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Paul Coughlin, S&P executive managing director, said he expects the Treasury to give priority to debt payments over other government obligations, but he said such a monumental juggling act could only go on for a short time before the system breaks down. He noted that the Treasury may have difficulty finding investors willing to roll over the government’s existing debt at a scheduled auction Aug. 4.

Meanwhile, the damage to the U.S. economy would be enormous as the Treasury is forced to cut or delay nearly half the government’s spending obligations, he said.

“Moving to a balanced budget overnight” next month, as some in Congress have been advocating, “would constitute a profound shock to U.S. economy,” he said. “It would be as much of a shock as Lehman Brothers’ [bankruptcy in September 2008], maybe even more. It would be pulling out an enormous amount of demand overnight.”

A prolonged debt impasse, he added, “would imply a very profound debt shock and probably another recession in the U.S.,” not unlike what the economy just weathered in 2008 and 2009.