Leahy's solution


Washington -- GEORGE BUSH is on the verge of a Pyrrhic victory. He picked a fight with Israel just before a peace conference, demanding that loan guarantees to Soviet refugees be again delayed, giving him a lever to force Israel to freeze settlements and in effect hand over the West Bank.

He knows his veto would be sustained in Congress, as all others have. He has Washington Post and New York Times editorialists behind him. In a test of strength, he would humiliate Israel and its American supporters, delighting Arab despots.

But at what cost? By inflicting unforgettable punishment, Bush would boost super-hawk Ariel Sharon in Israel, win unwanted backing here from gleeful neo-isolationists, hearten the lunatic fringe, harm his party and earn a place in history as domestic polarizer rather than global peacemaker.

Cool heads in Congress are looking for a way to avert this political Armageddon. The key player, according to senators on both sides of the aisle, is Patrick Leahy, the Vermont Democrat whose Senate committee controls all foreign-aid appropriations.

Pat Leahy is a maverick establishmentarian, a parsimonious liberal, an Italian-Irish Yankee.

His Agriculture Committee failed in its oversight of commodity credits to Iraq through the Bank of Lavoro, and he has been an implacable foe of the Stealth bomber.

He is his own man, however, and was the Democrat that George Bush counted on, after a private meeting excluding John Sununu, to delay Senate consideration of the loan guarantee to house Soviet immigrants to Israel.

Leahy delivered; the Senate version of the House-passed bill will not be taken up until Congress returns from its post-Thanksgiving recess, probably at the end of January. Nobody knows what assurances Leahy received from Bush about support of the bill in return, but bipartisan deals are rarely -- one way.

According to Senate colleagues who have been approached by Leahy over the weekend, here are the elements of the Leahy Compromise:

1. The $10 billion guarantee spread over the coming five years will be part of a "must pass" bill, tied to all other foreign aid including Egypt's; it will not be stand-alone legislation that can be singled out for veto, nor will it be subject to further delay.

2. For every dollar Israel spends on settlements in the West Bank, the loan guarantee will be reduced by $1. This answers the "fungibility" argument, which holds that guarantees for housing within pre-1967 Israel would free up money that could then be used to settle the West Bank. It enables Bush to assure Arabs that no American aid is directed to Israeli West Bank settlement.

How much of an economic disincentive would the dollar-for-dollar proviso be? Last year, Israeli spending on new settlements was about $85 million; if Israel spends, say, $100 million next year, that much in loan guarantees would be deducted from the year's $2 billion.

Whose figures would be used? The Leahy compromise envisages a Government Accounting Office continuing on-site review, not dependent on Israeli, Arab or State Department estimates.

3. The guarantee will be tied to Israeli economic reforms. This will be met with cheers from conservatives who wish Israel well and wish it to abandon old socialist economics; in Jerusalem, it will make necessary habit-breaking palatable.

According to a jowly OMB official in a baseball cap, such reforms would affect the amount needed for U.S. budgetary set-aside, which could be brought down to 5 percent of the guarantee, or $100 million a year, as credit ratings improve; Israelis say it could go as low as 1 percent.

Would the Israelis accept the Leahy approach, which permits the JTC president to hold a million Soviet Jews hostage for four months as a negotiations whip, forces settlement spending to come out of Israeli defense dollars and dictates systemic changes? They don't have much choice.

Will Bush buy into the compromise? He could send Secretary of State James A. Baker III to the Congress with a different plan, or double-cross Leahy by vetoing all foreign aid if Israel does not follow orders at the peace table.

He might still win, but as Plutarch reported King Pyrrhus to have said, "another such victory and we are ruined."

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