Troop Paychecks Could Be Delayed if US Defaults, Austin Warns

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Secretary of Defense Lloyd J. Austin III at a SASC budget hearing.
Secretary of Defense Lloyd J. Austin III provides testimony at a Senate Armed Services Committee budget hearing, Dirksen Senate Office Building, Washington, D.C., March 28, 2023. (DoD photo by Chad J. McNeeley)

Paychecks for service members would be disrupted if the United States defaults on its debts, Defense Secretary Lloyd Austin warned Thursday.

"What it would mean realistically for us is that we won't, in some cases, be able to pay our troops with any degree of predictability," Austin testified at a Senate Appropriations Committee hearing. "And that predictability is really, really important for us. But this would have a real impact on the pockets of our troops and our civilians."

Austin's comments come as a deadline to raise what's known as the debt ceiling rapidly approaches, while talks between congressional leaders and the White House to avoid a default fail to make progress.

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The debt ceiling or debt limit is the amount of money the Treasury Department can borrow in order to pay for spending Congress has already approved through the annual appropriations process.

The Treasury Department has warned that it could hit the debt ceiling as soon as June 1.

Republicans have been demanding spending cuts in exchange for lifting the ceiling, but the White House and Democrats have insisted the ceiling should be raised immediately to avoid a default and that any talks of spending cuts should be handled separately.

After a meeting at the White House on Tuesday between President Joe Biden and the top four congressional leaders, House Speaker Kevin McCarthy, R-Calif., said he "didn't see any new movement" on bridging the gap, while Biden called the talks "productive." Staff-level talks have continued since Tuesday, and Biden and congressional leaders are expected to meet at the White House again Friday.

Because a default in modern times is unprecedented, experts have said the exact effect on government payments, such as how long troop paychecks would be delayed, is hard to predict and would largely depend on how the Treasury Department decides to try to keep paying U.S. bills. The Treasury could choose to prioritize certain payments, something officials have suggested is not a realistic idea, or it could wait until it has enough cash in hand to make a full day's worth of payments.

About $4 billion in military salaries are due to be paid out on June 15 and could be affected if the United States defaults before then, according to an analysis released this week by the Bipartisan Policy Center.

Apart from the effects on service members, Austin and Chairman of the Joint Chiefs Gen. Mark Milley also argued that a default would be exploited by U.S. adversaries such as China and damage the reputation of the United States on the international stage. Their message echoes a similar warning Director of National Intelligence Avril Haines delivered last week at a Senate Armed Services Committee hearing.

"China right now describes us in their open speeches, etc., as a declining power," Milley said at Thursday's hearing. "Defaulting on the debt will only reinforce that thought and embolden China and increase risk to the United States."

-- Rebecca Kheel can be reached at rebecca.kheel@military.com. Follow her on Twitter @reporterkheel.

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