Paycheck Chronicles

Another Pay Crisis Averted - Now What?

Well, it appears that the federal debt ceiling crisis that could affect military pay and veteran benefits has (probably) been averted.  Now what?  This is not the time to relax.  The compromise contains all sorts of spending cuts that are going to impact military families, one way or another.

Key factors in the deal include:

  • Up to 2.4 trillion dollar increase in the government's ability to borrow (the debt ceiling)
  • Mandated cuts to federal spending, including the Department of Defense
  • No impact on military pay and benefits, for now.
Okay, so we're clear, right?  Not so fast.  For starters, this entire debacle has made our country's financial situation look bad to the outside world.  Even if the United States' debt rating isn't downgraded, experts say that interest rates are likely to rise.  Rising interest rates are not really a good thing for most people.  (Unless you've got a stash of cash you're trying to keep safe and grow.)  Housing costs will probably increase.  Inflation seems pretty likely.

More specific to military families, the Department of Defense is going to have to do some serious cutting.  Where can they begin?  The basic choices are equipment/technology, physical troops, and "extras."   My guess is that the first things to go will be the extras:  child care, gyms, all those freebies they give out at events.  We all know about programs that aren't worth the money being spent on them.  Hopefully, the powers that be will make the least painful cuts first.  Once they've trimmed programs, they're likely to start looking at troops.  Quantity, quality, pay raises, and the long-term costs of keeping people on the payroll.  Technology and equipment are expensive, but they are also often locked into contracts that are equally expensive to break, so they're likely to be late in the cutback game.

Military families need to be aware that times are going to be tough, and prepare appropriately.  As Philip Ewing says in his piece, The City On The Edge of Forever, "Whatever happens, Sunday’s announcements about this debt bargain don’t mean the end of this story — in fact, they might not even be the end of the beginning."

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