So there is finally a “deal” to increase the public debt limit, agreed to, at least, by the president, Harry Reid, Mitch McConnell and John Boehner (Nancy Pelosi is assumed to be selling it to unhappy House Democrats behind the scenes). There is no guarantee it will be approved by the House, where both progressive Democrats and Tea Party Republicans would like to vote “no” for very different reasons. The pressure to approve it, though, was underscored by the positive response to news of a “deal” by financial markets, first overseas and then on Wall Street. Defeat of a deal now, on the eve of the supposed August 2 deadline, and at the hands of House Members with diametrically opposed reasons for killing it, would probably produce a pretty bad, interest-rate-boosting, 401(k)-melting, reaction, and leave no obvious course open (assuming the president continues to categorically reject the “14th Amendment option”).
Signatories to the deal are unsurprisingly spinning it their own way, but Ezra Klein’s assessment seems pretty sensible:

[Here is] the truth of this deal, and perhaps of Washington in this age: it’s all about lowest-common denominator lawmaking. There are no taxes. No entitlement cuts. No stimulus. No infrastructure. Less in actual, specific deficit reduction than there was in the Simpson-Bowles, Ryan, or Obama plans, and even than there was in the Biden/Cantor or Obama/Boehner talks. The two sides didn’t concede more in order to get more. They conceded almost nothing in order to get a trigger and a process, not to mention avoid a financial catastrophe.
There’s reason to be skeptical that a trigger and a process will do much to change these basic dynamics. We’ve now attempted to get a deficit-reducing grand bargain by yoking it to both a near-shutdown and a near-default, not to mention a series of negotiations, commissions, and senatorial gangs. None of it has been enough. And that’s because bipartisan commissions and terrible consequences have not been enough to convince Republicans to agree to revenues, and revenues are fundamental to large deficit-reduction compromise.

Aside from this “trigger and a process,” the deal includes pretty much the same immediate domestic discretionary spending cuts (half from domestic programs, half from “security spending”) negotiated by Biden and McConnell weeks ago, that were assumed to be baked into any agreement. The main last-minute wrinkles, which the White House is treating as significant wins, are that defense spending joins non-defense discretionary spending in the new “hostage room” of the automatic cuts that would be triggered by the failure to reach a second deficit reduction agreement by December, while Social Security, Medicaid and Medicare benefits (as opposed to provider reimbursements) would be exempted from such automatic cuts. Lingering in the background, of course, is the scheduled expiration of the Bush tax cuts at the end of 2012, which will keep revenues on the table in broader budget discussions even if they are not part of the current deal itself.
I think it’s safe to say that progressive hostility to this deal (which is pervasive, and varies mainly only in temperature) is more about the process that led up to it than the specific details worked out at the final minute. Some think the president fatally erred by even getting into a discussion of deficit reduction ( way back when he appointed the Simpson-Bowles Commission) so long as the economy was struggling. Many think he should have negotiated a debt limit increase as part of the deal at the end of last year that temporarily extended the Bush tax cuts. Still others think he should have threatened from the very beginning to use the “14th amendment option” if Republicans didn’t agree to a “balanced approach” (e.g, one including new revenues) to long-term deficit reduction. If you read what is likely to be the most influential progressive condemnation of Obama, Paul Krugman’s column today, it’s notable that virtually every false step he excoriates happened weeks or months ago, not during the end-game.
Some progressives obviously still believe, and will put votes behind the proposition in the House, that the potential consequences of a debt default are exaggerated, or in any event cannot justify the sort of damage an all-cuts, no-taxes deficit reduction agreement will inflict on the economy (via virtually certain big cuts in “investment” programs that most affect growth, and additional, perhaps massive, reductions in federal employment levels) and on diverse beneficiaries of federal programs, from K-12 school children to people who prefer to drink safe water and breathe clean air.
Any way you look at it, the aftermath of this depressing series of events will require some pretty serious rethinking of Democratic strategy, tactics and messaging for 2012. If the deal is defeated in the House, all bets are off and we’ll just have to see what happens both economically and politically. If it is approved, we’ll be looking at a Democratic Party that is not much in the mood to celebrate any theoretical improvement in the president’s approval ratings or 2012 prospects, and is forced to reconsider how it talks about its plans for a federal government that will be operating under new constraints beyond anything conservatives were proposing as recently as last year’s election campaigns.