The July 8 deadline to raise the nation’s debt limit came and passed, and thanks to some creative accounting by Treasury Secretary Timothy Geithner, catastrophe was temporarily averted. But now, with just a few weeks to go before the August 2 deadline that Geithner set, Republican and Democratic lawmakers are seemingly farther apart than ever. President Obama has cast himself as the moderate in the debate, and is calling on both sides to make politically painful choices. He wants there to be a deal in place by July 22 and during a Monday news conference, demanded that lawmakers continue negotiating “every single day” until they get there.

What exactly are they arguing about?

Many House Republicans, who credit their new majority to a pledge to reign in government spending and not raise taxes, fear that if they vote for the revenue increases being proposed by Democrats, the Tea Party will drum them out of office faster than they helped them win last November. In addition, they are demanding trillions of dollars in budget cuts in exchange for their votes.

Democrats are almost as stubborn in their determination that any deal must include raising revenues through such means as closing tax loopholes that enable corporations and the nation’s top earners to pay less in taxes than they should. They believe it would be cruelly unfair to cut programs that help the middle class and poor people without making the wealthy feel a bit of pain, too. In addition, they’re none too pleased that Obama is now amenable to cuts in entitlement programs like Social Security, Medicare and Medicaid in an effort to compromise with Republicans.

What happens if lawmakers can’t make a deal?

Obama says it would be “irresponsible” and Geithner says the effect would be “catastrophic,” but in reality, nobody knows how bad things could get because it’s never happened before. Congressional leaders on both sides of the aisle say they do not want to default on the nation’s debt, but getting a vote through the Republican-controlled House is going to require Democratic help and it is very unclear how they’ll get there.

How will  it affect ordinary people?

The world financial markets would be thrown into turmoil and this nation’s slow economic recovery would be even slower. Interest rates on credit cards and mortgages would probably increase and unable to borrow more money, the government would have to make some difficult choices like who to pay first: China or Social Security beneficiaries and military personnel.

(Photo: Alex Wong/Landov)