US cities with military bases risk economic damage in debt ceiling fight

Washington, DC CNN

If lawmakers do not act, the United States could default in less than two week's time. Cities with large military presences risk a financial firestorm.

In the event of a default, the government would not be able meet its financial obligations. This includes paying salaries to federal employees and Social Security payments. According to the Congressional Budget Office, about a sixth (or 25 percent) of all government expenditures go to national defense. A quarter of that is spent on paying military personnel.

Cities with large bases of military face potentially huge consequences if the United States cannot pay its national defence bills. This could include missed payments, increasing debt, and a significant reduction in spending, which would affect local businesses.

CNN reported that a default on federal debt could be a disaster for the economy in many ways. It would especially affect cities with disproportionately high levels of government employment. This makes military communities across the country particularly vulnerable.

These are middle class families who live paycheck to paycheck. They have little extra income and no savings. If the payments are delayed to these families, they will have to make some really bad choices.

The Treasury Department has not yet revealed what its priorities are or how it will service government debts if it runs out cash.

According to Brookings Institution analysis, workers on government payrolls such as military personnel would not be laid off, but payments may be delayed. This could cause local economies to be further damaged by financial market turmoil that may occur even before a default.

According to data from the government, at the end of march, the Defense Department employed at least 1.7 millions Americans in all 50 states, including civil servants.

Delayed payments can have huge impacts on US cities with large bases like San Diego, San Antonio, and El Paso in Texas. This is even worse for smaller cities who don't have diverse economies and are heavily dependent on military presence for activity.

Mayo warned that federal workers might be forced to use their savings or credit cards for everyday purchases. The federal workers could also make a 'dramatic spending cut' on discretionary items, like dining out or going to the movies, which would hurt local businesses. If this continues for a long time, these businesses may have to lay off workers or even go out of business.

San Antonio has one of the largest military bases in the United States, which is comprised of four installations: Fort Sam Houston (Camp Bullis), Randolph Air Force Base, and Lackland Air Force Base.

Thomas Tunstall is an economist at University of Texas at San Antonio. He says that despite the fact that the economy of the region is diversified, it won't protect households from major damage if federal workers' payments are delayed.

Thomas Fullerton is an economist at the University of Texas at El Paso. He says that in the city of El Paso located far west Texas, Fort Bliss, and William Beaumont Army Medical Center pays more than $3.5 Billion to its military and civilian staff.

Fullerton said in an email to CNN that 'business cash flow will be disrupted' by any delays with paychecks, as well as by employee furloughs, layoffs, or other actions on the base or at the medical centre, or companies who subcontract there. He said that the impacts would be particularly severe for households with low incomes and wages.

San Diego, another major city, has a strong military presence. The city is home to one of the nation's largest naval bases and has a thriving tourism industry. According to Bureau of Labor Statistics data, the metropolitan area employed more than 193,000 people in leisure and hospitality.

According to Jeffrey Clemens of the University of California San Diego, if payments are delayed to workers on government payrolls, they will first reduce their leisure spending. Tourism businesses could be seriously affected.

Clemens stated that the local economy will be affected by late wage and salary payments, which could affect their consumption of food, entertainment, electronics, and other consumer products. If the federal government defaults and there is a slowdown in economic activity, it will affect people's plans for summer vacations. This could be especially true in places like San Diego with a strong tourism industry.

The President Joe Biden, and House Speaker Kevin McCarthy, had expressed optimism earlier in the week, that the negotiations would lead to a successful raise of the debt limit as early as this weekend. However, the negotiations hit a snag last Friday, which put the talks on hold for the time being.