There’s no way out of it. Spending cuts will slow down our economy. If the 3rd and 4th quarters of this year are moving at a quicker pace we may be alright. If they’re as slow as the 1st and 2nd quarters then we’re in a pickle.

It should be no shock that we’re getting a debt ceiling deal with just spending cuts, no revenue, and nothing useful to solve our real economic problems. The GOP had a problem to tackle that superseded the economic troubles in the United States. They’d been elected to cut spending by a sector of bitter, delusional and misinformed American voters and the GOP was not about to let the hacks down.

Brad DeLong sums it up this way:

It is a loss for the American people: it is not the way that they want to reduce the long-term deficit. It is certainly not a win for bipartisan compromise.

And it is not a win for the economy.

More from Brad DeLong:

A first guess: -0.4% off of fiscal 2012 real GDP growth, with an unemployment rate in November 2012 0.2% above the baseline.

A hideous waste of opportunity. There is nothing in there to boost employment and capacity utilization. Absolutely nothing.

So how bad is this deal really? Well, we don’t know yet. I’m sure we’ll see a host of scores from CBO and other agencies this week measuring the actual impact on debt and GDP. It will probably be too late if we see something bad coming from it. The GOP intentionally made this come down to the wire so that it would be law by the time anyone actually realizes how bad this could be.

The “compromise” could still fail in Congress but the chances are slim and besides that this is sadly the last and best chance we have to avoid a default. If this does fail it’s possible we could have just a clean debt ceiling increase like I’ve been wanting but I’m very doubtful such a thing will ever happen. This seems to be the deal that will pass.

Maybe someday voters will catch on that the GOP offers absolutely nothing useful in the way of sound economic or fiscal policy. Luckily our country is strong enough to survive recessions and depressions. We’re a resilient people. It just doesn’t have to be this way. We should be divorcing our abusive Republican spouses. Instead we’re just giving them another chance to get drunk and beat on us again tomorrow night.


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