Pentagon sees ‘Chinese threat’ in US default

Top military leaders claimed a massive spending hike is needed to confront Beijing

US Defense Secretary Lloyd Austin and other senior Pentagon officials have urged lawmakers to extend the federal borrowing limit, insisting a default on the national debt would be devastating for America’s reputation and “embolden” China.

Testifying at a Senate Defense Appropriation hearing on Thursday, both Austin and Chairman of the Joint Chiefs of Staff Mark Milley spoke in support of the White House’s 2024 budget request, also warning that a default would deal a major blow to US national security. 

“China right now describes us in their open speeches, etc., as a declining power,” Milley said. “Defaulting on the debt would only reinforce that thought and embolden China and increase risk to the United States.”

Arguing that the Pentagon’s $842-billion budget request for next year is “driven by the seriousness of our strategic competition with the People’s Republic of China,” Austin went on to state that a default would carry “substantial risk to our reputation” which could benefit Beijing.

Read more

Default would be ‘catastrophe’ for US – Treasury

“What it would mean realistically for us is that we won’t, in some cases, be able to pay our troops with any degree of predictability. And that predictability is really really important for us,” he added. “This would have a real impact on the pockets of our troops and our civilians.”

In his opening remarks, the defense secretary also said the budget sought by the military would mark a 3.2% increase over 2023 – including a 40% boost to the ‘Pacific Deterrence Initiative,’ which aims to expand the US military presence in China’s backyard – but insisted the money is required to meet the “pacing challenge” posed by the PRC.

Austin and Milley are the latest in a series of senior officials to issue dire warnings about a potential default, as lawmakers struggle to strike a deal to extend the federal borrowing limit, which currently sits at $31.4 trillion and could be reached as soon as next month.

Earlier on Thursday, Treasury Secretary Janet Yellen claimed a default would be “a catastrophe,” suggesting the move could “raise questions about our ability to defend our national security interests.”

Read more

Biden fears for US reputation

Director of National Intelligence Avril Haines also told Congress last week that both China and Russia would seize on a debt default, saying they could use the event to portray “chaos within the United States.”

Much like the Pentagon, President Joe Biden himself has also stated that default is simply “not an option,” as it could trigger a recession and damage the US’ international reputation “in the extreme.” While little progress was made in negotiations with House Speaker Kevin McCarthy on Tuesday, Biden is set to meet with the Republican leader again next week for further talks on extending the debt ceiling.

Learn More