'Destructive' debt default threatens military payroll and defense programs (2023)

WASHINGTON — No one knows exactly what a US default will mean for military operations and veteran support programs. But there is general agreement that it will not be good.

Military pay may be delayed or stopped altogether. Similarly, benefit checks for veterans would be delivered irregularly. Equipment purchases may be cancelled. Contractors and civilian employees may have to choose between leave or work without any guarantee of a stable salary.

“Unlike government shutdowns in the past, there is no set scenario for how all of this will play out,” said Rachel Snyderman, senior associate director for economic policy at the Bipartisan Policy Center. “We have never been in this situation before. But we know that no matter what happens it can get very chaotic quickly."

President Joe Biden was scheduled to meet with top congressional officials on Tuesday in a final attempt to broker a deal to raise the country's debt ceiling. The Treasury is expected to hit its current cap around June 1 if Congress doesn't act to raise it.

Without a solution, the country could default on its debts for the first time in history, creating a cascade of financial problems throughout the economy.

Defense Department leaders have already warned that financial complications will have dire consequences for the military and other federal agencies.

During a Senate hearing on May 2, Secretary of the Air Force Frank Kendall said that an increase in the US interest rate would have an "absolutely devastating impact" because of the increase in interest rates. , which noted that "they are already approximately at the level of the defense budget." " Only a few days later, in a separate session in the Senate, Defense Secretary Lloyd Austin warned that the US debt default would implement the programs."

But debt defaults will also have tangible effects on soldiers, veterans and their families, even if the timing of the impact is unclear.

"Because there is no precedent for insolvency, it is difficult to pinpoint the impact on specific federal programs," Veterans Affairs press secretary Terrence Hayes said in a statement.

“But what is clear is that without the ability of the federal government to borrow funds, there is a very real potential for any government program or payment to be halted or severely delayed.

(Video) What is the debt ceiling?

According to the Bipartisan Policy Center, the Department of Defense has about $12 billion in payments to military and civilian retirees that are due June 1.

Some $7 billion is owed to arms suppliers between June 5 and June 17. On June 15, another $4 billion in military payroll checks will be sent out. Snyderman said that if the debt ceiling is not raised, the payment schedule will be disrupted.

"The treasury can prioritize some payments over others, or just wait for other money to come in," he said. "Now this is turning into a cash flow crisis for the country."

Austin, in testimony before the Senate, warned that "in some cases, we will not be able to pay our troops with any degree of predictability." This means that the money families need for rent, shopping and other basic expenses could be delayed.

Similarly, the approximately $25 billion in veterans benefits due in June could be delayed for days or weeks, causing problems for the millions of families whose monthly incomes depend on this support.

If Treasury officials prioritize these payments, veterans and service members may not notice any disruption. But instead, it would mean delays in payments from other governments, such as Medicare support, non-defense federal salaries, and interest payments on the national debt (a default that would lower the country's credit rating and cause get even more in debt).

Todd Harrison, managing director of Metrea Strategic Insights, a national security consultancy, noted that payment delays will also affect defense contractors.

"They could continue to work and [the Department of Defense] could continue to award contracts and bonuses, but the bills would be delayed," Harrison said. “The administration could decide to stop all new orders and commitments during this period, but that would make the impact even worse,” possibly in violation of the law.

"If they were to suspend all new contractual obligations, it would have a significant and immediate impact on [Defense Department's] programs and activities," he added.

The damage will only get worse if the crisis drags on into the summer. Another $14 billion in payments to defense equipment suppliers is due July 15, when another $3 billion in military payments and bonuses are planned.

Failure to pay contractors can lead to multiple lawsuits and long delays in procurement schedules. Hayes said officials are concerned that retailers could "decide to reduce or stop providing VA goods and services entirely if payment is uncertain."

Not paying soldiers, and forcing them to continue working, could become a political nightmare for both sides.

(Video) Democrats Hammer Republicans Over Possible Debt Default Catastrophe On Eve Of Memorial Day Weekend

Legislators have passed legislation in the past to mitigate the impact of the government shutdown on military and veteran families by ensuring that some Department of Veterans Affairs funds are awarded up to a year in advance and ensuring that veterans are paid. military even if the funds expire. .

These safeguards do not exist if the country does not have the money to write checks.

Harrison noted that the Treasury could “continue to borrow and pay the bills as usual” if Biden decided to invoke the 14th Amendment clause. But doing so would likely mean legal challenges and other complications, Biden said at a news conference earlier this month.

In March, Virginia Democratic Senators Mark Warner and Tim Kaine introduced legislation that would allow all government employees and contractors to defer bill payments during downtime or debt default. The proposal has not advanced in recent weeks.

Advocacy leaders said the real legislative solution was simply to pass a measure to increase the debt limit, which lawmakers have done 13 times since 2009.

Earlier this month, after another meeting with congressional leaders, Biden said he was "absolutely certain" a deal could be reached and that default was "not an option." But since then, no true path has emerged in this regard.

OLeo Shane IIIIBryant Harris

Leo covers Congress, Veterans Affairs and the White House for "Military Times." He has been covering Washington since 2004, focusing on military personnel and veteran politics. His work has garnered numerous accolades, including the 2009 Polk Award, the 2010 National Headliner Award, the IAVA Award for Leadership in Journalism, and the VFW News Media Award.

Bryant Harris is a congressional reporter for Defense News. Since 2014, he has covered foreign policy, national security, international affairs, and US politics in Washington. He has also written for Foreign Policy, Al-Monitor, Al Jazeera English and IPS News.


dn dnrcongresspentagondebt ceilingveterans affairsJoe Bidentreasurybudget

In other news
'Destructive' debt default threatens military payroll and defense programs (1)
Russia carried out the "biggest drone attack" in the Ukrainian capital
The attack lasted for more than five hours and air defenses reportedly shot down more than 40 drones.
'Destructive' debt default threatens military payroll and defense programs (2)
Taiwan claims Chinese warships are passing through the Taiwan Strait
Taiwan's Defense Ministry said it had detected three Chinese warships, including the aircraft carrier Shandong, passing through the Taiwan Strait.
'Destructive' debt default threatens military payroll and defense programs (3)
(Video) These are the cuts the GOP wants in a debt ceiling deal
"A snapshot of her memories": the widow of the Estrella Dorada remembers Remembrance Day
Army 1st Lt. Doyle M. Hufstedler was killed by an improvised explosive device in Iraq in 2004. He was 25 years old.
'Destructive' debt default threatens military payroll and defense programs (4)
Remembrance Day is for those of us who have lost, on the battlefield and at home.
Suicide has become an epidemic in the veteran community. But it is a problem that we can try to solve by connecting with each other.
'Destructive' debt default threatens military payroll and defense programs (5)
Ghosts of Beirut focuses on the CIA's decades-long search for a terrorist leader
The 25-year manhunt, which began after the Beirut bombings in 1983, formed the basis of Showtime's four-episode series Ghosts of Beirut.
(Video) Hayes: What the Republican debt ceiling threat is really about

charge more

(Video) Sen. Ted Cruz on debt ceiling showdown: President Biden is not engaged in the negotiations


What happens if government defaults on its debt? ›

“It would likely push the economy and transportation markets into a real recession (not a maybe recession like we have now) and would hurt the ability of trucking businesses to borrow money,” Meil says. “And no doubt, it would bring about higher interest rates.

What happens to veteran benefits if the US defaults on its debt? ›

In the event of a default the US government would face a severe fiscal crisis, leading to a significant reduction in available funds for all government programs, including veterans' benefits. This would result in delays to benefit payments until alternate funding has been sourced.

Will the debt ceiling affect military retirement pay? ›

New analysis shows that millions of veterans may experience delays in receiving their pensions, disability compensation, educational allowances, or health care if Congress doesn't raise, suspend, or eliminate the debt ceiling.

What happens if we hit the debt ceiling? ›

Potential repercussions of reaching the ceiling include a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the United States' financial market and tip its economy—and the world's—into immediate recession.

What does government debt default mean? ›

If the U.S. defaults on its debt, it will be unable to pay its bills, rocking global financial markets and resulting in what Yellen predicts would be "an economic and financial catastrophe." This news has investors understandably worried about protecting their money should the worst occur.

Who do we owe government debt to? ›

Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.

Can you get kicked out of the military for debt? ›

Military members who repeatedly fail to make payments or honor their debts can receive various punishments, including being discharged. The maximum punishment is a Bad-conduct discharge, forfeiture of all pay and allowances, and confinement for 6 months.

Are VA benefits protected from creditors? ›

Legal Authority for Garnishing VA Benefits. There is no statutory prohibition against the garnishment of military retired pay (MRP) when the Veteran is in receipt of Department of Veterans Affairs (VA) disability compensation. make a payment in compliance with the garnishment order for certain categories of payees.

Can debt disqualify you from the military? ›

Members of the military dealing with credit card debt face an extra level of penalties if that debt becomes delinquent or excessive: They could lose their security clearance, be denied promotions and, in extreme circumstances, face dismissal.

What happens if you don't pay military debt? ›

Having a debt in the military can come with a variety of consequences. Involuntary repayment options are available to the DoD, including wage garnishments that allow them to collect what's owed. Additionally, certain funds received from the federal government are potentially subject to seizure until the debt is repaid.

What can stop military retirement pay? ›

Military retired pay stops upon death of the retiree! The Survivor Benefit Plan (SBP) allows a retiree to ensure, after death, a continuous lifetime annuity for their dependents.

Can a creditor garnish military retirement? ›

Are military or civil service retirees subject to garnishment? No. Retired military members' pay is exempt from garnishment for commercial debts.

Is the US going to hit the debt ceiling? ›

On January 19, 2023, the United States hit its debt ceiling, leading to a debt-ceiling crisis, part of an ongoing political debate within Congress about federal government spending and the national debt that the U.S. government accrues.

What would happen if the US defaulted? ›

And if a government default were to last much longer — well into the summer — the consequences would be far more dire, Zandi and his colleagues found in their analysis: U.S. economic growth would sink, 7.8 million American jobs would vanish, borrowing rates would jump, the unemployment rate would soar from the current ...

What happens if we don't raise the debt ceiling? ›

Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history.

How do I get out of default debt? ›

Complete rehabilitation by making on-time payments after the payment suspension ends. You need to make nine on-time monthly payments (or payment credits) in order to successfully complete loan rehabilitation. During the COVID-19 emergency relief period, paused payments count toward loan rehabilitation.

Which country has defaulted the most? ›

10 Countries That Are Most Likely to Default
  • 10 Countries That Are Most Likely to Default. Mar 17, 2023. ...
  • Argentina. The country is facing economic turmoil with a weakened currency, critically low reserves, and bonds trading at a low price. ...
  • Ukraine. ...
  • Tunisia. ...
  • Ghana. ...
  • Egypt. ...
  • Kenya. ...
  • Ethiopia.
Mar 17, 2023

Who bears the burden of the US federal debt? ›

So who does bear the burden of this debt? Buchanan's correct answer is this: the taxpayers who repay the debt. These taxpayers, in order to transfer resources to the creditors, are compelled to reduce their consumption when payments on government bonds come due.

Who does us owe the most money too? ›

Japan and China have been the largest foreign holders of US debt for the last two decades. Japan and China held almost 50% of all foreign-owned US debt between 2004 and 2006. However, this has declined over time, and as of 2022 they controlled approximately 25% of foreign-owned debt.

Who is America in debt too? ›

States and local governments hold 5 percent of the debt. Foreign governments who have purchased U.S. treasuries include China, Japan, Brazil, Ireland, the U.K. and others.

Is there a country with no debt? ›

A low level of debt shows less reliance on foreign borrowings. The best example can be taken from Hong Kong (it is a one of the debt free countries), whose economy has the least debt to GDP ratio. It is an almost debt free country. It has a well-regulated financial system and large foreign reserves.

How much debt is too much debt? ›

Debt-to-income ratio targets

Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.

Can I sue the military for not paying me? ›

Military Pay Claims at the U.S. Court of Federal Claims

Federal law allows you to sue the U.S. government for payment of money as a result of the wrongful discharge, improper retirement, denial of promotion, service-related disability, and incorrect military records under some circumstances.

Why do I owe money to the Department of Defense? ›

A debt may be for an overpayment of retired pay, an overpayment of active duty pay and allowances, or other indebtedness arising from service on active duty, an overpayment from another department or agency of the Federal Government, unpaid government hospital bills, unpaid rent due military installations, IRS tax ...

What is the 11 word phrase to stop debt collectors? ›

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

What type of bank accounts Cannot be garnished? ›

Bank accounts solely for government benefits

Federal law ensures that creditors cannot touch certain federal benefits, such as Social Security funds and veterans' benefits. If you're receiving these benefits, they would not be subject to garnishment.

What can stop your VA benefits? ›

VA disability compensation payments are reduced if a Veteran is convicted of a felony and imprisoned for more than 60 days. Veterans rated 20 percent or more are limited to the 10 percent disability rate. For a Veteran whose disability rating is 10 percent, the payment is reduced by one-half.

How much debt is too much for a security clearance? ›

Generally, lenders in the financial world aren't comfortable with a debt-to-income ratio higher than 43%, so that 50% ratio likely would be a red flag for a candidate applying for a security clearance.

Can you have bad credit in the military? ›

You will be able to apply for a military loan, even if you have bad credit. Active duty military members seeking a personal loan, as well as those with any other military affiliation (whether a reservist, career-retired, a military spouse, or military dependent) are ALL able to apply for a loan up to $40,000.

What is a top secret clearance in the military? ›

Top Secret: Individuals with this clearance have access to information or material that could be expected to cause exceptionally grave damage to national security if it was released without authorization. This level needs to be reinvestigated every five years.

What is the statute of limitations for military pay? ›

STATUTE OF LIMITATIONS: In this case the Court explained that military pay claims must be filed within 6 years from their accrual. When a claim accrues is a question of law that your experienced military counsel can advise you on.

What not to say to debt collectors? ›

If you get an unexpected call from a debt collector, here are several things you should never tell them:
  • Don't Admit the Debt. Even if you think you recognize the debt, don't say anything. ...
  • Don't provide bank account information or other personal information. ...
  • Document any agreements you reach with the debt collector.
Nov 23, 2021

What happens after 7 years of not paying debt? ›

Although the unpaid debt will go on your credit report and cause a negative impact to your score, the good news is that it won't last forever. Debt after 7 years, unpaid credit card debt falls off of credit reports. The debt doesn't vanish completely, but it'll no longer impact your credit score.

How do I get the $16728 Social Security bonus? ›

To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.

What is the major Richard Star Act? ›

Currently, over 50,000 medically retired veterans are forbidden from receiving their full retirement pay and disability compensation. The Major Richard Star Act would repeal this unfair offset, allowing these disabled Veterans to receive both their retirement pay and their disability compensation.

How much is E7 retirement pay with 20 years? ›

What is the retirement pay for an E7 with 20 years? As of 2022 the pay calculation projection an E7 retiring with exactly 20 years of service would receive $27,827 per year. It's important to note the present value of almost $800,000 for a 40 year old receiving this pension indefinitely.

Can the military take your whole paycheck? ›

It's not just your basic pay that can be withheld, garnishments can also include almost all of your "pay" such as special pay, incentive pay, etc. Your allowances such as Basic Allowance for Housing and Basic Allowance for Subsistence cannot be garnished.

What type of federal benefits Cannot be garnished? ›

Benefits That Cannot Be Garnished

Supplemental Security Income (SSI) Benefits. Veterans' Benefits. Civil Service and Federal Retirement and Disability Benefits. Military Annuities and Survivors' Benefits.

Can debt collectors go after your retirement? ›

Retirement accounts set up under the Employee Retirement Income Security Act (ERISA) of 1974 are generally protected from seizure by creditors. ERISA covers most employer-sponsored retirement plans, including 401(k) plans, pension plans and some 403(b) plans.

Has the US ever not been in debt? ›

As a result, the U.S. actually did become debt free, for the first and only time, at the beginning of 1835 and stayed that way until 1837. It remains the only time that a major country was without debt. Jackson and his followers believed that freedom from debt was the linchpin in establishing a free republic.

When was the last time the debt ceiling was raised in the US? ›

Debt ceiling increases under President George W. Bush

While George W. Bush was President, both Republicans and Democrats controlled the House and the Senate at various points during his term. Congress increased the debt ceiling eight times in 2002, 2003, 2004, 2006, 2007, and twice in 2008.

Why is the US in debt right now? ›

America's growing debt is the result of simple math — each year, there is a mismatch between spending and revenues. When the federal government spends more than it takes in, we have to borrow money to cover that annual deficit. And each year's deficit adds to our growing national debt.

Where do I put money if US defaults on debt? ›

How you can prepare if US defaults on its debt
  • Military families should keep extra cash. ...
  • Expect volatility in bonds. ...
  • Stick with high-quality investments. ...
  • Don't over invest, despite temptation.
6 days ago

What will happen if the US debt keeps rising? ›

Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.

Who owns the US debt? ›

Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.

What is the debt limit for the government? ›

As of January 19, 2023, the U.S. had borrowed as much money as it is legally allowed to borrow—$31.4 trillion. Since then, the Treasury has taken so-called “extraordinary measures” to keep paying the nation's bills, but its ability to do so will end in the coming days according to Treasury Secretary Janet Yellen.

How much debt is the US in 2023? ›

At the end of FY 2023 federal debt is “guesstimated” to amount to $32.69 trillion. Thus far, on 2023-05-25, the federal debt is $31.47 trillion. See Coronavirus Update page. Click for federal debt from 1960 to present.

What happens if the government shuts down? ›

When there is a government shutdown, federal agencies are required to classify their employees as either “essential” or “non-essential.” The employees classified as “essential” continue to work during the shutdown. However, the employees classified as “non-essential” are put on unpaid furlough.

Can VA benefits be garnished by debt collector? ›

Many people receive federal benefits such as Social Security or VA on a prepaid card. If your benefits are loaded onto a Direct Express card or to another prepaid account, they are still automatically protected from garnishment just like money in a bank account.

Can the VA take back money? ›

If you don't pay or request help within the time limit, we may take these actions: Collect your debt from your VA benefits.

Can IRS garnish veterans disability? ›

Normally, the IRS may not garnish VA disability benefits, even if the Veteran in question files for bankruptcy or finds themselves in major financial debt. However, the IRS can garnish VA disability benefits if the Veteran doesn't make legally required alimony payments or child support payments.

Can VA survivor benefits be garnished? ›

Typically between 20% and 50% of your benefits can be garnished. Less than 20% is considered to be an insufficient amount for a veteran's dependents, and more than 50% is considered to cause undue hardship to a veteran. Equal amount of funds will be provided to each child out of the garnishment.

What is the statute of limitations for VA debt? ›

Summary: The Virginia statute of limitations on debt is five years for written contracts and credit cards and three years for open accounts and oral contracts. When Virginia debt collectors contact you, check the statute of limitations before you pay anything off.

Does the VA waive debt? ›

You can request a waiver if you can't afford to repay your full debt balance—even with smaller monthly payments over time. We may grant a waiver for part or all of a VA debt. If we grant your waiver request, you won't have to repay the amount we agree to waive.

Can you walk away from a VA loan? ›

A VA escape clause allows a buyer to walk away from the deal if the home's appraised value is less than the contract price. If the buyer walks away for this reason, they will get their earnest money deposit back.

Can the VA forgive debt? ›

You can request a waiver (asking us to stop collection action on the debt), write-off (asking us to cancel the debt), or compromise (asking us to accept a lower amount of money as full payment of the debt). If we grant part or all of your request, you won't have to pay the amount of the balance we agree to relieve.

How much VA disability can be garnished? ›

Typically, between 20 to 50 percent of VA disability benefits can be garnished as 20 percent is considered to be an insufficient amount for a veteran's dependents and 50 percent is considered to cause undue hardship to a veteran.

How do I stop a VA garnishment? ›

There are two ways to stop garnishment in Virginia. One way is by filing for bankruptcy, which will stop all garnishments and other collection efforts. The other way is by filing for an exemption, which will exempt you from garnishment but not bankruptcy.

Can military benefits be garnished? ›

Are military or civil service retirees subject to garnishment? No. Retired military members' pay is exempt from garnishment for commercial debts. Under the Uniformed Services Former Spouses' Protection Act, child support, spousal support, or a property division are allowable.

Can my ex wife take my VA disability? ›

Is a divorced spouse entitled to VA disability benefits? No. Under federal law, VA disability benefits are not marital property which courts can divide in a divorce. However, the VA disability payments are not invisible to the court, and do count as income when calculating child support or alimony.

Can an ex wife get VA benefits after death? ›

Am I eligible for a VA Survivors Pension as a surviving spouse? You may be eligible for this benefit if you haven't remarried after the Veteran's death, and if the deceased Veteran didn't receive a dishonorable discharge and their service meets at least one of these requirements.


1. Press Secretary Karine Jean-Pierre says a debt default is ‘not an option’
(Fox Business)
2. The US Government is BROKE | The 2023 Debt Ceiling
(Marko - WhiteBoard Finance)
3. The Showdown Over the Debt Limit is Converging on a Hard Deadline | Faith Nation May 22, 2023
(CBN News)
4. As Democrats and Republicans Spar, US Debt Ceiling Deadline Nears | Vantage with Palki Sharma
5. 8 Days Until USA $31 Trillion DEBT DEFAULT as Cash Runs Out 1st June & Congress Cannot Agree on Deal
(Joe Blogs)
6. Jeffrey Sachs: Bipartisan Support of War, from Iraq to Ukraine, Is Helping Fuel U.S. Debt Crisis
(Democracy Now!)


Top Articles
Latest Posts
Article information

Author: Dong Thiel

Last Updated: 16/07/2023

Views: 5466

Rating: 4.9 / 5 (79 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Dong Thiel

Birthday: 2001-07-14

Address: 2865 Kasha Unions, West Corrinne, AK 05708-1071

Phone: +3512198379449

Job: Design Planner

Hobby: Graffiti, Foreign language learning, Gambling, Metalworking, Rowing, Sculling, Sewing

Introduction: My name is Dong Thiel, I am a brainy, happy, tasty, lively, splendid, talented, cooperative person who loves writing and wants to share my knowledge and understanding with you.