The Israeli government has come under criticism from both the Obama administration and American Jewish communities over the past week – the latter focused on a bizarre advertisement campaign aimed at the US diaspora. The current Israeli government's insensitivity toward American Jews has gotten their attention, but whether forthcoming Knesset bills that are an affront to democratic values will cause similar alarm is yet to be seen.

Hillary Clinton, America's top diplomat, said at this past weekend's Saban Forum in Washington that she is "concerned over Israeli democracy", according to reports. Earlier in the week, prominent US communal organisations condemned a series of public-service announcements produced by the Israel's Ministry of Immigrant Absorption, which insinuated that Israeli citizens should not marry American Jews.

In one of the ads, a family split between the US and Israel shares a holiday rendezvous via Skype; when the Israeli grandparents ask their American granddaughter what holiday it is, she says that it's Christmas. "They will remain Israelis; their children won't," the ad's narrator advises. The campaign has since been withdrawn, but it is just one example of bad taste.

More troubling is a forthcoming Knesset bill which would give the Israeli government new powers to regulate – or, more accurately, police – Israeli NGOs that receive foreign funding. The draft law would "revoke the right to income tax exemption" on such non-profits, and place a 45% tax rate on contributions from "a foreign state entity", to Israeli organisations, among other parameters scarcely seen in liberal democracies. Secretary of State Clinton was said to have criticised this piece of legislation as a threat to Israel's democratic institutions at last weekend's closed forum. She also drew attention to restrictions on women singing in public, according to Israeli news outlets. As for gender segregation on Jerusalem buses, Clinton called it "reminiscent of Rosa Parks".

One Israeli headline described US Defense Secretary Panetta's remarks at the same forum as "a slap on the face" to Netanyahu. Panetta warned against Israel's military option with regards to the Iranian nuclear program and advised Tel Aviv to "mend fences" with Egypt and Turkey. Panetta said that taking risks for peace with the Palestinians is "Israel's long-term security interest", despite the fact that talks between the two parties remain mired.

It is little surprise, perhaps, that a senior US official would be so forthcoming on security issues with Israel and the need to "get to the damn table", as Panetta put it. "The [Obama] administration has been making an ongoing strategic argument that Israel faces real, serious challenges," said Jeremy Ben-Ami, director of J Street, a group which has advocated that Washington take a bolder role in Middle East diplomacy.

Panetta's remarks do not indicate any sort of break; rather, they mesh with what former national security adviser Jim Jones and former Centcom commander General David Petraeus have said. That Clinton rebuked Israel's sequence of "anti-democratic" legislation, though, signals that Washington is taking note of the shrinking space for dissent in Israel. The past year has witnessed a variety of oppressive Knesset legislation, including laws targeting Israel's Palestinian-Arab minority and banning organised boycotts against the state.

Last week, an egregious Defamation Prohibition Law was passed, which "raise[s] the amount of punitive compensation for libel, without proof of actual damage", according to the Association for Civil Rights (ACRI) in Israel. If the NGO bill goes forward in Israel's parliament, watchdog groups like ACRI would be taxed at a punitive rate. In fact, a wide range of NGOs, today fully compliant with Israeli law, would suddenly come under an Orwellian regime.

"By focusing on individual flare-ups like the fuss over a minor ad campaign, the Israeli government is missing the bigger picture strategically," Ben-Ami told me. "American Jewish support for and connection to Israel will continue to erode over time if Israel isn't fully committed to the core values that bind the Jewish people together."