The 16-month-old intifada has taken its toll on American-supported projects in Palestinian areas, with money being shifted from infrastructure, health care and natural resources to more basic needs for a people in economic collapse.
Contrary to popular belief, U.S. aid does not go to the Palestinian Authority, government officials say.
The average of $75 million designated annually for the West Bank and Gaza Strip is distributed by the U.S. Agency for International Development (USAID). Formerly earmarked for development projects, many of USAID's projects have been suspended or terminated as priorities have shifted to more basic needs such as emergency employment programs and health assistance.
Larry Garber, USAID's mission director for the West Bank and Gaza, said Israel's security closures of the West Bank and Gaza Strip have left about 75,000 Palestinians unemployed. A majority of Palestinians, according to Garber, live on less than $2 a day.
International organizations such as the World Bank's Holst Fund, the European Union and Arab states also provide money to the region, often giving funds directly to the Palestinian Authority.
With corruption rampant in the Palestinian Authority -- one year, more than 40 percent of the Palestinian Authority's $800 million budget could not be accounted for -- congressional legislation prevents the U.S. government from giving money directly to the Palestinian Authority.
Instead, it provides aid to nongovernmental organizations in the West Bank and Gaza Strip. Garber said the agency tries to ensure that the organizations it supports are not linked to terrorist organizations.
But a Congressional Research Service report last April suggested that funds may be inadvertently landing in the Palestinian Authority's hands.
"It is possible that some U.S. assistance provided to the Holst Fund, contractors, or private organizations does reach PLO members or organizations through indirect means, but it is not the intention of USAID or the Department of State to provide funding directly to the PLO," the report said.
The budget for assistance to the West Bank and Gaza has grown since 2000, as the United States maintained its commitment under the 1998 Wye Accords to provide the Palestinians an additional $400 million over three years.
Most of the $400 million has not yet been spent, as conditions on the ground are not ripe for development. If the money is not earmarked by the end of this fiscal year, it will be lost. But, there are "contingency plans" to prevent that from happening, Garber said.
A year ago, the State Department earmarked an additional $8.8 million to the United Nations Relief and Works Agency to address emergency needs of Palestinian refugees.
The additional aid places the Palestinian territories among the top five recipients of U.S. assistance programs in terms of total size, and probably the largest recipient on a per-capita basis, Garber said.
Historically, a majority of the aid has been spent on improving access to and management of water resources, providing services to local governments and strengthening legal and democratic institutions. A smaller amount has been spent on economic growth, health care and educational programs.
U.S. aid to the Palestinians has caused concern in Congress. last year, several pieces of legislation were introduced to cut nonhumanitarian aid to the region. However, none made it to the floor. Earlier this month, Rep. Eric Cantor (R-Va.) introduced a bill to cut all aid to the West Bank and Gaza. That bill still is pending.