Bernanke warns of a "huge financial calamity"

WASHINGTON - This country still hasn't fully recovered from the financial meltdown. So the last thing we want to hear is a prediction of a "financial calamity." But as CBS News correspondent Nancy Cordes reports - that's what we heard today from the chairman of the Federal Reserve.

But despite warning after warning, Democrats and Republicans still can't reach an agreement to raise the government's borrowing limit. Congressional leaders met again with President Obama today.

Ben Bernanke told Congress a calamity could happen if the government defaults on its debts. He said that if the debt limit isn't raised by August 2nd, the federal government's balance sheet would plummet by 40 percent.

"So this is a matter of arithmetic," Bernanke said. "Fairly soon after that date, there would have to be significant cuts in Social Security, Medicare, military pay or some combination of those in order to avoid borrowing more money."

Here's why: without the ability to borrow, the federal government will take in roughly $172 billion in August.

But its bills will total roughly $306 billion - creating a shortfall of more than $130 billion that Congressional leaders like Nancy Pelosi, D-Calif, will have to contend with immediately.

"Have there been any discussions of which bills shouldn't get paid," Cordes asked.

"I have a little more optimistic view - I believe that the United States will pay its bills and that we will honor the full faith and credit of our country," Pelosi said.

McConnell: Not a single Republican will vote to raise debt limit

But that was before Republican leader Mitch McConnell, deep in talks with the White House, make this prediction on a radio show: "I bet there won't be a single Republican vote to raise the debt ceiling at the end of the day."

Michele Bachmann calls on President Obama to "tell the truth"

"I'm 'no' on raising the debt ceiling right now," Rep. Michele Bachmann, R-Minn., said. The Republican presidential candidate and two other GOP representatives insisted today that President Obama and the Federal Reserve Chairman are overstating the risks of default.

"I would encourage our Speaker, quit believing the president when he uses these scare tactics," Rep. Louie Gohmert, R-TX, said. "There's money there regardless of what we do."

Those three introduced a bill today that would pay troops first if there's a shortfall. But when we asked who should not get paid? They didn't have an answer.

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    Nancy Cordes is CBS News' congressional correspondent.

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