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RE: That’s wrong. If we default on our loans, it’ll cost us MORE than if paid them. Just like if you don’t pay your credit cards...that doesn’t mean you don’t still owe it, and that it won’t cost you MORE down the line.

The folks at American Thinker did some serious math on this. Here's what they think....

By the time the debt ceiling is reached, most of Fiscal Year 2011 will be behind us. FY 2012 starts October 1. So I will use FY 2012 numbers to guide this exercise.

OMB estimates FY 2012 revenues to be $2.6 trillion. So if the debt ceiling is not raised, the federal government would have to get by on that for the year. That is more than the federal government spent in any year prior to 2006.

But OMB estimates 2012 spending to be $3.7 trillion, or $1.1 trillion more than revenues then. Somehow, spending would have to be "cut" (from the expected levels) by 29.5%.

To avoid default, interest payments would have to be made. OMB expects them to be $243 billion in 2012. That would leave $2.4 trillion for everything else.

If Social Security and Medicare are also untouched, that would leave $1.1 trillion for everything else. That is, we could avoid default and pay seniors every cent they expect from Social Security and Medicare, and still have well over one trillion dollars left for everything else.

The trouble is OMB estimates everything else to cost $2.2 trillion. So to leave SS and Medicare untouched, and also not default, the rest of the 2012 budget would have to be cut by $1.1 trillion, or about 50%.

The elephant in the room is defense spending. We certainly don't want to stop paying our military men and women who are fighting wars. OMB estimates all spending on national defense to be $738 B in 2012. But less than $160 B of that is military pay. Let's say we leave military pay untouched, but cut overall defense spending to 2005 levels. That is a 33% cut. Maybe we could find savings by removing bases and troops from Japan, Korea, Germany and elsewhere around the world, especially since ground wars in Asia, Africa and the Middle East have been ruled out.

Here is a shot at an overall spending budget, using OMB's categories, that meets the $2.6 trillion target to match revenues. (Most spending amounts in the right-hand column fall into one of three categories: untouched from OMB's 2012 estimate, zeroed out, or matching the minimum year's spending since 2005.

Spending category	FY 2005 Actual	OMB's 2012 estimate	A balanced 2012 budget
National Defense	495,308	737,537	495,308
International Affairs	34,565	63,001	8,974*
General Science, Space and Technology	23,597	32,284	23,584
Energy	429	23,411	0
Natural Resources and Environment	27,980	42,703	27,980
Agriculture	26,565	18,929	17,662
Commerce and Housing Credit	7,566	23,620	0
Transportation	67,894	104,854	67,894
Community and Regional Development	26,262	25,701	8,545**
Education, Training, Employment, and Social Services	97,555	106,172	0
Health (excluding Medicare)	250,548	373,774	250,548
Medicare	298,638	492,316	492,316
Income Security	345,847	554,332	226,554***
Social Security	523,305	767,019	767,019
Veterans Benefits and Services	70,120	124,659	69,811
Admin. of Justice	40,019	58,696	23,770****
General Government	16,997	31,149	16,997
Net Interest	183,986	241,598	241,598
Allowances	0	6,566	0
Undistributed Offsetting Receipts	-65,224	-99,635	-99,635
Total Outlays	2,471,957	3,728,686	2,638,925

*2005 level, but without foreign aid

**Disaster relief only

***Retirement, disability and unemployment only

****Retains prison spending, cuts other justice funding in half

The above budget is in rough balance. It would not increase debt, so the debt ceiling would not have to be raised or violated. It would also preserve the core functions of the federal government, and then some. Note some key features:

•Net interest is paid in full. No default.
•Social Security and Medicare are completely covered.
•Federal retirement and disability programs would also be fully funded.
•The men and women of the military would continue getting paid in full.
•Federal prisons and correctional facilities would continue to operate.
•Funds for disaster relief are preserved.
•General government would be funded enough to keep operating. That includes the courts, legislative functions, the executive branch, and foreign affairs.
•There is still funding for infrastructure, science, agriculture, etc.

Of course, deep and painful cuts would have to come from somewhere.

Education spending is eliminated in the above budget. But note that the federal government accounts for less than 10% of total public education spending. Public schools would have to survive on the 90% of planned budgets that come from state and local governments. But they also would be relieved of federal mandates and rules. Would that be so bad? The Dept. of Education did not even exist prior to 1980; it was given to us by President Jimmy Carter. We lived without it before; we can live without it now.