Debt Ceiling Struggle Could Pose Economic Threat to U.S. Cities with Military Bases

The United States may default on its debt within two weeks, which could have serious economic consequences for cities with large military bases. In the event of a default, the government would be unable to meet its financial obligations, including salaries paid to federal employees and social security recipients. A sixth of government spending goes toward defense, with a quarter of that going to military salaries. Cities with large military bases face the potential for delinquent payments, rising debt, and massive spending cuts that could adversely affect the revenue of local businesses.

Professor John Mayo, who specializes in economics, business, and public policy at Georgetown University, says that a federal debt default would be an economic catastrophe, particularly affecting the cities with the most government jobs, making military communities across the country especially vulnerable. Families with high pay-to-pay ratios do not have a lot of extra income or savings, making it difficult for them to pay their bills on time. Delayed payments could force federal employees to withdraw from savings accounts or rely on credit for everyday purchases, leading to significant spending cuts on discretionary purchases such as dining out and movies.

Delaying payments could also have a significant impact on U.S. cities with large military bases, such as San Diego, San Antonio, and El Paso, Texas, which have less diversified economies and rely heavily on military resources to drive activities. Household budgets will be affected primarily by the delay of wages and salaries for purchases of restaurants, entertainment, electronics, and other consumer goods. Delayed payments could lead to layoffs or bankruptcy of local businesses, and in the long run, businesses may be forced to lay off workers.

President Joe Biden and House Speaker Kevin McCarthy expressed optimism that negotiations would result in a successful debt ceiling hike as early as this weekend. However, talks stalled on Friday, and the negotiations have been suspended for the time being. Companies are urging lawmakers to raise the debt ceiling before a default occurs to avoid catastrophic economic consequences.

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