Default would threaten national security, keep troops from getting paid

Secretary of Protection Lloyd J. Austin testifies earlier than the Home Armed Providers Committee on the conclusion of navy operations in Afghanistan on the Rayburn Home Workplace constructing on Capitol Hill in Washington, DC, U.S. September 29, 2021.

Olivier Douliery | Reuters

Protection Secretary Lloyd Austin on Wednesday warned that nationwide safety may very well be threatened and troops might go unpaid if Congress fails to boost the U.S. debt restrict earlier than the nation defaults.

Lawmakers should vote to boost or droop the debt ceiling by Oct. 18 or danger lacking a fee to its bondholders in what can be thought-about an unprecedented nationwide default.

“If the US defaults, it will undermine the financial power on which our nationwide safety rests,” he wrote in a press release emailed to reporters.

“It could additionally severely hurt our service members and their households as a result of, as Secretary, I’d haven’t any authority or capacity to make sure that our service members, civilians, or contractors can be paid in full or on time,” he mentioned.

The Division of Protection, the largest federal employer, mentioned giant corporations and 1000’s of small companies might see funds delayed and jeopardize American operations.

Advantages owed to 2.4 million navy retirees and 400,000 survivors would even be put in danger, Austin wrote. Tens of thousands and thousands of Social Safety recipients might additionally see their checks postponed if Congress fails to behave.

His remarks got here minutes after a bipartisan group of six former Protection secretaries despatched a letter to congressional leaders, urging them to boost or droop the debt restrict as quickly as doable.

Former Protection chiefs William Perry, William Cohen, Leon Panetta, Chuck Hagel, Ashton Carter and James Mattis known as on Congress to “authorize the federal government to pay payments it has already incurred.”

Elevating or suspending the debt ceiling doesn’t authorize new spending, however slightly permits the Treasury Division to proceed to repay receipts for appropriation payments Congress has already handed.

“The federal authorities has obligated funds for federal contractors who function our navy bases at house and overseas and supply service to essential protection applied sciences,” the previous secretaries wrote. “We must always not ask our all-volunteer navy to serve our nation with out pay. If we do this, we is not going to have a extremely succesful navy to battle and win the nation’s wars.”

They addressed their letter to Home Speaker Nancy Pelosi, D-Calif., and Senate Majority Chief Chuck Schumer, D-N.Y., in addition to to Senate Minority Chief Mitch McConnell, R-Ky., and Home Minority Chief Kevin McCarthy, R-Calif.

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A primary-ever U.S. default couldn’t solely delay revenue to troops, however economists say it will probably set off a recession within the U.S.

Treasury Secretary Janet Yellen on Tuesday informed CNBC that she would “absolutely anticipate” an financial downturn within the case of a default. She has warned inaction might result in a leap in rates of interest and weaken the U.S. greenback’s position because the globe’s reserve foreign money.

Austin issued the same warning in his letter Wednesday.

“A default dangers undermining the worldwide repute of the US as a dependable and reliable financial and nationwide safety companion,” he wrote.

Regardless of the severity of the implications, Democrats and Republicans seem gridlocked simply 12 days forward of the so-called drop-dead date.

Senate Republicans are blocking Democrats from passing a debt ceiling hike or suspension by common Senate guidelines by promising to filibuster. A filibuster would power Democrats to hunt at the least 60 votes in a chamber break up 50-50 to maneuver forward with a invoice as an alternative of a easy majority.

That obstruction has drawn criticism from President Joe Biden, who earlier this week known as on the GOP to “get out of the best way” and do their half to forestall a recession. The president is meeting with some of the nation’s top CEOs on Wednesday to debate the financial calamity that might consequence if lawmakers fail to behave.

Republicans say that Democrats ought to as an alternative move a repair to the debt ceiling by a particular rule often called reconciliation that enables sure laws to clear the chamber with a easy majority.

McConnell has for weeks argued that Democrats ought to use reconciliation to elevate the borrowing restrict because the majority appears intent on passing a multitrillion-dollar local weather and anti-poverty invoice utilizing the identical rule.

“I mentioned in July, I mentioned in August, I mentioned in September, there is a clear path to realize elevating the debt ceiling — which should occur, America should not ever default — and doing it with Democrats solely,” he mentioned throughout a press convention Tuesday.

CNBC’s Amanda Macias contributed to this report.

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