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Nation split but not alarmed as debt crisis looms

It might be time for another midnight ride by Paul Revere, this time warning "the creditors are coming."

Americans seem not to have awakened to the approaching debt crisis that could bring a new recession, imperil stock market investments and shatter faith in the world's most powerful economy. Those are among the developments expected if the U.S. defaults on debt payments for the first time.

Facing an August deadline for raising the country's borrowing limit or setting loose the consequences, politicians and economists are alarmed. The public? Apparently not so much. They're divided on whether to raise the limit, according to an Associated Press-GfK poll that found 41 percent opposed to the idea and 38 percent in favor.

People aren't exactly blase. A narrow majority in the poll expects an economic crisis to ensue if the U.S., maxed out on its borrowing capacity, starts missing interest payments to creditors. But even among that group, 37 percent say no dice to raising the limit.

In Washington, talk of a financial apocalypse is thick.

Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, warned of "credit markets in a state of panic," causing a sudden drop-off in the country's ability to borrow and pushing the government off a "credit cliff."

He was characterizing a report by the government's nonpartisan Congressional Budget Office that warns of a "sudden fiscal crisis" in which investors might abandon U.S. bonds and force the government to pay steep interest rates and impose spending cuts and tax increases far more Draconian than if default were avoided.

The dire warnings appear to be falling on unconvinced ears.

Call it doomsday fatigue.

Americans have seen Congress come to the brink time after time, only to pull something out of its hat. Recently, a partial government shutdown was averted in that manner.

To Robin Knight, 50, a teacher from Gilbert, Ariz., who's trying to stay informed on the debt crisis, Washington's tendency to cry wolf and stage histrionics on issues of the day isn't helping. "It should be very easy to understand," she said, "but I think there are so many skewed views and time given to people screaming that it can be hard to follow."

As during the lead-up to the government shutdown that didn't happen, tortured negotiations are under way.

Republican leaders are insisting on huge spending cuts as a condition for raising the debt limit. This position finds solid support from Republicans in the poll and backing from independents.

President Obama is pushing for increased tax revenue to be part of the deal. That insistence led House Republican leader Eric Cantor of Virginia to walk out of the negotiations last week and Obama to take control of the talks.

Vice President Biden, who had led the talks, said Saturday in Columbus, Ohio, that the Obama administration won't let the middle class "carry the whole burden" to break the deadlock. He said there has been great progress on a deficit-reduction agreement but added that Democrats won't agree to cuts in programs benefiting the middle class.

About half of Democrats in the poll said the debt limit should be raised regardless of whether it's paired with a deal to cut spending.

The survey found no significant differences by education, age, income, or even by party, in perceptions of whether a crisis is likely if the limit is not increased. There was widespread dissatisfaction with how Obama is dealing with the deficit -- a new high of 63 percent disapproval on that subject -- and an even harsher judgment of how both parties in Congress are doing on the issue.

A deal would permit the government to resume borrowing more than $100 billion a month to pay its bills. Paradoxically -- or "perversely," as Federal Reserve Chairman Ben Bernanke put it -- the absence of a deal would not stop the nation's debt from climbing.

Bernanke said the stain on U.S. creditworthiness would drive up deficits simply by saddling the country with higher interest rates on borrowing.

The poll points to a divide in how people see the country and their own lives. Although 80 percent ranked the economy as poor, 63 percent said the financial situation in their own household was good. Also, 70 percent predicted the economy will improve or stay the same.

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