updated 3/11/2009 12:48:36 PM ET 2009-03-11T16:48:36

Lower oil prices make already unstable U.S. suppliers more volatile. Economic weakness in Mexico empowers drug cartels on the southern border. China faces more domestic unrest, leading to government crackdowns. Increased protectionism stifles recovery at home and abroad, and global perception of America's power is harmed as the nation's economy founders.

Add to those scenarios a U.S. military viewed as weak from scaled-back defense spending to cut costs, and it's easy to see how the global financial crisis threatens U.S. national security, according to testimony prepared for a House panel Wednesday.

"The most important effect of the financial crisis and subsequent recession may be the least tangible — a serious worldwide erosion of confidence in American competence, a confidence which previously almost carried a sense of invincibility," Richard Cooper, an international economist at Harvard University, said in written testimony for the House Armed Services Committee.

U.S. officials recently have warned that the nation's recession and global financial crisis were top security concerns. Director of National Intelligence Dennis Blair has said the economic weakness could lead to political instability in many developing nations.

The House panel also is concerned about how the government is devoting money to handle the crisis. President Barack Obama has proposed a 4 percent increase in defense spending to $534 billion during the next fiscal year.

But with a $787 billion stimulus package, and billions being poured into propping up banks and other companies, many defense analysts believe that Pentagon budgets, one of the largest shares of government spending, are likely targets for cuts. That could include big programs like the Army's plans to modernize its forces, led by Boeing Co., and programs by Lockheed Martin Corp. to build new advanced fighter jets.

Analyst: Perception of weakness
Dov Zakheim, a Defense Department comptroller during the most recent Bush administration, said cuts in defense spending could create the perception of American weakness.

"Can we say with confidence in one or two decades' time no powerful adversary will act upon a perception of American weakness and threaten one of our vital national interests?" he wrote.

Analysts told the House panel that economic instability in places like Pakistan could foster the growth of extremist and terrorist groups. Consistently lower oil prices could lead to popular unrest in Venezuela, prompting President Hugo Chavez to ratchet up antagonism of the U.S. to deflect attention from domestic woes. Russia also appears to be continuing efforts to modernize its military, especially its nuclear forces, which could pose a problem for a U.S. government that may slash defense spending.

Not all effects are harmful. Cooper said that a tighter job market could drive more recruits to the military, and that the fall in oil prices has weakened potentially hostile states like Iran.

But salvaging the U.S. economy may leave the nation weaker over the long term. Heavy borrowing for stimulus and recovery plans likely will saddle the U.S. with a heavy load of new debt, potentially stifling any recovery. And other nations such as China could eventually lose their appetite for dollars and U.S. investments if the economy continues to sour, the panel warned.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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