The aid is a result of past peace negotiations (partly). Typically, Israel makes some concessions, the Arab side makes some concessions, and the US pays for the whole thing by showering everyone with money to help make the medicine go down. Thus we have Egypt receiving huge amounts even though they waste it, and Israel receiving huge amounts even though they're not poor.

Israel would do fine without the economic aid, they'd just be slightly less well off. There were plans to slowly phase out the economic aid some years ago, while keeping the massive military aid. I think the pro-Israel lobby (some Jewish groups, some right-wing Christian groups) have nixed that idea.

If the peace process works out, you can bet your wallet that we'll be paying for it. I suppose it beats the alternative though.