DefenseNews

Debt breach could damage defense industry, Air Force official says

WASHINGTON — A breach of the debt ceiling could do “long-lasting and profound damage” to the defense industrial base, the Air Force’s top acquisition official said Thursday.

The exact effects of a breach are hard to predict because it is “such uncharted territory,” Andrew Hunter said at a discussion in Arlington, Virginia, hosted by George Mason University’s Greg and Camille Baroni Center for Government Contracting.

But Hunter said it would have “profound implications for the [defense] industrial base.”

President Joe Biden and House Republicans are now engaged in a standoff over the nation’s debt ceiling, which limits how much the United States can borrow to cover its debts and has been nearly reached. Biden and Democrats are pushing Republicans to raise the debt ceiling without preconditions by passing a “clean” bill, which happened under President Donald Trump’s administration.

In April, Republican lawmakers, who hold the majority in the House of Representatives, passed a bill to raise the debt ceiling while cutting non-defense discretionary spending by $130 billion, along with other concessions.

If the debt limit is breached, the Treasury Department’s ability to pay the government’s bills would be severely limited, if not curtailed entirely. This would mean the Pentagon might not be able to pay its contractors on schedule.

With the United States’ ability to pay its debts suddenly thrown into question, he said, credit markets could seize up.

And with credit frozen, Hunter said, the Defense Department’s suppliers might not be able to get financing they need to stay afloat while waiting for the government’s payments — perhaps forcing them to suspend operations and not pay their own workforce.

“They can’t get the short-term financing needed to make payroll, while they’re waiting for the reimbursements from the government — which also, by the way, may be delayed,” Hunter said. “So they’re going to need that short-term financing even more to cover their expenses.”

Under a debt ceiling breach, Hunter said, appropriations would still be in place, meaning the department would not have to shut down and employees would not be furloughed. But because the Treasury Department would not have the money to fund the government’s payments, Hunter said, service members and civilian employees might not be paid on time.

This could ripple through the military’s entire force structure, Hunter said. Since many service members don’t earn high salaries and may be living paycheck to paycheck, a missed payday — or several — could deal a severe blow to their personal finances.

“For a lot of service members, that’s a huge issue, because that can then reflect on your eligibility for [a] security clearance — really everything it takes to do your job,” Hunter said. Such a breach would have “huge impacts on families, huge impacts on the workforce, and a lot of consequences that could ripple for quite a long time.”

Hunter also warned of the national security consequences of a theoretical deal to raise the debt ceiling that rolls back all federal spending to fiscal 2022 levels — particularly for the still-young Space Force.

Pentagon Comptroller Mike McCord said in a March 17 letter to Capitol Hill that lowering defense spending to 2022 levels would amount to a $100 billion, or nearly 12%, budget cut from the Biden administration’s $842 billion request for fiscal 2024.

Republicans want to exempt the Defense Department from spending caps, and even further raise military spending.

Hunter said Thursday a budget rollback to 2022 levels “would come upon us with absolutely no warning, no notice,” and compared such a deal to the “painful” sequestration caps that occurred during the Obama administration.

Sequestration led to furloughs and a sudden scale back of defense spending, Hunter said — particularly in vital research and development efforts.

“You would see a huge hit to our research and development, which is right now one of [the Department of the Air Force’s] priority areas of pursuit,” Hunter said.

Congress approved $18 billion for the Space Force in 2022 and $26.3 billion in 2023. The Biden administration requested $30 billion in 2024 funding for the Space Force, which was formally stood up as its own service in December 2019.

“Because the Space Force is relatively new … much of its budget is growing to reflect the fact that they’re doing things that have just never been done before, because they hadn’t previously been budgeted,” Hunter said. “The Space Force would be absolutely devastated by a rollback to FY22 [funding], but for the Air Force, it would be devastating as well.”


Author: Stephen Losey
Source: DefenseNews

Related posts
GamingNews

Marvel vs. Capcom 2 is back with friends in new collection

AI & RoboticsNews

DataStax looks to help enterprises escape RAG ‘Hell’ with AI tools update 

AI & RoboticsNews

OpenAI acquires team behind Multi, formerly Remotion, startup focused on screensharing and collaboration

AI & RoboticsNews

Nvidia gets the glory, but Supermicro is the unsung hero of the AI revolution (learn more at VB Transform)

Sign up for our Newsletter and
stay informed!