This article was first published in Foreign Affairs.

For the last four decades, every U.S. administration has opposed the construction of settlements in the territories that Israel has occupied since 1967. The Jimmy Carter administration termed the settlements “illegal.” President Ronald Reagan called for “the immediate adoption of a settlement freeze,” noting that “further settlement activity is in no way necessary for the security of Israel and only diminishes the confidence of the Arabs that a final outcome can be freely and fairly negotiated.”

President George H.W. Bush withheld loan guarantees that Israel needed to absorb Soviet Jewish immigrants until Israel agreed not to settle the immigrants in the occupied territories. And during the Clinton administration, the U.S. Congress passed legislation to deduct the amount of money Israel spent on settlement-related activity from U.S. assistance to Israel (apart from security aid). Most recently, the administrations of George W. Bush and Barack Obama have called on Israel to freeze all settlement activity, including “natural growth.”

Yet Israel has continued to expand its settlements. Except for a ten-month period in 2009-10 when the country imposed a moratorium on new housing starts, it has largely ignored U.S. views. In response, the United States has offered periodic condemnation, but no actions to back up its words.

This has made for bad policy. Rhetoric unsupported by action is meaningless, and in this case it has debased the value of words as a tool of foreign policy. It has also led to hypocrisy; in 2011, for example, the United States vetoed a UN Security Council resolution that quoted almost verbatim the words the United States had itself used to express opposition to the settlements.

Not only has the United States taken few serious measures to dissuade Israeli settlement activity, but it effectively continues to subsidize it. U.S. law and regulations prohibit official U.S. aid to Israel from being spent in the occupied territories. But money is fungible. U.S. aid flows into Israel’s entire budget, and thus frees up money that can fund settlement activity.

There is a solution to this problem—one that was made law for a period in the 1990s: to deduct, dollar for dollar, the amount of money budgeted by Israel for settlements from official U.S.  (non-security) assistance. Israel could still make its own decisions regarding how much to spend on settlements, but U.S. aid would not subsidize such spending.

That would take care of part of the problem, but it’s not just the U.S. government whose money supports the expansion of Israeli settlements. After a detailed investigation, the Israeli daily Haaretz reported that American tax-exempt charities have sent more than $200 million to Israel over the past few years for activities that directly strengthen settlements, such as schools, parks, and infrastructure. Some of those funds have also supported organizations such as Honenu that provide assistance to individuals convicted of murder by Israeli courts, such as Ami Popper, who murdered seven Arab workers in 1990; Menachem Livni, one of the leaders of the Jewish Underground, the terrorist organization that maimed two Palestinian mayors and killed three Palestinian students in the 1980s; and Yigal Amir, the assassin of former Prime Minister Yitzhak Rabin.

These tax-exempt contributions raise several challenging policy questions. If the Internal Revenue Service (IRS) starts passing political judgment on the purposes for which contributions will be used, it could lead down a slippery slope and risk severe unintended consequences. For example, administrations could then start choosing which charities to support or oppose, based on political ideology or personal preference. But it seems strange that tax-exempt charities should be engaged in overseas activities that are in direct contravention of longstanding, bipartisan U.S. foreign policy. At the very least, the U.S. Government Accountability Office and the IRS should conduct a full investigation into the activities of these tax-exempt organizations, and should end the tax-exempt status of organizations that provide assistance to convicted murderers, in Israel or elsewhere.

These moves would have a significant political impact in Israel, as opponents of the settlements would use the change in U.S. policy to galvanize support for their views. In the short term, it might not lead to a peace breakthrough, but it would send a critically important message of U.S. seriousness on a core issue in the peace process.

For almost five decades now, Israel has defied international pressure and U.S. advice and continued to expand its settlements in the occupied territories. Without a halt to the settlements, as well as an end to Palestinian terrorism and incitement, a peace deal remains as far away as ever. The settlements represent a policy of choice, not of necessity, and will do little to guarantee Israel’s long-term security. It is long past time for the United States to match its words with deeds.