April 13, 2024
‘There’s no blueprint’: If U.S. defaults on debt, $12 billion in benefits for veterans and their families is at stake

‘There’s no blueprint’: If U.S. defaults on debt, $12 billion in benefits for veterans and their families is at stake

While debt-ceiling negotiations could grind through the Memorial Day weekend, members of the military and veterans are some of the people who could suffer financially if lawmakers don’t reach an agreement soon.

As early as June 1, if there is no deal on the debt limit, the U.S. government might no longer be able to pay all its bills — which include military salaries and veterans’ benefits.

The Treasury Department pays out $25 billion every month on behalf of the Department of Veterans Affairs, according to VA press secretary Terrence Hayes. The money goes toward expenses including $12 billion in benefits for veterans and their families, $835 million in pharmacy costs, $4.8 billion in staff salaries and over $4 billion for contracts to providers of care for veterans, he said.

“There is no blueprint of what happens to VA if the debt limit is reached,” said Hayes. But “if the debt limit is reached, all of these payments could be curtailed or stopped.”

On Thursday, President Joe Biden and House Speaker Kevin McCarthy both said there had been some progress in the negotiations, with Biden saying that all sides agree default isn’t an option. Increasing funding for discretionary spending on the military and veterans is one hotly debated topic on the table.

“‘There is no blueprint of what happens to VA if the debt limit is reached.’”

— VA press secretary Terrence Hayes

Huge numbers of families as well as stock-market investors stand to lose if the U.S. defaults on its debts, projections say. A default impasse lasting at least a month would wipe out $10 trillion in household wealth, and even a brief default would tip the economy into a mild recession, according to Moody’s Analytics.

This year, the default angst happens to coincide with Memorial Day weekend, a holiday commemorating military service and sacrifice in a nation with 16.5 million veterans. It’s also occurring as the economy places more veterans under financial stress.

High inflation has been hard for veterans recovering from physical and mental injuries sustained in the line of service, especially if they are on a fixed income and without full-time work, said Wounded Warrior Project CEO Michael Linnington.

The Wounded Warrior Project serves nearly 189,500 post-9/11 veterans and 47,500 of their family members. The organization’s work includes free, direct services and help accessing VA benefits.

“Veterans registered with the Wounded Warrior Project have an estimated 6.8% unemployment rate. That outpaces the jobless rate for all post-9/11 veterans.”

Veterans registered with the Wounded Warrior Project have an estimated 6.8% unemployment rate. That outpaces the jobless rate for all post-9/11 veterans. Of that demographic, 3.1% were jobless in 2022, according to Labor Department numbers.

Nearly half (46%) of veterans who participated in the organization’s annual poll last year said they lived paycheck to paycheck either sometimes or all the time.

Add to that the specter of delays in VA payments. “It creates that snowball of financial unwellness — that’s the only way I can describe it — that then exacerbates what you are already going through, trying to heal mind, body and spirit,” said Linnington, a retired U.S. Army lieutenant general.

From October 2022 through March 2023, Linnington said the Wounded Warrior Project provided emergency financial assistance to registered veterans and their families in approximately 1,800 cases, up from 657 in the comparable period from October 2021 to March 2022. The money usually amounts to several thousand dollars to help cover bills and expenses, he said.

“If you throw on top of that veterans not getting benefit stipends at the end of every month, I can’t imagine what that number will be. I can certainly say it will be more than our ability to take care of,” he said.

The military life has certain costs, according to Blue Star Families, a support and research organization for military members and their families. Active-duty military families have to manage relocation, travel expenses and the unreimbursed costs associated with pulling up stakes, said Kathy Roth-Douquet, CEO of Blue Star Families.

And it’s even tougher to relocate now, due to difficult housing and rental markets, she noted.

“‘What could happen with the debt ceiling could really be devastating for families, because they are on the edge right now.’”

— Kathy Roth-Douquet, CEO of Blue Star Families

Research by Blue Star Families showed the average military family that moved in the past 12 months paid an average of $8,000 in unreimbursed moving expenses, Roth-Douquet said.

Relocations also make it tough for many military families to have two incomes, and moving and unpredictable hours can complicate child care, she said. Housing allowances provided by the military often aren’t enough by themselves, she added.

“What could happen with the debt ceiling could really be devastating for families, because they are on the edge right now,” she said.

“People simply don’t have the margin in their account to carry the federal government debt for a month or two or however long it takes,” she added.

Department of Defense spokesman Christopher Sherwood said that “default would have severe consequences for the economy, financial markets and a vast range of government programs that the American people count on.”

Despite the uncertainty about specific programs, Sherwood said, “what’s clear is that without the ability for the federal government to borrow funds, there is a very real potential that any government program or payment would be halted or severely delayed.”

While negotiators work on a debt-ceiling deal, Roth-Douquet said there’s another deal to keep in mind. Service members and military families “are willing to have the backs” of the public and Congress, she said.

That relationship works both ways, she noted. For Congress, “part of having our backs is doing their job.”

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