Maybe, maybe not. It all depends on to whom you listen.
More on that later.
Another debate developing rather late in the game is whether failing to raise the debt limit by Aug. 2 would really be the catastrophe U.S. Treasury Secretary Timothy Geithner says it would be. Actually, in 1979, Congress briefly failed to raise the debt limit and the government briefly defaulted on a small portion of its bills.
Professor Peter Morici of the Robert H. Smith School of Business at the University of Maryland was on SiriusXM radio last Monday and said failing to lift the debt ceiling only would be comparable to a government shutdown.
"There is absolutely no possibility that we have to default on our debt," he insisted. "We will only default if Secretary Geithner chooses to default to give the president political advantage."
Morici said the U.S. government takes in $180 billion a month, while interest payments on the national debt are less than $30 billion a month. "The U.S. would not be insolvent but rather in a political crisis."
Besides debt interest, he did not say how the government would pay other bills, including those generated by entitlement programs.
Another hard-shell conservative, Sen. Jim DeMint, R-S.C., said earlier this month on "Fox News Sunday" Geithner was irresponsibly exaggerating.
"There certainly will be disruption, but this is not a deadline we should rush and make a bad deal," DeMint said.
In contrast, the administration points to international companies that threaten to lower the country's gold-plated triple-A bond rating if the debt limit isn't raised, or even if it isn't raised for a long period of time. Lowering the bond rating means higher interest rates for borrowing -- not just for the government but for personal credit cards and loans -- and gutting the value of the dollar, making the national debt that much harder to reduce.
One independent voice, George Pennacchi, a University of Illinois finance professor who studies financial institutions and the bond markets, says the effect of a default could be serious.
"If the [debt] ceiling is not raised by about Aug. 2, spending will have to be cut by almost 44 percent, down to the level of revenues, which are mostly tax receipts," Pennachi said in an interview with the university's New Bureau last week. "Then, the U.S. Treasury will be forced to prioritize which spending commitments get paid.
"I would speculate that the Treasury would continue to pay interest on Treasury securities to avoid defaulting on its existing debt," he said. "Also, it would have enough revenues to pay Social Security, Medicare and Medicaid, unemployment benefits, as well as active military duty pay. Those would soak up about 83 percent of revenues."
The remainder of the revenue would have to be spread very thinly, and would pay "only about 18 percent of all other federal spending, including defense contractor payments, federal employee salaries and benefits, IRS refunds, and all other veterans, education, agricultural, commerce and housing programs."
Pennacchi said the worst-case scenario "would be if the Treasury decided to stop paying interest on Treasury securities -- that is, to default on its Treasury bonds, notes and bills. Potentially, such a default could lead to a financial market panic if investors decide to withdraw their savings from financial institutions that hold Treasury securities, such as money market mutual funds."
Pennacchi said other effects could include "a chain-reaction of financial institution failures," a freeze of financial markets, a substantial decline in the U.S. dollar, an increase in private sector layoffs, a decrease in profits and damage to financial markets, depending on how long the default lasts.
Democrats and Republicans also can't agree on how high to raise the debt limit -- whether the action should just cover the next six months or whether it should extend past the 2012 election cycle.
President Obama has proposed a large debt reduction package of $3 trillion in 10 years, including spending cuts and ending tax breaks for the wealthy and oil companies, and has said he would veto any proposal that does not push the next raising of the debt limit to 2012 or 2013.
Congressional Republicans call for fewer spending cuts, no elimination of tax breaks and and only a six-month extension of the debt limit -- a time span that allows the Republican majority in the House to use debt-limit political leverage more often.
Back in 1979, The Washington Post pointed out July 10: "Congress had been playing a game of chicken with the debt limit, raising it to $830 billion -- compared with today's $14.3 trillion -- only after Treasury Secretary W. Michael Blumenthal warned that the country was hours away from the first default in its history."
The last-minute approval, a flood of investor demand for Treasury bills and technical glitches in processing a paperwork backlog caused late payments to thousands of holders of Treasury bills maturing that April and May, the Post said, adding that it was only "a minor blip."
But, the article added, a study by Terry Zivney, a finance professor at Ball State University, and his partner Dick Marcus found "that the series of defaults resulted in a permanent increase in interest rates" of more than 0.5 percent. Over time, that meant billions of dollars in increased interest payments on the nation's debt, a cost eventually paid by taxpayers.
A Congressional Budget Office report in February said raising interest rates only a third of a percentage point now would mean paying $1.1 trillion more on national debt interest in 10 years.
After that brief partial default in 1979, Rep. Richard Gephardt, D-Mo., proposed the "Gephardt rule." The rule, which is still technically in effect, raises the debt limit automatically to the level projected by budget legislation.
But House Republicans set aside the rule in 1995, without actually killing it, to force President Bill Clinton to accept spending cuts. The showdown caused two government shutdowns but Clinton refused to give way and the GOP legislators eventually had to throw in the towel.
It was Clinton who focused attention this month on the prospect of Obama raising the debt limit on his own hook, if the political knife fight pushed a deal beyond Aug. 2. Others had broached the subject in political discussions but Clinton lit a fire beneath it.
In an exclusive interview with long-time supporter Joe Conason for his daily newsletter, The National Memo, Clinton said if he were in Obama's place he would damn Congress and use the U.S. Constitution to raise the debt limit by himself "without hesitation, and force the courts to stop me."
"I think the Constitution is clear and I think this idea that the Congress gets to vote twice on whether to pay for [expenditures] it has appropriated is crazy," Clinton said.
The former president was referring to Section 4 of the 14th Amendment, which says in part: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."
Some legal scholars say that provision gives the president the power to raise the debt limit ceiling on his own if Congress refuses to do so. Other legal scholars point to Article I Section 8 of the Constitution, which lists the powers given to Congress. Among them, "To borrow money on the credit of the United States."
Earlier this month, U.S. Sen. Chuck Grassley suggested in a taped conference call with reporters the debt ceiling itself may be unconstitutional because of the 14th Amendment, the Huffington Post reported.
He personally supported a debt ceiling because it imposes discipline, Grassley said.
"I think it's a discipline that Congress uses effectively from time to time, maybe not to cut down on the amount of spending but to have a refresher course," the Iowa Republican said. "It's a good discipline, so it bothers me if the Constitution provision would trump it, but that would be up to the courts to say. But who's going to argue against the Constitution? It's the basis of our government; it's the law of our land, and everybody has to abide by it."
The U.S. Supreme Court has rarely touched on the national debt, which is a political rather than a legal matter. But in 1935, in a unanimous ruling on defunct gold-backed bonds, Chief Justice Charles Evans Hughes cited precedent: "By virtue of the power to borrow money 'on the credit of the United States,' Congress is authorized to pledge that credit as assurance of payment as stipulated -- as the highest assurance the government can give -- its plighted faith. To say that Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise, a pledge having no other sanction than the pleasure and convenience of the pledgor."
And, Hughes said, "Section 4 of the 14th Amendment, declaring that 'the validity of the public debt of the United States, authorized by law ... shall not be questioned,' is confirmatory of a fundamental principle ... and the expression 'validity of the public debt' embraces whatever concerns the integrity of the public obligations."
Some Republicans warn Obama would face impeachment if he uses the 14th Amendment to raise the debt limit on his own.
Rep. Tim Scott, R-S.C., said earlier this month it would be "an impeachable offense" for Obama use the 14th Amendment to raise the debt ceiling without congressional approval, Politico reported.
On the other hand, Rep. Steve King, R-Iowa, said Monday Obama "would be impeached" if the United States defaults on bond payments, even without a debt limit deal, to pay other government obligations, presumably Social Security and Medicare.
Impeaching the president might be easy but politically costly in the House, where Republicans hold a 257-158 majority. Impeachment, roughly equivalent to an indictment, requires only a simple majority in the House. But conviction in a trial in the Democrat-controlled Senate, 53-47, requires a two-thirds vote and would be extremely unlikely.
For his part, Obama has reacted negatively to the few public suggestions that he use the 14th Amendment and raise the debt limit on his own -- though he has appeared intrigued.
At a "town hall" in Maryland earlier this month, the president said of the theory: "I have talked to my lawyers. They are not persuaded that that is a winning argument."
Last Monday, Obama suggested to a gathering of Latino activists there have been times during the debt ceiling debate that he's thought about raising the limit by himself because Congress has made the process too difficult.
But he quickly nixed the idea, Politico reported.
"Believe me, right now, dealing with Congress -- the idea --" he said, stopping and smiling as the crowd began chanting. "Believe me, the idea of doing things on my own is very tempting. ... Not just on immigration reform. But that's not how our system works. That's not how our democracy functions."