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Time bomb

"Time bomb" Continued...

Issue: "Orphaned no more," July 30, 2011

"[Obama] has not made any proposal in writing to deal with entitlements and to deal with any specific cuts," Sen. Jim DeMint, R-S.C., said July 12. "The president talks a lot, but we can't vote on a speech."

The United States has never gone into full-blown default before, and government officials aren't certain what the precise repercussions could be. But the Bipartisan Policy Center recently role-played the scenario, and its report concluded that the U.S. Treasury would "be picking winners and losers"-who to pay and who not to pay.

The Treasury Department has about 80 million monthly payments, the report said, and would have to choose to ignore about 40 percent to 45 percent of them. Each day, though, the revenue coming into Treasury and the payments going out are different: On Aug. 3 the Treasury expects to take in $12 billion, with $32 billion in committed spending. But on Aug. 4, the Treasury takes in $4 billion with $11 billion in committed spending. Other days of the month revenue and spending commitments are equal, so inflows and outflows of cash do not match well, making the task of choosing what bills to pay difficult.

For the month of August, if Treasury chose to pay interest on Treasury securities, Department of Defense vendor payments, and benefits for Social Security, Medicare, and Medicaid-then the Treasury couldn't fund the salaries of active military personnel or federal employees.

House freshmen-key to any debt ceiling agreement-appear ready to risk immediate hardships for a long-term change in the federal government's spending habits. Rep. Austin Scott of Georgia, president of the Republican freshman class, said he expects "some short-term volatility," but told The New York Times: "In the end, the sun is going to come up tomorrow."

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