The military aid, which the United States pays to preserve Egypt's 1979 peace treaty with Israel, depends on Egypt's ruling military council showing it is taking tangible steps toward democracy, Assistant Secretary of State for Democracy, Human Rights and Labor Michael Posner said in Cairo Thursday.
This requirement, made law by Congress, includes letting non-governmental organizations operate freely, he said at a news conference scheduled before the diplomatic row erupted.
"[Civil society organizations] need to have the ability to operate openly, freely and without constraint," Posner said.
"Obviously any action that creates tension with our government makes the whole [aid] package more difficult," he said.
House Appropriations Committee member Frank Wolf, R-Va., said in Washington Egypt's military rulers' efforts to undermine democratic rights were "out of control."
"If the administration follows the law, there's no way they can continue the aid," he told The New York Times.
No money budgeted for this year's military aid has been given yet, the State Department said. The administration has also budgeted $256.1 million in Egyptian economic assistance, which is not tied by Congress to democratic progress.
Egypt banned at least six American and four European pro-democracy workers from leaving the country, including Sam LaHood, son of U.S. Transportation Secretary Ray LaHood, who was a Republican congressman from Illinois before joining the Obama administration.
The younger LaHood, director of the Cairo office of the International Republican Institute, a U.S.-funded pro-democracy organization, said he and the others were detained so Egypt could investigate whether his NGO and its sister National Democratic Institute were unregistered or funded by unregistered groups.
Egyptian authorities confiscated IRI and NDI documents, computers and other property, including cash, and sealed their offices, LaHood said.
IRI is one of three U.S. non-profit groups in Cairo raided and shut down Dec. 29 by Egyptian authorities, who accused the groups of using foreign funds to support Egyptian unrest.
"They're playing hardball and they want to get something out of it," the younger LaHood told The Wall Street Journal Thursday.
"The reality is, this is bigger than me or IRI," he told The Washington Post. "There are 300 NGOs being investigated by the Egyptian government, and only a handful of them are American."
Obama called Egypt's top general, Field Marshal Hussein Tantawi, Jan. 20 to hail the seating of Egypt's democratically elected Parliament and to underscore "that non-governmental organizations should be able to operate freely," the White House said.
The next day, LaHood learned at the airport he was barred from leaving the country.
Secretary of State Hillary Clinton and other top U.S. officials pressed for the Americans' release Thursday.
McCain's office expressed "outrage" at the incident and warned the action "could set back the longstanding partnership between the United States and Egypt."
Egypt's ruling Supreme Council of Armed Forces had no immediate comment on any part of the incident.
Ray LaHood, said Thursday he was "very gratified by all the work that's going on by the administration and our ambassador in Egypt, and I appreciate the work they're doing on that," but would say no more.
The transportation secretary was due in Tampa Friday for an event on economic development and infrastructure policy tied to Obama's State of the Union address.