As the deadline for congress to raise the US debt limit fast approaches, many people around the globe are nervous about potential fallout if congress delays. Financial experts predict the economic impact will be swift with far reaching implications to many global economies. This prediction is based on the 2011 event where the US Government hit the debt ceiling. It took 11 months for the economy to recover, with very real impacts to the stock market and the economy. As a result of the 2011 event, the US government had its credit rating downgraded for the first time in history. This was not a full default, thus fallout this time is expected to be much worse. In turn, this economic impact is likely to have a cascading effect on national security that isn’t being discussed widely in the media today. Such impacts on national security will cascade down to all of us, businesses and individuals alike.
Before delving into matters of national security, it is important to understand what the debt ceiling is and how this problem is different from government shutdowns that have happened in the recent past. The debt limit was a construct created by Congress in 1917 to set the maximum amount of debt the U.S. government can incur. It was meant to provide flexibility in times of war. The Washington Post has a great primer on why the debt limit was created.
In January 2023, the national debt reached $31.4 trillion and hit the current cap set by congress. Since then, the US Treasury has executed extraordinary measures to avoid a debt default. The US Treasury predicts these measures will fail to be effective as soon as June 1, 2023. If the government defaults, it does not necessarily mean an immediate shutdown of government agencies. Timing of any shutdowns will depend on when specific bills and financial obligations for each agency come due, and how long it takes Congress to act.
And, although no schedule has officially been released, it is generally believed there is a plan for prioritization of funding for critical agencies and services, including national defense. Some of this is predicted in an article published by Fitch Ratings, a well-known debt ratings firm. However, if federal workers go unpaid, it is very likely some may call in sick or otherwise attempt to slow down work. This could affect agencies such as the TSA or air traffic control for example.
This is an obvious area of impact to national security, including cyber security. A recent article published by CNBC outlines concerns expressed publicly by Avril Haines, Director of National Intelligence. Specifically, Haines warned of intelligence indicating China and Russia will attempt to discredit the US on the international stage if there is a debt default. They would seek to bolster global uncertainty about the US stability which would in turn impact national security. Enemies of our country as well as other nations that have been less than hospitable may see this as an opportunity to strike in unexpected ways, hoping any response will be muted due to the underlying chaos already in process. Thus, we can expect the government and defense agencies to be on high alert if a default does occur.
We can see this playing out already in a post from Reuters that indicates China has recently been discovered spying electronically on US infrastructure including rail and oil and gas pipelines. As part of the 2023 Annual Threat Assessment, the Cyber Security & Infrastructure Security Agency (CISA) had already indicated China was the number one threat earlier this year. Openings created by a debt default and cascading uncertainty are certain to be leveraged to China’s advantage as mentioned earlier. Similarly, Russia had already escalated cyber-attacks against the US, presumably in response to funding and support for the defense of Ukraine. As with China, it is likely Russia may try to escalate efforts against the US during a time of uncertainty, further destabilizing the country.
Despite this doom and gloom, there may be light at the end of the tunnel. As of the writing of this post, Congress and the President are close to reaching an agreement, with plans to continue negotiations throughout the holiday weekend. Although, arguably, some damage has already been done to the global reputation of the US, a swift decision would avert further damage and allow critical agencies to focus on areas of concern, including national cyber security. And more importantly, a 2-year agreement would provide some much-needed stability so the US can focus on other areas of concern. In the meantime, we advise all individuals and businesses to remain on heightened alert while the risk of cyber threats remain high.
