And I don't mean that in a favorable way.
Although I'll wait until we see the details, all the early reports indicate that what we have is an agreement that does three, maybe four, things:
1. Raises the debt ceiling (although I've seen nothing that says by how much.
2. Makes an average of about $200 million per year in federal government spending cuts over the next decade.
3. Adds no additional revenue.
4. Makes it likely that we will have to revisit this entire issue in the relatively near future.
Or make that five things: Blackmail has, in fact, paid off.
It's the spending cuts that probably hurt the most. The Bureau of Economic Analysis (Department of Commerce) just released preliminary second quarter GDP data. They show GDP growth in the second quarter at an annualized 1.3% per year, which is not enough even to maintain the current unemployment level, let alone lead to a decline in unemployment. And, the revisions to the GDP estimates for the past couple of years were all downward--meaning that even the tepid recovery we though we were having was even worse than we thought.
And now we're going to cut federal government spending by $200 billion a year. In an economy in which nominal GDP seems to be right around $15,000 billion on an annual basis right now, that's not a lot, only 1.3%...but that's enough that it would more than wipe out the growth in GDP during the second quarter (growth in nominal GDP from the first quarter to the second quarter, annualized, was about $132 billion). Macroeconomic Advisers has apparently forecast a 3.1% increase in real GDP for the next four quarters; this spending reduction would cut that in half. That'll be helpful.
There were alternatives. Any number of people suggested ways to avoid this capitulation, from invoking an admittedly controversial interpretation of the 14th Amendment to the Constitution, to arguing that by passing a set of spending acts that required a budget deficit tacitly authorized additional borrowing, to overdrafts at the Fed to the "platinum coin" ploy. But the administration ruled out everything except a budget deal.
And so it goes. Another compromise that looks more, at this point, like a surrender.
UPDATE: It's even worse than I thought. The Huffington Post reports that the debt ceiling will increase by $900 billion. Since the budget deficit is currently running something more than $1,000 billion a year, we appear to have a ten-month window before we're back in the room, negotiating with blackmailers.