Debt crisis crushes military financing---key to overall power

A debt crisis would limit the federal government’s ability to rollover debt—much less to increase debt to finance existing benefits. While Greece and Spain have experienced a debt crisis, an economy in a deep recession, the imposition of austerity programs, and civil unrest, they have had the European Union and the IMF provide financing to buy them time. If the U.S. encountered a debt crisis, it’s unclear whether other countries would provide interim financing. Even if other countries wanted to assist the U.S., they might not have the capacity to do so. The Greek economy, for example, amounts to about $300 billion annually—compared with a $16 trillion U.S. economy. In other words, the federal-budget deficit for the first two months of this year amounted to $292 billion, enough debt to finance the entire Greek economy for a year.

Public finance is critical to national security. In a debt crisis, the federal government’s ability to finance its military could be compromised. Though defense spending has been declining as a share of the federal budget, the U.S. was also engaged in war during the financial crisis. As the federal government was responding to the financial crisis, President Obama also ordered the surge in operations for the War in Afghanistan on December 1, 2009. Though the cost of the surge of $35 billion was relatively small, history shows that a country’s ability to finance its military is critical to success on the battlefield. In The Ascent of Money, Niall Ferguson attributes Wellington’s victory over Napoleon to the British’s ability to borrow funds.20