Military Pay, Benefits Disruptions Uncertain Amid Debt Ceiling Fight

The president and Defense Secretary Lloyd Austin are warning that military pay and veterans benefits are at risk in Congress' battle over the debt limit, but experts aren't sure about the extent of the possible damage.

President Joe Biden said both could be hit during a speech this week to pressure Republicans to raise the limit. Austin said Wednesday that benefits owed to 2.4 million military retirees and 400,000 survivors also would be at risk.

"It would also seriously harm our service members and their families because, as secretary, I would have no authority or ability to ensure that our service members, civilians or contractors would be paid in full or on time," Austin said in a written statement.

However, the unprecedented nature of a default means it's unclear exactly how bad disruptions would be, according to two experts interviewed by Military.com. Lawmakers are locked in an impasse right now over raising what's known as the debt limit or ceiling, which is the amount of money the Treasury Department can borrow in order to pay the nation's bills.

"This is going to be something that unfortunately just comes down to the wire when it concerns the impact of whether or not military servicemen and women are going to be paid on time and have full access to their benefits," said Rachel Snyderman, associate director of economic policy at the Bipartisan Policy Center.

"We're dealing with a tremendous amount of uncertainty," she said.

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Much of the uncertainty is coming from Capitol Hill politics and wrangling between the political parties.

Republicans "won't raise it even though defaulting on the debt would lead to a self-inflicted wound that takes our economy over a cliff and risks jobs and retirement savings, Social Security benefits, salaries for service members, benefits for veterans and so much more," Biden said Monday.

An analysis by the Bipartisan Policy Center found that about $11 billion in military pay, $11 billion in veterans benefits and $5 billion in military retirement benefits are expected to be paid out in the weeks between mid-October and mid-November.

But exactly how hard those pay and benefits could be hit likely depends on how the Treasury decides to try to pay its bills -- and how long the impasse in Congress lasts, experts said.

"There's no playbook for what happens when you default on the debt," said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget. "But as time goes on, ultimately the only choice will be to not pay people, to not pay benefits on time because the money won't be there."

Weeks Without Paychecks

If the debt limit isn't lifted, the Treasury could try to prioritize payments based on what it believes is most important. "Where military pay and veterans benefits, for example, could fall on that list is anyone's guess," Snyderman said.

The Treasury could instead choose to wait until it has enough incoming revenue to make a full day's worth of payments. In that scenario, delays in paychecks and benefits payouts would depend on how long the congressional impasse lasts.

If the fight isn't resolved by Nov. 1, for example, the Bipartisan Policy Center estimates payments owed to troops and veterans could be delayed 18 days until Nov. 19.

"As the impasse extends, the amount of bills on the table just continue to pile on, and so that's where we really do get into the scenario where military families could go weeks with missed paychecks or access to their benefits," Snyderman said.

With the deadline looming, Republicans and Democrats are locked in a deadlock over suspending the limit.

In 2019, Congress voted to suspend the debt limit for two years. The suspension ended in July, but the Treasury has been using so-called extraordinary measures, such as suspending investments in retirement funds, to continue meeting its obligations.

Those extraordinary measures are expected to be exhausted as soon as next week, Treasury Secretary Janet Yellen has warned.

The potential for delays in paychecks and benefits payments is a small sliver in a potentially larger economic meltdown if the country defaults, with Senate Armed Services Committee Chairman Jack Reed, D-R.I., saying, "The issue is so large it will have a significant effect on the entire economy."

The House has voted twice in recent weeks to lift the ceiling, mostly along party lines. But in the Senate, where bills require 60 votes to proceed, Republicans blocked legislation to lift the debt ceiling last week and are expected to continue to do so.

Republicans maintain that, while they agree the nation cannot be allowed to default, Democrats should have to raise the ceiling on their own since they are pursuing Biden's domestic agenda in a way that doesn't require GOP votes.

Sen. Jim Inhofe, R-Okla., the ranking member of the Senate Armed Services Committee, insisted that disruptions to military pay and benefits are "not going to happen," arguing that Democrats are trying to "find some emotional issue to hang it on."

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

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