Default would threaten national security and prevent troops from being paid, Pentagon chief says

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Secretary of Defense Lloyd J. Austin testifies before the House Armed Services Committee on the conclusion of military operations in Afghanistan at the Rayburn House Office building on Capitol Hill in Washington, DC, the United States, September 29, 2021.

Olivier Douliery | Reuters

Defense Secretary Lloyd Austin warned on Wednesday that national security could be threatened and troops could go unpaid if Congress does not raise the US debt limit before the country defaults.

Lawmakers must vote to raise or suspend the debt ceiling by Oct. 18 or risk missing a payment to its bondholders in what would be considered an unprecedented national default.

“If the United States defaults, it would undermine the economic strength upon which our national security rests,” he wrote in an emailed statement to reporters.

The impacts could include the inability to pay troops and others who depend on the military for their livelihood.

“It would also seriously harm our servicemen and their families because, as secretary, I would have no authority or ability to guarantee that our servicemen, civilians or contractors would be paid in full or on time,” he said. -he adds.

As the largest federal employer, the Department of Defense has said large corporations and thousands of small businesses could see their payments delayed and put U.S. operations at risk.

Benefits owed to 2.4 million military retirees and 400,000 survivors would also be at risk, Austin wrote. Tens of millions of Social Security recipients could also have their checks deferred if Congress does not act.

His remarks came minutes after a bipartisan group of six former defense secretaries wrote a letter to leaders of Congress, urging them to raise or suspend the debt limit as soon as possible.

Former Defense Chiefs William Perry, William Cohen, Leon Panetta, Chuck Hagel, Ashton Carter and James Mattis called on Congress to “allow the government to pay the bills it has already incurred.”

Raising or suspending the debt ceiling does not authorize new spending, but rather allows the Treasury Department to continue repaying revenue from appropriation bills already passed by Congress.

“The federal government has committed funds to federal contractors who operate our military bases at home and abroad and provide services to critical defense technologies,” the former secretaries wrote. “We should not ask our army of volunteers only to serve our nation without pay. If we do, we will not have a highly skilled army to fight and win the nation’s wars.”

They addressed their letter to House Democratic Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, as well as Republican Senate Minority Leader Mitch McConnell and House Minority Leader Kevin McCarthy. .

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A first US default could not only delay troop revenues, but economists say it would likely trigger a recession in the US

Treasury Secretary Janet Yellen told CNBC on Tuesday that she “would fully expect” an economic slowdown if she defaults. She warned that inaction could cause interest rates to rise and weaken the US dollar’s role as the world’s reserve currency.

Austin issued a similar warning in his remarks Wednesday.

“Failure to pay risks undermining the United States’ international reputation as a reliable and trustworthy economic and national security partner,” he wrote.

Despite the gravity of the consequences, Democrats and Republicans appear stuck just 12 days before the so-called fall date.

Senate Republicans are blocking Democrats from passing a debt ceiling increase or suspension through ordinary Senate rules by promising to filibuster. An obstruction would force Democrats to seek at least 60 votes in a 50-50 split house to move forward with a bill instead of a simple majority.

The obstruction has drawn criticism from President Joe Biden, who earlier this week called on the GOP to “step back” and do its part to prevent a recession. The president is meeting with some of the country’s top CEOs on Wednesday to discuss the economic calamity that could arise if lawmakers fail to act.

Republicans say Democrats should instead adopt a debt ceiling solution through a special rule known as reconciliation that allows certain laws to clear the house by simple majority.

McConnell has argued for weeks that Democrats should use reconciliation to lift the borrowing limit because the majority appear to want to push through a multibillion-dollar climate and poverty bill using the same rule. .

“I said in July, I said in August, I said in September, there is a clear way to get to the debt ceiling – what must happen, America must never do default – and do it with Democrats only, ”he said at a press conference. press conference.

CNBC’s Amanda Macias contributed to this report.


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