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Notes -
Discriminating against Israeli citizens in the US seems bad from a civil rights perspective, yes.
Discriminating against Israeli companies or products seems much less problematic, especially if it is just spending decisions. Both states and companies should be free to chose with which companies they do business. If Texas prefers to arm its police force with weapons produced in Texas, that seems the kind of decision a state should be able to make. If Google decides that it hates South Korea and refuses to buy any computer components produced there, that is something for the market to solve.
I think that the use of financial incentives is pretty disingenuous, because it allows the feds to say "we did not violate your rights, you could just opt out of FEMA or not take tax credits".
If federal funds come with strings attached on how to spend that money specifically, that seems fine. "If you buy emergency shelters from your FEMA grant, you may not discriminate against Israeli companies" - "None of the medicaid funds may be spent on medical marijuana" - "5% of the medicaids funds are earmarked for abortion services. If you can not provide these, you do not get the 5%."
But my understanding is that this is not what is happening here. Instead, it is "follow our rules generally, or you don't get money", which I find bad.
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