Rumors are bouncing through Washington and Wall Street that Republicans in Congress are flirting with a debt default in August as a way to get President Obama to agree to spending cuts.

This rumors got steam from a widely cited Reuters report that said “an increasing number of Republicans do not believe the Obama administration’s dire predictions of economic catastrophe if the debt limit is not increased” and that the GOP thinks “a period of technical default can be managed without plunging markets into chaos.”

The story cites Republican presidential candidate Tim Pawlenty, the former Minnesota governor; Republican Pat Toomey, the freshman U.S. senator from Pennsylvania; and GOP Rep. Paul Ryan of Wisconsin. They agree that a short-term failure to raise the debt limit would not lead to Armageddon and might even be a welcome turn of events.

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