Recent embarrassing blunders by both Israel and the United Nations might present an opportunity for a deeper look at the fate of Arabs classified for decades as refugees.

Convinced that the U.N. Relief and Works Agency for Palestine Refugees abets terrorists, Israel is no closer to demanding its demise. In its turn, the agency uses the incident as a donation drive.

How did the agency known as Unrwa come to be?

For the U.N., there were two classes of refugees in the years after World War II. In one category were hordes of Europeans, Asians, and Africans who were displaced by the mid-century conflict. The office of the High Commissioner of Refugees tried to help, and today all of them, including some 800,000 Jews who fled Arab countries, are no longer defined as refugees.

In the other category were 700,000 people displaced during a war caused by the Arab rejection of a 1947 U.N. resolution partitioning British-ruled Palestine into two states. After losing that war, Arab leaders decided to perpetuate their refugee status as a political tool.

By the time Unrwa began operations in 1950, 914,000 were classified as refugees. Today it cares for some 4,136,449 people, a third of them living in squalor and poverty in 59 camps in Syria, Lebanon, Jordan, Gaza, and the West Bank.

The agency is the largest, and at times the only employer in those camps.

Only once those poor souls were offered to move to permanent housing – by Israel after it inherited the camps from Egypt and Jordan in the aftermath of the 1967 Six Days War. Arab U.N. diplomats and their Western backers were so alarmed that the idea was never raised again.

In the 1990s, after the Camp David accords, a Palestinian Authority was established to administer most of the West Bank and Gaza. Like other Arab governments, it failed to alter the refugee status of the camp residents under its control.

But if there was ever a need to end welfare as we know it, Unrwa is it. It abets the perpetuation of the suffering of people who after six or seven generations still carry keys to homes that when abandoned might have been no more than shacks, but by now have grown in their minds to mythical palaces.

The head of the agency, Peter Hansen, is constantly writing press releases using headlines highlighting Palestinian Arab suffering to remind the world how short-funded his agency is. His needs keep ballooning with the high birth rates and camp residents’ ever-growing dependency on Unrwa. Of its more than $400 million annual budget, 30% comes from American taxpayer money.

Canada, one of the largest donors to the agency, is reportedly now reconsidering its donations after Mr. Hansen assured the country’s television viewers that he sees no “crime” in employing members of Hamas, an organization that justly tops Ottawa’s list of terrorist groups.

It was a typical blunder for Mr. Hansen, a Danish-born U.N. veteran who has lived in Gaza since 1994 and immersed himself so deeply in the one-sided narrative of the locals that he could not even imagine that in some quarters of the world the mere uttering of the word Hamas might hurt his cause.

Israel, too, shot itself in the foot.

Mid-level military analysts studied recent video footage from a drone flying over Gaza, where they saw an Unrwa ambulance just sitting there, waiting for quite a long time as young men land-mine an access road. One particular shot at the end of the video seemed most damning. An object thrown on the ambulance, they concluded, must have been a rocket. That shot was then touted by higher-ups as conclusive evidence of Unrwa’s guilt in abetting terrorism.

Since then, Israel has admitted that the object was a stretcher, making moot a U.N. investigation that will arrive at the same conclusions this week when its report is finalized.

So we are back to square one. Israel cannot take over Unrwa’s welfare program so its diplomats publicly support the agency. The camps continue to breed names of high interest to international intelligence agencies and remain hotbeds of terrorism.

The U.N. will declare victory in the latest public relations war, but nobody expects it to reexamine its role in allowing millions of Arabs to suffer forever in refugee limbo.