investment in development is gradually increased, culminating in a complete shift to an investment-based model by 2048. What is today an annual budget expense should instead be viewed as a long-term national asset. Instead of measuring success in dollars transferred, we should measure it in companies built, technologies exported, jobs created, and deterrence sustained.
The American public deserves a true picture of this relationship. They should not be told that an investment which has built American factories, fielded American capabilities, and protected American troops is a favor done to someone else.
The battlefield says the partnership works. American industry says the partnership works. Capital markets say the partnership works. Every investor with access to the facts is committing more money to Israel, not less.
The question is not whether to continue. The question is how to shift the way we talk about the relationship, to reflect what the evidence has been showing the world for years.
— General Yoav Gallant is the former Minister of Defense of the State of Israel and a decorated Israel Defense Forces commander. You may follow him on his Substack, “The Defense Memo”.
Add in the cost of Israel taking us into armed conflicts. How much have we spent so far with the war in Iran? Not to mention 23 Americans dead.
I get that the world is not a perfect place and we need to defend ourselves militarily, but lets also defend ourselves from Israeli influence as well. They're a foreign country with interests that conflict with a large percentage of the American populace, do you want republicans to win or not? Because the Israelis pay to play with the democrats too, they play both sides of the political aisle.
The Israelis are interested in getting a return for their lobbying efforts not American well being.