WASHINGTON – Horror stories are flying about the damage that might be wreaked should Congress and President Obama fail to cut a deal by the Aug. 2 deadline to increase America’s borrowing limit. Nearly every American is in harm’s way, either directly or indirectly.

Absent a deal by then, the government would find itself tight on cash and unable to borrow — and have to decide which of the 80 million bills due in August it should pay.

On Aug. 3, some $23 billion in Social Security benefit payments are due. On Aug. 4, the Treasury Department must pay $87 billion to investors to redeem maturing Treasury securities. On Aug. 15, more than $30 billion in interest payments come due.

In addition to those costs, the government normally pays $5 billion to $10 billion daily to defense contractors, Medicare providers, federal employees and others.

One analysis, by the Bipartisan Policy Center, suggests that once the government runs out of cash and lacks the power to further borrow, it would need to slash spending at once by as much as a whopping 44 percent. The U.S. now borrows more than 40 cents for every dollar it spends.

So long as the Treasury has tax revenues coming in, it can still make interest payments to technically avoid default, and lessen the harm to the country’s long-term credit rating. Default would be a “major crisis” that would radiate “shock waves” through the financial system, Federal Reserve Chairman Ben Bernanke told Congress recently.

But putting a priority on paying interest on maturing debt to avoid a default would simply force spending cuts.

Parks and monuments can be temporarily shut. That’s been done before.

But is it worth taxpayers’ money to pay the costs of pursuing a second trial against former baseball star Roger Clemens? What about clinical trials on new drugs? Or completing half-finished highway construction projects?

Major rating agencies such as Moody’s have already signaled they’re poised to lower the nation’s coveted Triple-A credit ratings if no agreement is reached.

They also hinted that the ratings might be lowered even if the U.S. continues to make interest payments on its debt.

“There would be long-lasting economic damage,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy would be back in recession. Tax revenues would be falling again and the deficit increasing.”

Any unprecedented default on the U.S. debt would send the price of Treasury bonds — long viewed as the world’s safe-haven investment — tumbling and interest rates soaring. And the higher rates wouldn’t just be on Treasury bills and bonds but also on a wide variety of loans pegged to Treasury rates, from mortgages to credit cards, car loans and student debt. The value of the U.S. dollar against other major currencies could tank.

Economists can easily see a 1,000-point or larger plunge in the Dow if no deal is reached — dealing a savage blow to already fragile 401(k) plans and similar retirement investments.