Cabinet Members Raise Concerns Over Budget Cuts in Efforts to Compete with China

Lloyd Austin, Antony Blinken and Gina Raimondo (Chad J. McNeeley/DoD)

The Lede: Three of Biden's notable cabinet members appeared before the Senate Appropriations Committee on Tuesday, May 16, presenting their strategic endeavors in outmaneuvering China in military, diplomatic, and economic spheres amid budget talks and intensified relations between Washington and Beijing.

What we know:

During the committee hearing, dedicated to a review of the President’s fiscal year 2024 budget request, Defense Secretary Lloyd Austin, Secretary of State Antony Blinken, and Secretary of Commerce Gina Raimondo expressed concerns about potential financial cuts, emphasizing they could have detrimental impacts on the United States' capacity to compete with China across multiple sectors.
Consequences from budget cuts and congressional delays were recurring topics during the cabinet members' testimonies.
Secretary Austin underscored the significance of timely and sufficient funding, expressing concerns about the negative impact of continuing resolutions (CRs) and budget reductions, which could impede the Department's ability to effectively compete with the People’s Republic of China (PRC). He said that addressing the PRC's challenge requires more than just military strength. Even if the Department of Defense is exempt from budget cuts, it would still hinder U.S. abilities. He urged Congress to prioritize the allocation of sufficient resources, emphasizing the importance of supporting the efforts of all government entities.
Secretary Blinken said that to bolster diplomatic efforts in the Indo-Pacific region, particularly in response to China's growing influence, the proposed FY2024 State Department Budget seeks to allocate resources accordingly. This includes funding for the establishment of new missions, the creation of positions, and the implementation of initiatives focusing on technology, economics, and regional organizations. Blinken said Beijing recognizes the crucial role of diplomacy and has made significant investments to strengthen its diplomatic capabilities and global presence. In fact, it has increased its diplomatic budget at a faster pace than its military budget, resulting in a larger number of postings worldwide compared to the United States.
Secretary Raimondo also voiced concerns about budget reductions impacting national security and economic competitiveness. She emphasized that returning to previous funding levels or implementing a significant spending reduction would hamper critical activities, including export control enforcement and trade promotion. These cuts would necessitate a hiring freeze and potentially reduce the workforce, undermining the Department's ability to oversee programs and strengthen national security and economic competitiveness effectively.

The background: The hearing takes place amidst the impending debt ceiling limit for the U.S., which the Treasury Department estimates could be reached by June 1. As the national debt continues to rise, the U.S. Treasury Department has been compelled to increase borrowing for covering government expenditures. The limit imposed by legislation on this borrowing is commonly referred to as the debt ceiling. Approval from both the House of Representatives and the Senate is required for any alteration to the margin.

The Biden administration aims to negotiate an agreement with Republicans in Congress to raise the current debt ceiling of $31.4 trillion. Reuters reported that Biden and Republicans have been in a prolonged standoff over the issue. Democrats are pushing for a "clean" increase without any conditions, aiming to address the debts resulting from approved spending and tax cuts by Congress. Biden said he would even cancel his G-7 trip on May 18 if needed to work and solve the issue.

On the other hand, Republicans in both the House and Senate have made it clear that they will not approve any further borrowing unless there is an agreement to reduce future spending. And they have generally advocated for reductions in non-military expenditures. Earlier this year Speaker of the House Kevin McCarthy wrote on Twitter that “if you gave your child a credit card and they kept hitting the limit, you wouldn't just keep increasing it. You would sit down with them to identify where they are overspending and where they can change their behavior,” saying the federal government should do the same.

Likely outcomes/Takeaway:

If the United States reaches its debt ceiling, it means the government cannot borrow more money to fulfill its financial obligations. This can lead to chaos, a failure to meet essential payments like salaries and benefits, increased market volatility, and potential economic contraction.
It could also undermine the country's economic stability and hinder its ability to respond effectively to challenges posed by China in areas such as trade, technology, and global influence. Reduced financial resources could also yield extensive repercussions, compromising military capabilities. Such a scenario would curtail essential funding for security, enhancements, cyber defense, and the development of infrastructure, which are vital in countering the expanding influence of China on a global scale.
In the event that congressional negotiations concerning the debt ceiling remain unresolved until it is reached, the Treasury Department can prevent a default through a series of temporary measures known as "extraordinary measures," according to the Council on Foreign Relations. These measures involve actions such as pausing payments to certain government employee savings programs, reducing investments in specific government funds, and postponing auctions of securities.

Quotables:

“The PRC has a very different view of the region’s future. We see a pattern today of unceasing PRC efforts to coerce its neighbors. As President Biden has stated, the PRC is becoming our only global competitor with both the power and the intent to reshape the international system to suit its authoritarian preferences. And increasingly, the PRC is turning to its military in an attempt to advance its revisionist aims.” – Defense Secretary Lloyd Austin.
“We are not demanding that other countries “choose” between us and China – but rather, are offering a more attractive choice. If we can spark a race to the top, that would be to everyone’s benefit. Our budget sets us up to work with like-minded partners to strengthen our offer and ensure it is relevant and responsive to the needs and aspirations of people around the world.” – Secretary of State Antony Blinken.
“We seek fair competition – because no one can outcompete the U.S. if we are playing by the same rules." – Secretary of Commerce Gina Raimondo.

Good Reads:

What Happens When the U.S. Hits Its Debt Ceiling? (The Council on Foreign Relations)

US Congress, White House begin tough debt limit, budget negotiations (Reuters)

China Would Benefit If US Can’t Pass Next Budget, White House Officials Warn (Bloomberg)