If the United States runs short of cash to honor its obligations 18 days from now, the economic impact would be fast and furious. Continue reading after the jump.

@capriSUNshine

The country almost certainly would not default on its loans to bond holders, but all other payments would be thrown into doubt. That could start a cascading effect on jobs, loans, investments, prices — virtually every facet of Americans’ financial lives.

Some Republicans in Congress dispute the level of chaos that would ensue, charging that the Treasury Department is trumping up the potential repercussions. They include Rep. Michele Bachmann and former governor Tim Pawlenty of Minnesota, both presidential candidates, as well as prominent senators such as South Carolina’s Jim DeMint and Pennsylvania’s Pat Toomey.

Prominent economists and accountants, business leaders and veterans of Republican administrations disagree, pointing to potentially calamitous results if the nation’s $14.3 trillion debt ceiling isn’t raised by Aug. 2.

“The federal government will run short of money and be unable to pay approximately half of its non-interest bills,” says Jay Powell, a Treasury undersecretary in President George H.W. Bush’s administration. “Those who believe otherwise have been misinformed.”

Here are some of the grim realities:

Q: Would we really default on our Treasury bonds?

A: Almost definitely not. There would be plenty of money to pay interest to investors, thereby avoiding a technical default.

Q: Who wouldn’t get paid then?

A: It could be anybody, under a “prioritization” scenario that Treasury has been unwilling to discuss because officials insist it simply must be avoided.

Q: What would happen to Social Security recipients?

A: More than half of the nation’s beneficiaries are due to receive their monthly payment on Aug. 3, and three smaller payments are due later in the month. President Obama said this week that he could not promise they would get paid — though politically speaking, it’s likely that they would.

Q: Couldn’t we pay for all the essential things and just cut the waste?

A: Not unless you believe 41% of the federal budget is a waste. In August, for instance, the government will take in $172 billion but will owe $307 billion. That’s $135 billion that could not be paid. Assuming that $29 billion in interest on Treasury securities is paid, you’re left with about half the money needed.

Q: So what would be the priorities?

A: It’s anybody’s guess. If Treasury paid for Social Security, Medicare, Medicaid, unemployment insurance and defense contractors in August, it would be out of money. That would leave out the military and veterans’ programs, other safety-net benefits and virtually every government agency and employee.

Q: Would there be broader economic effects?

A: Almost certainly. The most likely is a rise in interest rates, prompted by a decline in the number of bidders for new Treasury bonds. That would raise the costs of home mortgages, student loans, credit cards and auto loans. It also would increase the federal deficit by raising interest rates on the debt.

Q: What about personal investments?

A: If the economy goes into a swoon, the stock market will feel the effects, and your 401(k) and other accounts could take a beating.

“It’s going to be negative,” says David Walker, former U.S. comptroller general. “The question is, we just don’t know how much.”

Q: How does our situation compare to other countries with debt problems, such as Greece?

A: It’s not nearly as bad — but the trends are headed in that direction. The U.S. public debt — what we owe to private investors, much of it held overseas — is about 70% the size of the economy. Counting state and local debt, it’s 93%. In Greece, it’s about 130%

USAT