How a Breach of the Debt Ceiling Could Damage U.S. National and International Security

By Nicholas Hager, Transatlantic Community Analyst

The stalemate which has led the U.S. government to shutdown, ostensibly to defund the Affordable Care Act, has morphed into a hostage situation animated by a disorderly jumble of demands for budgetary reform. It’s unclear whether the debt ceiling was initially part of the Republican strategy, but it’s apparent that the party is no longer satisfied with shutting down government operations; the fight has now shifted to whether Congress will raise the debt ceiling or allow the U.S. to default. Some argue that default would actually be a good thing, because it would force a spending-neutral budget, automatically and radically shrink the government. And others, like Congressman Ted Yoho, even believe that default “‘would bring stability to…world markets,’ [because it will assure them] that the United States had moved decisively to curb its debt.”


Yet these arguments are woefully misguided and reflect a gross misapprehension of basic economics. A default would only serve to increase the U.S. cost of borrowing by billions of dollars, forcing it to spend much more money in the long-run. One estimate projects that it would take “decades to recover from the Depression caused by a default,” while many argue it would spark “a [global] financial apocalypse,” More importantly, advocates of default miss a larger point. Even disregarding the vast, direct effects that a U.S. default would have on the domestic and global economies, the shutdown, and the looming specter of default, threatens to undermine U.S. national and international security by diminishing America’s capacity to credibly project hard and soft power.  


Lawrence Korb, of the Center for American Progress, estimates that in the event of a default, “if only the troops and the cost of operations are paid,” – which is all Congress’ original exemptions made provision for – there would be monthly shortfalls of $11.3 billion in procurement and $6.8 billion in research and development. Direct combat operations would be funded, but there would be no money to replace outdated or damaged weapons systems, nor would there be funding for the development of new ones. This would make the military reliant on potentially inferior or obsolete technology, but the failure to invest in research would also leave the U.S. particularly vulnerable to non-traditional threats like cyber-attacks. So a default would erode the military’s operational capacity while also delaying, perhaps very significantly, its capacity to analyze new threats and develop countermeasures. General Alexander, director of the National Security Agency (NSA), flatly told Congress that “[our] nation needs [the] 4,000 computer scientists [and] over a thousand mathematicians” that are currently furloughed so the U.S. can maintain the integrity of its security apparatus. Its proper functioning is largely predicated on the work of employees who conduct research and provide analysis. The damage here would likely not be felt immediately but would, nonetheless, be unequivocally harmful.


The broader impacts on U.S. and international security, however, are less quantifiable but no less insidious, and could be far more devastating.  First, the domestic political gridlock at the crux of this situation raises very real questions about the U.S.’ capacity to assist its allies. Even before the shutdown began, Secretary of Defense Hagel had to reassure South Korea that, regardless of domestic policy, “there’s never been any consideration of changing [the U.S.] force presence…in Korea or anywhere else [and that its] commitments still stand.” This reassurance is significant in itself because it indicates a conscious awareness by U.S. policymakers that domestic developments may unsettle its allies, and they want to preempt this damage as much as possible. President Obama’s decision to seek Congressional approval for punitive strikes against Syria, after President Hollande had already pledged France’s full support, is a prime example of how domestic disputes can diminish U.S. credibility abroad. Obama’s decision left Hollande to twist in the wind, and he was criticized mercilessly at home. After being the only European leader to pledge full support for a U.S. strike, it is unlikely that Hollande, or many other leaders, will be willing to stick their credibility on the line and risk the same fate. There is no longer a guarantee that the U.S. will follow through.


Second, the current domestic situation projects an aura of reckless indecisiveness which is likely to be deeply troubling for allies as they struggle to discern what commitments the U.S. will and won’t adhere to. This could have untold consequences for the international order because, as Richard Haass notes, “[the] most important currency for a great power is to be reliable and predictable.” Reliability is the “principle source of security” for allies of support because it provides a credible deterrent to foes who know that “certain actions…will trigger a U.S. response.” Without this reassurance and deterrence, the domestic “political disorder [in the U.S.] will lead to political disorder abroad.” As anxiety spreads among allies, enemies will become emboldened, and if they don’t perceive a credible threat of opposition from the U.S, they will be more likely to flout international laws, hurl bellicose invective at their neighbors, and engage in destabilizing actions with little fear of reprisal.


Third, the U.S. risks damaging its reputation as both an economic and political model for the world. Self-inflicted economic frailty, along with bitter, very public, political infighting may lead elites in more authoritarian governments, like China and Russia, to be less inclined to emulate the U.S. as they push toward modernization. The same goes for developing states which may look elsewhere for systems to emulate. They will hardly see unequivocal success in the U.S. system of governance if “chronic crisis sap[s] America’s economic strength” and demonstrates its ability to thwart itself. Congress would therefore do well to address its economic and political nearsightedness soon, or it may find itself committed to path that jeopardizes both American and global security. 

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