Israel's latest government crisis places a huge responsibility on Washington to do the right thing. It also gives President Bush an opportunity to take decisive action to help Israelis and Palestinians escape the cycle of violence in which they've been trapped for so long.

Israeli Labor leader Binyamin Ben-Eliezer took his party out of the ruling coalition Oct. 30 over an issue familiar to members of previous US administrations: the question of how generously the Israeli government should fund the long-standing project to implant "Israelis-only" settlements in the occupied West Bank and Gaza.

Prime Minister Ariel Sharon is an ardent, longtime supporter of the settlement project. Mr. Ben-Eliezer and others in the Labor Party agree with the long-held US view that the settlements constitute a real obstacle to peace. Labor left the Sharon government because Mr. Sharon insisted on keeping a special allotment of $145 million for the settlements in the budget he is now preparing, while Labor wants to use that sum to help fix Israel's tattered social safety net.

Washington is also an important participant in the discussion on Israel's budget priorities. Just two weeks ago, Sharon traveled to Washington cap in hand to ask Mr. Bush for a special, one-time infusion of aid to help Israel deal with its current economic nose dive. He reportedly requested as much as $10 billion for this purpose. (That would be over and above Washington's already generous donations of annual aid to Israel.)

Back in '91, an earlier Likud Party prime minister, Yitzhak Shamir, also asked Washington for a $10 billion tranche of "one-time only" aid. That earlier request was for US guarantees for private-sector loans. The first President Bush responded to that request in a way that the present President Bush should consider emulating. The first President Bush told Mr. Shamir he could agree to Israel's special funding request – but would deduct from the aid an amount equal to what the US judged was being invested in the settlements.

Then, as now, Israeli elections were imminent. In 1992, Israeli voters faced a clear choice: There was Shamir, who seemed dedicated to supporting settlements, and thus to losing substantial US aid. And there was Labor leader Yitzhak Rabin, who promised to cut back on settlement aid and inject new life into a peace process that Shamir had been steering into a dead end. Mr. Rabin won handily.

The peace diplomacy that followed was by no means perfect. (And it suffered a terrible setback when Rabin was murdered by a Jewish-Israeli extremist in November 1995.) But in 1993, Rabin successfully broke the long-standing Israeli taboo that had until then prevented Israeli leaders from dealing directly with the Palestinians. And through the eight years of Israeli-Palestinian contacts that followed, both sides came considerably closer to understanding what a stable, two-state solution to their conflict might look like.

By January 2001, Israeli negotiators working for another Labor prime minister, Ehud Barak, held marathon negotiating sessions in Taba, Egypt, where they reached agreement with the Palestinians on many key aspects of a final-status peace agreement.

Those diplomatic efforts were sadly overtaken by the continuing violence, and by Mr. Barak's ouster at the polls just days after he pulled his negotiators out of Taba. (He had postponed starting his "big push for peace" until fatally late. I hope no incoming Labor prime minister repeats that mistake.) But the broad history of the 1993-2001 diplomacy left two important legacies.

First, though the peace diplomacy got bogged down later in the 1990s, remember the massive support from Israelis – and millions of well-wishers, including Jewish well-wishers, worldwide – for Rabin's bold diplomacy with the Palestinians at Oslo. There was a huge yearning for peace back then – as there is today.

Second, the record of those years left us with a clear plan showing what a stable, mutually acceptable outcome would look like. No need now to reinvent this wheel. The Taba plan needs further refinements. But it is considerably bolder, clearer, and more compelling than the flimsy, indecisive "peace road-map" that the Bush administration has been waving around the Middle East in recent days.

Ben-Eliezer reportedly believes in something he calls "Taba plus." But equally as important as the final shape of his peace vision is the fact that he – unlike Sharon – actually has a vision. And he says publicly that Israel can't solve its problems with the Palestinians through force alone and needs to pursue an active peace diplomacy.

There are two key questions for the White House and Israel's friends in Congress: Which vision of Israel's future do you support at this critical time – Sharon's or Ben-Eliezer's? How will you use tax dollars to support the better vision?

US politicians cannot duck these choices. If pursued wisely the choices could empower millions of Israelis and Palestinians who yearn for peace and who would embrace a stable two-state outcome. But if American generosity and political power are misused to support trends inimical to peace in the Holy Land, then the effects of that choice will be felt for generations to come.