Some major turning points in the lives of nations announce their importance in plain sight, in front of TV cameras, while the whole world is watching: Sept. 11, the repressive violence of the Chinese Communist Party in Tiananmen Square, the fall of the Berlin Wall, the signing of the Camp David Peace Accords between Israel and Egypt all come to mind. Others happen in secret. And still others try to slink away from the lights while clothed in the drab, everyday disguise of bureaucratic double-speak, as happened at a State Department press conference in Washington on Monday, at which a reporter wondered how America, once the leader of a global war on terrorism, would respond to the announcement of a Palestinian unity government that would include Hamas, which the State Department has clearly and repeatedly designated as a global terrorist organization.“Based on what we know now,” State Department spokesperson Jen Psaki told the press, “we intend to work with this government,” adding that “if needed” the United States might “recalibrate our approach.” Hidden beneath this deliberately boring verbiage was a shocking change in American foreign policy: Instead of making war on terrorists, America would henceforth be directly funding one of the largest and most deadly terrorist armies in the world.Israel denounced the United States for accepting Abbas’ government, but many of the reporters in the room found nothing all that shocking in Psaki’s announcement. That’s not entirely their fault. Generations of American diplomats working on the Arab-Israeli conflict have been motivated by the conviction that there’s nothing to be lost—and plenty to be gained—by trying to make peace between the two sides. Sure, the Israelis and Palestinians might seem far apart, the leadership of one side or another might not have the ability to sign a deal, but what harm could there be in getting the two sides in the same room to feel each other out, to explore possibilities and find common ground? Certainly that was the idea that inspired Secretary of State John Kerry, compelling him to make dozens of trips to Jerusalem and Ramallah over the past two years.Yet Psaki’s announcement is, in fact, shocking. Palestinian Authority President Mahmoud Abbas’ move on Monday to bring Hamas into a unity government with his own Fatah party means that U.S. taxpayers will be paying the salaries of men and women who belong to an organization sworn to the destruction of an American ally—and who repeatedly endorse and employ the murder of innocent civilians through the grim arsenal of terror as a means of achieving their goals. Trading five Taliban honchos from Guantanamo for one lost American soldier in Afghanistan may be denounced by some Americans as a bad deal and applauded by others as proof of how highly we value the lives of our servicemen. But it is hard to imagine any significant number of Americans who would endorse blowing up women and children on buses, or sending shrapnel-laden suicide bombers into pizza parlors and discos, or sending volleys of rockets against kindergartens—let alone would want their tax money to wind up in the pockets of people who dream up and carry out such atrocities.How did this happen? After all, it was Washington that invented the Palestinian Authority, in the heady moment after the Soviet collapse had brought the Cold War—and even history itself, some said—to an end, leaving the United States as the world’s sole remaining superpower. The purpose of the PA was to placate America’s Arab partners, like Egypt and Saudi Arabia, while ensuring that the remaining regional troublemakers—from Saddam Hussein to the Islamic Republic of Iran—would be unable to use the Palestinian cause to their advantage. Moreover, it was believed that the easiest way to neutralize Yasser Arafat and the PLO was to suffocate him in a warm American embrace that would reward the scruffy old terrorist for good behavior, and hold out the promise of a late-life transformation into the Palestinian Nelson Mandela. It came as a shock to American policymakers that Arafat didn’t want to be Mandela; he wanted to be Saladdin, and if he couldn’t free Jerusalem with fire and blood he would rather die trying than go down in history as the traitor who relinquished the dream of a Palestinian homeland, the way that the Palestinians—not the Americans—imagined it.Arafat was a hard case. But now the United States has been outfoxed by Mahmoud Abbas, a dull 79-year-old bureaucrat who is also regularly proclaimed to be “a man of peace” but who displays little interest in any aspect of governance besides collecting tribute from Western powers and daring them to call his bluff. In Abbas’ view, the Americans and the Israelis are not in control; he is. Without him, the White House loses control of the peace process, which is a key part of the American diplomatic patrimony in the region—an asset that the Obama Administration can ill afford to lose, especially now.Abbas is therefore gambling that the Obama Administration will continue to pay out hundreds of millions of dollars to whatever he proclaims to be the new Palestinian government. The White House is desperate, and so it doesn’t matter that including Hamas in a government is against the letter of U.S. law—indeed, a number of U.S. laws. The 2006 Palestinian Anti-Terrorism Act, for instance, prohibits any U.S. funds from going to Hamas, Hamas-controlled entities, or a power-sharing PA government that includes Hamas as a member, or results from an agreement with Hamas. Most recently, the 2014 Consolidated Appropriations Act prohibits “assistance to Hamas or any entity effectively controlled by Hamas, any power-sharing government of which Hamas is member, or that results from an agreement with Hamas and over which Hamas exercises undue influence.”That last clause regarding “undue influence,” say some analysts, represents a loophole the administration may try to crawl through. “The White House may argue that since Abbas is still president of the PA, and since there aren’t really that many new Hamas members in the cabinet, Hamas does not have ‘undue influence,’ ” says a senior official at a Washington-based pro-Israel organization. “But if that’s true, then why won’t the new PA cabinet disarm Hamas?”That’s not going to happen, of course. One purpose of the deal is for Fatah to protect Hamas’ arsenal, which, so long as it’s pointed at Israel, will enhance the prestige of a PA president whose term in office was over five years ago, and who has failed at both the small-bore work of ending corruption, fixing roads, and providing real jobs for his people, as well as big-picture tasks like winning his people a state. Protecting the weapons of his rival, in other words, is all that Abbas has left to offer the Palestinians and that suits Hamas fine.“If anyone expects Hamas to hand over its missile network to the PA, he’s making a big mistake,” said one Hamas official. The reality is that Fatah has embraced Hamas.To be sure, neither side has forgotten about the Palestinian civil war of 2006-2007, which culminated with Hamas fighters throwing Fatah members off of roofs in Gaza. Presumably there are Fatah loyalists unhappy with the deal, most notably Abbas’ key rival Mohamed Dahlan, who led the Fatah side in the conflict with Hamas almost exactly seven years ago. As it happens, hatred for Dahlan and his faction in Fatah is one more thing that Abbas and Hamas have in common. Dahlan was poised to make a comeback earlier this spring with backing from then Saudi intelligence chief Prince Bandar bin Sultan and the man assured to be next president of Egypt, Abdel Fattah al-Sisi. But by striking a deal with Hamas, Abbas has outflanked Dahlan, who had made an earlier play for reconciliation with Hamas and is now out in the cold.Hamas has plenty to gain from the deal, too. Without the Iranian assistance that Hamas once enjoyed, what Gaza’s Islamic resistance needs most is some relief on the Egyptian side of the border. The Egyptians have been closing tunnels and effectively starving Gaza’s economy, and Hamas believes that the deal with Abbas will bring better days. Even if Hamas backed Sisi’s predecessor as president, the Muslim Brotherhood’s Mohamed Morsi, Cairo’s new ruler can afford to be magnanimous with Hamas, especially if it means he will inherit the Palestinian file in toto. Indeed, some Palestinians hope that Sisi will choose to confront Israel. In short, Palestinian reconciliation is good for everyone—except the United States and Israel.The results for Israel are likely to be particularly unpleasant. Both Bush and Obama White Houses boasted that the security cooperation between Israel and the PA was excellent. But that seems over now since there is reportedly a clause in the Palestinian unity agreement that “criminalizes” security coordination with Israel. Perhaps, as many have feared over the last decade, those U.S.-trained Palestinian security forces will now turn their American weapons on an American ally, as they did during the second intifada. Indeed, just hours after the formal announcement of the unity government, and the State Department’s press conference, a Palestinian gunman was killed after opening fire on Israeli troops in the West Bank.More such attacks will certainly follow, and some of them will be more successful—whether perpetrated directly by Hamas, or by Fatah, or some new terror entity in which both parties cooperate together.Meanwhile, as crazy as it sounds, U.S. diplomats will continue searching for loopholes that allow us to fund officially designated terrorist organizations with taxpayer dollars. As Jonathan Schanzer, director of research at the Foundation for Defense of Democracies, explains “there are waivers embedded in the legislation, with which the president can override stipulations for reasons of national security or national interest. The assumption,” says Schanzer, “is that Obama is going to override everything.”The administration will also be able to cite a regional precedent for its likely next step of embracing the new Palestinian “unity government” as a “partner for peace” while claiming that America is not funding terrorism. Hamas officials boast that they are now employing the “Hezbollah model”—i.e., becoming a political party that avoids responsibility for governance, while also maintaining an independent military organization that engages in terrorism. In other words, the PA will serve as legitimate cover while the Islamic resistance continues to wage its war of liberation against Israel. After all, Washington continues to fund the Lebanese Armed Forces, even as it is common knowledge that the LAF is under Hezbollah control. So, why wouldn’t the White House fund the PA?It is depressingly easy to imagine the State Department spokesperson making the same argument about “the Lebanese model” at her next press conference. But the difference is this: Lebanon is a sovereign state that would exist regardless of American support. The Palestinian Authority is an entity created by the United States, and it cannot exist without massive U.S. financial, political, military, and diplomatic support. Rather than finding ways around American law, the Obama Administration should be looking for ways to snap Abbas’ spine. If Kerry’s assiduous and careless peace processing was evidence of the administration’s incompetence, the decision to work with Hamas is evidence of the White House’s cravenness. The bill for this moral rot will be paid by Israelis—and by American taxpayers who will now be directly covering the salaries of thousands of card-carrying members of a terrorist organization. It’s not just Obama who will be crossing a red line by funding Hamas—he’s dragging the rest of us along with him into a political and moral swamp, in which America will combat terrorism with one hand, while paying for terror with the other.***Like this article? Sign up for our Daily Digest to get Tablet Magazine’s new content in your inbox each morning.Lee Smith is the author of The Consequences of Syria.