NEWS ANALYSIS : Bush Prevailing in Battle With Israeli Lobby

In a major test of political muscle, President Bush has done what some Washington sages said no President would ever do--force a showdown with the Israeli lobby just before the start of an election campaign.

To the shock of Israel and its allies in Washington, Bush is prevailing in his fight to delay U.S. guarantees for $10 billion in loans to help resettle Soviet Jewish immigrants in Israel.

The outcome of the sometimes-bitter battle, which provoked one Israeli Cabinet minister to call Bush an anti-Semite, reveals much about the fast-changing dynamics of the U.S. relationship with Israel--and Israel’s waning political clout in Washington.

For decades, diplomatic folklore held that Middle East peace talks could never take place during a U.S. election year, because no President would dare pressure Israel as a campaign approached.

But in the wake of the Persian Gulf War, in which the United States was allied with half a dozen Arab nations, Israel can no longer claim the title of America’s only real friend in the Middle East. The vaunted pro-Israel lobby, which vowed to ram the loan guarantees through Congress, now looks overrated.

And instead of endangering Bush’s reelection chances, the President’s tough stance against Israel actually may have boosted his popularity--by enabling him to inveigh against foreign aid, the most unpopular program in the federal budget.

More enduring, the squabble appears to be a precursor of more bitter battles as the Administration’s effort to launch peace talks in the Middle East forces both Israel and the Arabs to make some fundamental choices.

“This is not just a typical flash point in U.S.-Israeli relations of the kind every President has,” said Stuart E. Eizenstat, a former domestic adviser to President Jimmy Carter who is active in Jewish affairs. “This one is over a basic policy disagreement that has been there since 1967--a fundamental difference over trading land for peace. The United States believes in that; the Shamir government does not. . . . It is going to be a continuing and major source of problems.”

On the surface, the dispute is a simple one: Israel has asked for the $10 billion in loan guarantees over the next 10 years so it can obtain commercial financing to build housing for Jewish immigrants from the Soviet Union.

But the Administration objects for fear that a commitment to further settlements on the West Bank would make it more difficult for the Arabs to compromise in preparation for a Middle East peace conference that Washington, together with the Soviet Union, hopes to sponsor next month.

The impact of Bush’s initial victory here at home has been stunning--and contrary to some conventional political wisdom. A Wall Street Journal poll published last week showed that 69% of those questioned favored a delay in the loan guarantees, 46% were unfavorably disposed toward any economic aid to Israel (against only 44% supporting aid) and 49% favored an Israeli withdrawal from Arab territory (against 31% opposed).

“The reflexive reaction of many Americans to support Israel on the grounds of opposition to the Soviet Union no longer applies,” conceded Abraham H. Foxman, national director of the Anti-Defamation League of B’nai B’rith. “(And) in light of the Gulf War and progress toward a peace conference, there is a perception that the Arabs are not necessarily the same bad guys as they have been.”

The tough White House stance also has created a rift between Bush and the American Jewish community.

“This did some damage,” said Rabbi Alexander M. Schindler, a former chairman of the Conference of Presidents of Major American Jewish Organizations. “It wasn’t so much the position he took as the tone he used--an imperious tone, an insulting tone.”

Another Jewish activist was more strident: “The most important lesson of this was that George Bush can be a mean s.o.b.,” he said. “We never knew he could turn on the Jews the way he did. . . . After this, we can’t trust him.”

Bush’s decision to take a stand against Shamir’s government flew in the face of advice from some of his political lieutenants--including Vice President Dan Quayle and top Republican Party officials--who had privately implored him to avoid a confrontation over the issue at the start of an election year.

“I’m catching hell from the party,” Bush complained, a U.S. senator who met with him recounted. “They’re afraid we could lose some Senate seats out of this--especially in California.”

But other advisers, including Secretary of State James A. Baker III and National Security Adviser Brent Scowcroft, reportedly argued that the political risks were exaggerated. And, most important, Bush was genuinely angry over what he considered Shamir’s dismissive treatment of U.S. concerns.

At first, the White House pessimists looked as if they might be right: Bush’s stand touched off furious resistance from Israel’s friends in Congress, who vowed to pass the $10 billion in loan guarantees whether the President liked it or not. In California, where GOP operatives were worried about a backlash among Jewish voters and campaign donors, Democratic Senate hopeful Dianne Feinstein quickly issued a blistering statement calling Bush’s position “reprehensible.”

But within a week, the pro-Israel juggernaut ran out of steam. Polls showed that the American people supported Bush overwhelmingly, by as much as 86% in an ABC News survey. Congress members who had ballyhooed bills to lock in the $10-billion loan guarantee quietly folded their hands and looked for a dignified exit. “It’s dead,” acknowledged an aide to a leading pro-Israel legislator. “There was very little stomach to confront the President on this.”

Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate subcommittee that handles foreign aid appropriations, who (in a case of strange bedfellows) came out early in support of Bush’s position, said he was surprised and delighted to discover that his stand was popular with voters. “I went back to Vermont, and I expected that a number of people would be trying to hand me my head--and instead I’m finding just the opposite,” he said.

That should have come as no surprise, political scientists say.

“Presidents almost always win on foreign policy issues--unless they are intensely controversial, like Vietnam or Nicaragua,” said William Schneider, an analyst with the American Enterprise Institute and a political consultant to The Times. “The Israel lobby usually wins when there is no opponent on the other side. As soon as a President puts it to the test--and puts himself on the other side--there’s no contest anymore.”

Hyman Bookbinder, the retired dean of pro-Israel lobbyists in Washington, agreed. “We have to understand the limitations of our own power,” Bookbinder said. “The lobby has slowed up some arms sales to Arabs. . . . But if the President of the United States goes to the American people and says ‘Enough, already,’ the Israeli lobby can’t counteract that.”

Analysts say Bush was also clever to portray the issue as a question of being forced to spend foreign aid--which most voters don’t like--in a way that runs contrary to U.S. policy. “The American people aren’t anti-Israel,” Schneider said. “They’re anti-foreign aid.”

Also, Bush’s argument made it difficult for Democrats to oppose him--for that would have meant campaigning on behalf of foreign aid when most Democrats are trying to argue, instead, for increased attention to domestic problems.

In any case, Bush ran almost no direct political risk himself. He doesn’t need Jewish support to win reelection in 1992. “Jews normally vote about 25% Republican; this might drop that to 10%,” noted Mark Siegel, a Democratic political consultant. “So what? It isn’t enough to worry about.”

But it is enough, in some states, for GOP Senate and House candidates to fret about--and they do. “Some of us are worried as hell,” confessed a Republican senator who asked not to be quoted by name.

In California, where two Senate seats are up for election next year--and where Jewish voters and campaign donors are more important than in most other states--Republican activists complained loudly to the White House about Bush’s position, one official said.

The White House moved quickly to try to repair the damage. Bush wrote a conciliatory letter to Shoshana Cardin, the chairwoman of the Conference of Presidents of Major American Jewish Organizations. He gave a major speech calling on the U.N. General Assembly to repeal its 1975 resolution equating Zionism with racism. And both Bush and Quayle met privately with officials of pro-Israel organizations, seeking to soothe hurt feelings.

But among Israelis and their most devoted American supporters, the sting will take longer to wear off--especially as the tortuous process of launching a Mideast peace conference keeps forcing contentious issues to the surface.

“This President takes Israel’s settlement policy personally . . . and to think that he won’t exert his influence is to fool one’s self,” Foxman of the Anti-Defamation League said. “I think American policy is flawed. . . . Up until now, America has been like Israel’s brother. But when your brother starts undercutting your negotiating position, that hurts.”

Times staff writer Douglas Jehl contributed to this article.