WASHINGTON \u2014 No one knows for sure exactly what a U.S. debt default will mean for military operations and veterans support programs. But there is widespread agreement that it won\u2019t be good.<\/p>\n\n\n\n
Military paychecks could be delayed or stopped altogether. Veterans benefits checks would similarly be delivered erratically. Equipment purchases could be canceled. Contractors and civilian workers could face the choice of furloughs or working without any guarantee of stable pay.<\/p>\n\n\n\n
\u201cUnlike the government shutdowns of the past, there is no scripted playbook for how this all goes,\u201d said Rachel Snyderman, senior associate director of economic policy for the Bipartisan Policy Center. \u201cWe have never been in such a scenario before. But we know whatever happens, it could quickly become very chaotic.\u201d<\/p>\n\n\n\n
On Tuesday, President Joe Biden was scheduled to meet with senior congressional officials in the latest attempt to broker a deal raising the country\u2019s debt ceiling. The Treasury is expected to reach the current limit sometime around June 1 absent congressional action to raise it.<\/p>\n\n\n\n
Without a solution, the country could for the first time in history default on its debts, creating a cascade of financial problems across the economy.<\/p>\n\n\n\n
Defense Department leaders have already warned those financial complications would have severe consequences for the military and other federal agencies.<\/p>\n\n\n\n
At a Senate hearing on May 2, Air Force Secretary Frank Kendall said a spike in U.S. interest rates would have an \u201cabsolutely devastating impact\u201d because of skyrocketing interest rates, which he noted are \u201calready roughly at the level of the defense budget.\u201d Just a few days later, at a separate Senate event, Defense Secretary Lloyd Austin warned that defaulting on the U.S. debt would result in \u201ca substantial risk to our reputation\u201d with allies and security partners across the globe amid questions \u201cas to whether or not we will be able to execute programs.\u201d<\/p>\n\n\n\n
But a debt default will also have tangible effects on troops, veterans and their families, even if the timing of that impact is not clear.<\/p>\n\n\n\n
\u201cBecause there is no precedent for a default, it is difficult to know the precise impacts on specific federal programs,\u201d Veterans Affairs press secretary Terrence Hayes said in a statement.<\/p>\n\n\n\n
\u201cBut what is clear is that, without the ability for the federal government to borrow funds, there is a very real potential that any government program or payment would be halted or severely delayed.<\/p>\n\n\n\n
According to the Bipartisan Policy Center, the Defense Department has about $12 billion in payments to military and civilian retirees due on June 1.<\/p>\n\n\n\n
Roughly $7 billion is owed to defense vendors between June 5 and June 17. Another $4 billion in military salary checks are set to be sent out on June 15. Snyderman said if the debt limit is not raised, that schedule of payouts gets thrown into disarray.<\/p>\n\n\n\n
\u201cThe Treasury could prioritize some payments over others, but they also may just have to wait for other money to come in,\u201d she said. \u201cNow this becomes a cash flow crisis for the country.\u201d<\/p>\n\n\n\n
Austin in his Senate testimony warned that \u201cwe won\u2019t, in some cases, be able to pay our troops with any degree of predictability.\u201d That means money families need for rent, groceries and other basic expenses could be delayed.<\/p>\n\n\n\n
Similarly, about $25 billion in veterans benefits set to be paid out in June could be delayed by days or weeks, causing problems for millions of families that depend on that support for their monthly income.<\/p>\n\n\n\n
If Treasury officials prioritize those payments, veterans and service members might not see any disruptions. But that would mean delays to other government payouts instead, things like Medicare support, non-defense federal salaries and interest payments on the national debt (failing to pay that would downgrade the country\u2019s credit rating, creating even more debt).<\/p>\n\n\n\n
Todd Harrison, the managing director of the national security consulting firm Metrea Strategic Insights, noted that payment delays would also affect defense contractors.<\/p>\n\n\n\n
\u201cThey could continue to do work and [the Defense Department] could continue to award contracts and obligate money, but the payment of invoices would be delayed,\u201d said Harrison. \u201cThe administration could elect to stop all new contract awards and obligations during this period, but that would make the impact even worse,\u201d while possibly violating the law.<\/p>\n\n\n\n
\u201cIf they were to halt all new contract obligations, that would have a significant and immediate impact on [Defense Department] programs and activities,\u201d he added.<\/p>\n\n\n\n
The damage only gets worse if the crisis drags on well into the summer. Another $14 billion in defense vendor payouts are due before July 15, when another $3 billion in military paychecks and bonuses are scheduled to be paid out.<\/p>\n\n\n\n
Failing to pay contractors could result in a host of lawsuits and long-term delays to procurement programs. Hayes said officials worry that vendors could \u201cdecide to reduce or completely cease providing goods and services to VA if payment was uncertain.\u201d<\/p>\n\n\n\n
Failing to pay troops \u2014 and requiring them to keep working anyway \u2014 could become a political nightmare for both parties.<\/p>\n\n\n\n
Lawmakers in the past have passed legislation to blunt the impact of government shutdowns on military and veterans families, ensuring that some Department of Veterans Affairs appropriations are awarded a year in advance and ensuring that military members receive pay even during an appropriations lapse.<\/p>\n\n\n\n
Those protections don\u2019t exist if the money to cut checks isn\u2019t there for the country.<\/p>\n\n\n\n
Harrison noted that the Treasury could \u201ccontinue borrowing and paying bills as usual\u201d if Biden opts to invoke a clause in the 14th amendment. But doing so would likely mean court challenges and other complications, Biden said in a press conference earlier this month.<\/p>\n\n\n\n
In March, Virginia Democratic Sens. Mark Warner and Tim Kaine introduced legislation that would have enabled all government employees and contractors to postpone paying any bills during a shutdown or debt default. The proposal has not moved forward in recent weeks.<\/p>\n\n\n\n
Defense leaders said the real legislative solution is simply passing a measure to increase the debt limit, as lawmakers have done 13 times since 2009.<\/p>\n\n\n\n
Earlier this month, after another meeting with congressional leaders, Biden said that he was \u201cabsolutely certain\u201d a deal could be reached and that default \u201cis not an option.\u201d But in the days since, no real path ahead on the issue has emerged.<\/p>\n","protected":false},"excerpt":{"rendered":"
If Congress fails to raise the debt ceiling, payments to troops, veterans and defense contractors could cease as soon as June.<\/p>\n","protected":false},"author":7,"featured_media":107682,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_yoast_wpseo_meta-robots-noindex":"","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_canonical":"","_acf":"","_yoast_wpseo_primary_category":44,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","_smg_distribution_targets":{"2":{"categories":["veterans","home","left-column","pay-benefits","newsletters","news","pentagon-congress"],"primary_category":"pentagon-congress"},"4":{"categories":["veterans","pay-benefits","newsletters","daily-news-roundup","home","middle-column","news","pentagon-congress"],"primary_category":"pentagon-congress"},"5":{"categories":["veterans","home","middle-column","pay-benefits","news","pentagon-congress","newsletters","daily-news-roundup"],"primary_category":"pentagon-congress"},"6":{"categories":["veterans","home","middle-column","pay-benefits","news","pentagon-congress","newsletters","daily-news-roundup"],"primary_category":"pentagon-congress"},"7":{"categories":["veterans","home","middle-column","pay-benefits","news","pentagon-congress","newsletters","daily-news-roundup"],"primary_category":"pentagon-congress"},"8":{"categories":["contracting","govcon","home","congress","federal-oversight"],"primary_category":"federal-oversight"}}},"categories":[44,8,160,36,19],"tags":[],"coauthors":[3424,3411],"class_list":["post-64334","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget","category-congress","category-daily-news-roundup","category-newsletters","category-pentagon"],"acf":{"subheadline":"","legacy_arc_id":"QWBIXYKUZVGMZBF6I2VYC4HLM4","arc_canonical_url":"\/congress\/budget\/2023\/05\/16\/devastating-debt-default-threatens-troop-pay-defense-programs\/","remove_feature_photo":false,"is_sponsored":false,"subtype":"","redirect_url":"","disable_inline_ads":false,"native_logo_pretext":"Presented By:"},"yoast_head":"\n