In 30 days, on August 2nd, the US government will officially run out of money unless the Congress raises the debt ceiling, allowing the government to borrow more money. This is pretty damned serious in that we won't have enough money to service our existing debt and we would be in default. That, of course, would be financial Armageddon.
The Republicans, driven by the Tea Party, are insisting that the #1 issue in America right now isn't the economy or unemployment, but the debt and deficit. They are positioning the raising of the debt ceiling as the worst thing we can do, conveniently ignoring that they did it ten times over the last decade when they controlled Congress. One plan is to draw a line in the sand and not raise the debt ceiling until an equal amount of spending cuts are extracted--about $2.4 trillion worth. Another is to not raise the debt ceiling and simply prioritize debt payments. This option would force Congress reduce spending by a third, immediately, and would still throw the debt markets into panic.
The Democrats are saying that the #1 issue in America is, in fact, the economy, that deficit spending is perfectly OK during an economic downturn, and the debt can best be reduced when the economy is growing. While it seems they've already conceded to some spending cuts, they've recently begun insisting on several hundred billion of tax increases, mostly targeted to the businesses and the wealthy, which, of course, is anathema to Republicans.
So now we're set for a month of political wrangling that will still fail to address the core issues of our budgetary problems: we spend too much *and* we need to take in more revenue if we really want to reduce reduce our debt. Given how poorly Britain's and Greece's economies reacted to the austerity measures they implemented last year, I'm not sure that now is exactly the time to be slashing government spending by trillions.