Yesterday, the US Supreme Court decided that the President has the constitutional power to determine the view of the US on the status of Jerusalem. The case before the court concerned section 214 of a 2002 appropriations bill signed into law by then-President George W. Bush, who issued a signing statement concerning the congressional mandate for the US embassy in Israel to record Israel as the country of birth for US citizens born in Jerusalem. President Bush rejected this provision as violating the "recognition power" of the presidency. President Obama followed suit. The law was challenged in court by the Zivotofsky family, whose son was born in Jerusalem. The family sued to force an issue that, as the Supreme Court found, exceeded the personal life-style concern of private citizens and their desire to have the country of birth of their child recorded in their US passport, as defense council had argued. Instead, it became a matter of the division of powers. The liberal judges, supported by Justices Anthony Kennedy and Clarence Thomas, found that it is the President's prerogative within the narrow confines of his "recognition power" to determine whether or not to recognize anyone's claim to sovereignty in Jerusalem. (To read the majority opinion of the court, written by Anthony Kennedy, see HERE.)
Jerusalem is the capital of Israel. It has been so officially since 1950, when the city was still divided and the East was under Jordanian rule. The US Government never acknowledged any unilateral changes in the status quo of the city and insists that the final status of Jerusalem needs to be resolved through negotiations between the parties concerned; today: between Israel and the Palestinians. Israel conquered East Jerusalem in June 1967 and de facto annexed it into a larger municipality of 126 square miles that, today, is separated from its West-Bank hinterland by means of a separation wall.
Soon after, the Israeli government led by Golda Meir began to build Jewish neighborhoods in East Jerusalem to make sure the city was to remain "complete and united," as the 1980 "Basic Law: Jerusalem, Capital of Israel" puts it. [More, by this author, on the Jerusalem Basic Law.] On the other hand, the Israeli government allowed special arrangements to prevail for the Arab residents of Jerusalem who are now about a third of the population of the city. Among these special arrangements were the extension of residency permits, but not automatic citizenship; the use of the Jordanian Dinar as currency and of the Jordanian (later: the Palestinian) curriculum in schools; as well as other measures, that provided the Palestinian residents of Jerusalem special status without necessarily extending services, such as housing and urban development, to their neighborhoods in measures equal to their need and number. Today, many feel that Jerusalem is united only by law but not in fact. Instead, it is a separate and unequal place to live for its constituent communities. As the director of the Jerusalem Institute for Israel Studies put it at a recent Association for Israel Studies panel held in Montreal/CA, it will take a major national effort to rectify the situation of Jerusalem's Arab populations.
American foreign policy with regard to Jerusalem has been divided between the majority of Congress and the Presidency. Congress has repeatedly written Jerusalem's status as Israel's capital into US law, most famously in form of the 1995 Jerusalem Embassy Act, which found that Jerusalem is Israel's capital, that Jerusalem is the spiritual center of Judaism, that Israel has maintained freedom of access for all religious communities to their holy places and that the US is deviating from the norm of having its embassy at a place that the host country does not consider its capital. (The US embassy has since remained in Tel Aviv. In fact, no country maintains its embassy in Jerusalem today.) Yet it may go too far to say, as Moshe Amirav writes in his analysis of Israeli policy goals in regard to Jerusalem (see Jerusalem Syndrome, Sussex, 2009), that Israel failed to secure international recognition for its unilateral annexation of Jerusalem. US Congress remains in favor of Israeli sovereignty, and the Supreme Court merely refused to decide on a political issue that is for the President and Congress to work out. In the meantime, it sided with the narrow power of the Presidency to refuse to record "Israel" on the passport of a US person born in Jerusalem.