Fmr. Chairman of the Joint Chiefs of Staff Michael Mullen joins CNBC's Leslie Picker to talk the security risk around the U.S. debt spiral.

Washington

Former Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen, has reiterated concerns that the United States' rising national debt poses a significant risk to national security. Mullen noted that as debt and interest payments increase, they threaten to constrain discretionary defense spending, potentially weakening the country's global standing. Recent legislation is expected to increase both defense spending and interest costs, with interest payments projected to exceed defense expenditures by a substantial margin.

Experts highlighted that foreign holders of US debt, such as China and Japan, may view America's debt as a vulnerability, while changes in global trade relationships could affect demand for US Treasuries. Addressing the deficit will likely require a combination of spending cuts, tax increases, and emergency funds, but significant political divisions remain a major obstacle to reaching a solution.

Consequences of U.S. debt on defense spending

President Trump signing his tax bill into law on Friday. It is projected to add trillions to the u.s Deficit over the next decade Leslie Picker joins us with a special report America's deficit Reckoning and a look at the potential International implications of America's soaring debt Leslie great work and tell us. Yeah Thank you, John when Admiral Michael Mullen was asked back in 2010 What he thought was the biggest threat to national security his answer shocked the nation. I I Responded that the most significant threat was our national debt, which was a bit of a surprise The reporter and others actually would have expected some kind of weapon system or some kind of country or something like that The former chairman of the Joint Chiefs of Staff told us that as debt levels rose His concern was that interest payments would over time squeeze the discretionary defense budget Historian Neil Ferguson published research recently Which says that a great power that spends more on debt servicing than on defense Risks ceasing to be a great power this year The u.s. Is expected to spend about 90 billion dollars more on interest payments than on defense deepening a critical tipping point that America hit in 2024 the recent tax and spending legislation that was just passed is projected to increase defense spending by two billion Dollars this year and a hundred and fifty billion over the next decade the committee for a responsible federal budget Estimates that the law will boost interest costs and those will rise by seven hundred billion dollars I asked Admiral Mullen whether our adversaries pay attention to our debt levels and see them as a potential vulnerability. I Would think that Putin in Russia Xi Jinping in China see this as a vulnerability and you've heard President Xi in China over the last certainly decade plus talk about the United States being in decline The irony is that China is one of the largest foreign holders of US Treasuries Although it's been steadily reducing its stash Japan holds more than a trillion dollars worth of debt the most of any foreign country They recently started accumulating or they really started accumulating US debt in the late 70s and 80s through trade While the White House says higher tariffs will generate additional revenue to shrink the budget deficit There's also a looming question about what the reworking of global trade relationships might mean for international demand for treasuries guys Yeah It's a fundamental reworking of how our how our system operates or our economy operates and I've had these type of conversations With folks on the national security side because of it and you sort of just touched on it But this impasse we've seen at least ahead of today with tariffs announced today with Japan sort of speaks to the leverage the Japanese for example as investors maybe have in trade talks and the reason why the Japanese have treasuries to begin with the Japan is an exporting nation So if they're exporting say a car that's worth thirty thousand dollars, they get that Japanese automaker gets dollars They need to convert that to yen through a bank that bank invests in Treasury So not to cause much appreciation for the yen, which would hurt their exports So all of this kind of goes back to trade. So if you start to see a weakening relationship for trade How does that impact the demand for treasuries over time? What does that mean for the US dollar over time? And what are the options for the US economy? One might argue we've taken our first big step gamble perhaps with an entitlement cut Medicaid now how people feel that how people react to that might determine whether we can cut further in order to balance this out down The line or whether taxes might end up having to go up eventually, right? Well, that's exactly right because the basically the way we got here is one-third due to tax cuts One-third due to spending increases and one-third due to emergencies. So there's a lot of blame to go around. It's not just one thing It's not just the other thing and every expert I spoke with said that you have to have a combination of these levers Spending taxes and then have kind of a rainy day fund for emergencies in order to prevent something like this from Happening in the future Kent Smetters at Wharton said that if you only tried to solve this problem with tax revenue For example, you would have to increase taxes 30% to solve this problem if you only wanted to solve this problem with spending cuts You'd have to cut spending 25% which means anyone who's receiving Medicaid or Medicare or Social Security They're gonna see their checks cut by 25% So either option is not great for the country That's essentially austerity, which nobody wants to see but the challenge is coming together at the table for an agreement And and one of the things that I asked Admiral Mullen is do you still see the debt as the biggest? Issue for national security facing this nation. You know what he said It's number two. The political divide is the biggest Facing our nation right now, right, which I think all kind of feeds together as well Well that could keep us from getting exactly an agreement on there again Great work calling America to the kitchen table where we got to figure some stuff out Leslie Picker Well, you can catch much more of Leslie's special report by scanning this QR code on your screen Go to CNBC comm slash deficit reckoning or by following listening to the closing bell overtime podcast

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