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The image of a black Al Qaeda flag flying above the United States Embassy in Cairo on Sept. 11 shocked Americans. It should have shaken the Egyptian Government as well. Egypt receives $1.5 billion annually from the U.S., and Washington is about to forgive $1 billion in the ailing state’s debt.

But Egypt’s government is charting a different course. Rather than denouncing the egregious violation of U.S. sovereignty, Egypt’s ruling party, the Muslim Brotherhood, is doubling down. This Friday, the Brotherhood is slated to hold a mass demonstration just two blocks from U.S. compound in Cairo.

In Egypt and the U.S., the attack is widely being attributed to an obscure anti-Islamic movie. But in fact, Al Gamaa Al Islamiyya, a U.S.-designated terrorist organization,...