If President Obama is serious about tackling the ever-elusive goal of achieving peace in the Middle East, he should start his efforts not by focusing on Israel or the Palestinians, but rather a little closer to home: Foggy Bottom.

Either through deliberate neglect or simple ineptitude, the State Department has made U.S. taxpayers complicit in perpetuating the single greatest impediment to Middle East peace: an increasingly radical Palestinian society that despises Israel and embraces terrorism.

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Despite multiple government audits and several changes enacted in the law over the past few years, the State Department still cannot ensure that U.S. taxpayer dollars are not subsidizing terrorists or underwriting terrorist propaganda in schools across the West Bank and Gaza. According to a critical report issued late last month by the Government Accountability Office, the auditing arm of Congress, State has fallen short overseeing aid to Palestinians through both the U.S. Agency for International Development and the United Nations Relief and Works Agency, which administers Palestinian refugee camps.

What this means in practical terms is that many of the Palestinians who are consuming a steady diet of Islamist indoctrination and glorification of violence are receiving this brainwashing courtesy of the U.S. taxpayer. It doesn’t require high-level deductions to predict how badly this wounds—if not outright kills—any hope for Palestinian society to embrace peaceful coexistence with a Jewish state of Israel.

Given the billions of dollars U.S. taxpayers have steered to the Palestinians—almost $600 million just last year—the United States has as much leverage as anyone to put a stop to this nonsense. Unfortunately, State has done a bit to improve matters, but not nearly enough.

The GAO report, which was requested in part because of Congressional concerns over reporting by this journalist in the Washington Times, indicates that State has dropped the ball on overseeing UNRWA. For example, existing U.S. law requires that UNRWA take “all possible measures” to prevent assistance from going to anyone who has engaged in any terrorist activity. State, however, “has not defined the key term ‘all possible measures’ or defined nonconformance.”

Some of GAO’s recommendations are comically simple, such as “establishing criteria to evaluate UNRWA’s efforts.” Others are so obviously necessary that it’s shocking they haven’t been required all along, such as “screening the names of UNRWA contractors against lists of individuals and entities of concern to the United States.”

UNRWA defended its record by telling the GAO that over the past three years, the agency had “disciplined” (which could include termination) seven different employees for violating UN policies on “neutrality” and “impartiality.”

But seven employees out of 30,000 spread out over several countries seems tiny considering that over 5,000 Gaza-based UNRWA employees voted for the Hamas-affiliated union in elections this March, or more than half of the 10,000 total employees there. That’s not even counting the 17 UNRWA employees who ostensibly ran openly on the Hamas ticket – and won.

That figure also includes 11 Hamas-tied teachers who swept the teacher’s union elections. Do we need to guess what this means for classroom instruction in UNRWA schools?

The union elections of overtly Hamas-linked UNRWA staffers was cited in a footnote in the GAO report, but it’s difficult to fathom an innocent explanation how agency employees can campaign on a Hamas ticket, win and still stay employed.

For this and other reasons, interest on Capitol Hill is picking up.

Leading Congressional efforts to prevent U.S. taxpayer money from flowing to terrorists or their propaganda has been Rep. Steve Rothman (D-NJ). Earlier this year, he introduced a resolution calling for UNRWA to put its textbooks on the Internet for public inspection and for the U.S. to screen the agency’s payroll for terrorists.

His ultimate goal, he explains, is simple: “Not one penny of U.S. taxpayer dollars should go either directly or indirectly to anyone associated with Hamas or any other terrorist organization. Nor should any go to terrorist propaganda in classrooms.”

Congress moved one step further in that direction earlier this month. In the supplemental appropriations bill that included an additional $119 million for UNRWA for the current fiscal year, lawmakers made clear that they are not happy with the status quo. The spending bill requires State to propose a plan to increase transparency and accountability of UNRWA. More important, it sets aside $1 million for the State Department Inspector General to audit USAID.

Within the next month, the House foreign aid appropriators could go even further in the spending bill for 2010. Rothman has several proposals to increase accountability and transparency for both USAID and UNRWA.

But changing the law alone is not enough. Judging by current procedures, State seems intent on not enforcing the laws actually passed by Congress.

Lawmakers have repeatedly and explicitly dictated that no U.S. taxpayer funds can go to any organization that has even “advocated” terrorism—meaning no money should go to groups whose leaders have declared on Al-Jazeera or elsewhere that suicide bombers are “martyrs.” This is not trivial. Figures who lionize terrorists and praise evil acts poison society and ultimately help cause more terrorism.

State’s standards for its contractors and aid recipients, however, are set much lower. Even under the most thorough vetting State currently conducts, essentially only people who have actively participated in terrorism would be declared ineligible. It appears that State hasn’t even bothered to think of a way to determine which people trying to receive U.S. taxpayer dollars have advocated terrorism.

Considering Europe’s and the UN’s longstanding indifference to Palestinian radicalism, the U.S. is likely the only party who can start to drain the cultural swamp.

The stakes are high. If the U.S. doesn’t put its full efforts toward real peace, what signal does that send to Israel and the Palestinians?