Tuesday, April 16, 2024
Tuesday, April 16, 2024
Air Force Secretary Frank Kendall said the Defense Department would face severe consequences if Congress and the White House remain stalemated and allow the federal government to default on the nation's debt.
“The short answer to your question is it would be devastating,” Kendall told Sen. Jeanne Shaheen (D-NH) during a Senate Armed Services Committee hearing today.
“I think most people would predict a severe recession at least,” he said. “Going forward, one of the biggest parts of the federal budget is the interest on the debt. If those interest rates go up -- which is what happens to you when you default, if you can borrow money at all -- then that expense becomes much greater. The interest on the debt is already roughly at the level of the defense budget.”
Kendall also said news of U.S. default would likely be welcome news among military planners in Beijing.
“Obviously, anything that damages us would be a benefit to China,” he said. “For any creditor to default on their debt causes a number of reactions. It's more expensive for you to get money. Your creditors aren't as willing to lend money. All the economists I've seen suggest it will be an absolutely devastating impact.”
Treasury Secretary Janet Yellen has sent a letter to House Speaker Kevin McCarthy (R-CA) warning that the United States could be unable to pay its debts “as early as June 1” if Congress does not agree to increase the federal government’s borrowing limit, urging lawmakers to “act as soon as possible.”
But the clock is ticking, especially in the House, which has 12 legislative days left in May and is in recess this week.
McCarthy said last month at the New York Stock Exchange that defaulting on the debt is “not an option” but will not support any effort to increase the debt limit until congressional Democrats and the White House agree to significant spending cuts.
President Biden and senior Democrats in Congress, however, have rejected the spending cuts, which would lock discretionary spending at levels not seen since fiscal year 2022. Biden has invited McCarthy and other congressional leaders to the White House for a May 9 meeting on the debt limit.