Analysts: Playing Chicken With Debt Ceiling Harms National Security
But these short-term political spats could cause lasting geopolitical damage, and even weaken the nation’s security, said Todd Harrison, budget analyst at the Center for Strategic and Budgetary Assessments, a non-partisan think tank in Washington, D.C.
The tone of the debate in recent weeks implies that the impasse between Democrats and Republicans over raising the debt ceiling by Aug. 2 is more posturing than serious crisis, and that everyone knows that the United States would not really default on its financial obligations. Gridlock and fear mongering might be good for scoring political points, but are bad for the United States’ reputation and standing as a superpower, Harrison said.
“There really is a national security issue here,” he said July 18 at a news conference. “Even if we don’t default on our debt,” there could be long-term damage just from the perception that the United States would even consider failing to pay its obligations, said Harrison. “It can affect our ability to borrow, particularly during a time of crisis.”
Having easy access to credit is a requisite for any country, but particularly the United Sates, to be able to mobilize if its interests are threatened, Harrison said. “That’s important for national security. … If you look back throughout our history, whenever we have engaged in major wars of national survival [such as World War II] we ramped up quickly and we borrowed a tremendous amount of money,” he said. “Our ability to wage war was based on our ability to borrow the money on short notice. ... Anything we do that damages our credit worthiness as a country, that damages the view of the United States in the world’s financial markets, I think that could do long-term harm not just to our economy but to our national security and our ability to respond in a national emergency.”
Many people equate this debt crisis with the budget disputes that earlier this year brought the U.S. government to the brink of shutdown on several occasions. This is completely different, cautioned Harrison.
If the government shuts down, it cannot obligate money, award contracts or expect employees to show up to work. In a default, the government can still obligate money, but the problem is when invoices come in. “You can’t pay them,” he said. “That would have an impact on the industrial base.”
A default also would force the government to decide who gets paid and who doesn’t. The Treasury would prioritize payments, said Harrison. “But since this hasn’t happened before, we don’t know how they would prioritize payments. … I’d expect payments on interest would be top priority as it would limit damage to our credit rating and ability to borrow money in the future.” He noted that 40 percent of the money that Uncle Sam spends is borrowed. “So only 60 percent of our bills could be paid if we can’t borrow. … What falls in that 60 percent? We don’t know.”
James M. Lindsay, director of studies at the Council on Foreign Relations, noted in a July 15 Washington Postarticle that default could inflict “significant — and wholly unnecessary — harm to America’s ability to wield and project its power in the world.” At a minimum, he wrote, “by driving up the government’s borrowing costs, it would intensify pressure to cut defense spending at a time when the U.S. military is engaged in major operations across the planet. Meanwhile, America’s adversaries would cheer Washington’s unforced error as proof of their narrative that the United States is a fading power.