The Pentagon won't have control over who in the military-industrial complex would continue to get paid in the event the United States defaults on its debt, officials said Wednesday; that would be up to the Treasury Department or the Office of Management and Budget. Senior leaders and top spokesmen tried to moderate their clear frustration at the ongoing impasse over whether the U.S. will continue to permit itself to borrow money, which not only has long-term implications for the Pentagon's budget, but the potential to cause many near-term headaches as well.
In a breakfast meeting with reporters, one of DoD's top contracting and acquisition officers, Richard Ginman, framed the problem this way: If the U.S. defaults, DoD will still have the ability to write contracts and even to make payments, but it will soon have a cashflow problem as the Treasury pays out the remainder of the money it has on hand, without the ability to raise more through a standard auction of T-bills. Treasury couldn't raise more cash until the debt limit were raised again. Ginman said it'd be as though you needed to write check, but you had to wait until payday to be able to cover the full amount.
So if the U.S. does default, will DoD prioritize its disbursements so that troops get paid first from what cash remains? Or will the department give top consideration to payments of contracts that might be coming due soon?
"I don't believe we're going to be the master of our own destiny," Ginman said. OMB or Treasury will make decisions about who gets paid first or last, he said.
All right, so is Secretary Panetta telling them what he'd like them to do on the Pentagon's behalf, if worse comes to worst? And who does he think should be the Building's winners and losers? A top spokesman, Marine Col. Dave Lapan, said he wasn't going there.
"We're not going to get into internal deliberations and discussions," he said. "We're not going to get into a situation where we say, 'This is on the table, this is not on the table.'"
Will Panetta even weigh in publicly on this situation, or is he going to just keep working behind the scenes?
"I'd stay tuned on that," said his spokesman, George Little.
So, bottom line -- is military pay, or are payments to DoD's vendors, at risk?
"I can't give you a characterization on that," Lapan said. "I just don't know."