The debt ceiling deal might have saved the US from default but economists say it could destroy the US economy.
Writing in the New York Times, Paul Krugman says that slashing spending, and we're talking here about $2.4 trillion over 10 years, will depress the economy even further. "Demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker,'' Krugman says.
He takes the argument even further here where he warns that the US government is repeating the same mistakes that were made during the Great Depression.
Who is the big loser out of this? It's the US economy. As The Economist notes: "The result is a mishmash of expedient stop gaps and promises that tilts heavily to Republican priorities while guaranteeing more wrangling and uncertainty in the months ahead. It does nothing to support the near-term economic outlook, and makes less progress on long-term fiscal consolidation than hoped … If Republicans are the clear winner from this deal, the economy is the loser. An ideal deficit-reduction package would have coupled near-term stimulus with long-term consolidation that stabilised then reduced the debt as a share of GDP. This deal certainly doesn't do the first and it's unclear that it will do the second … True, stockmarkets rallied with relief that the most reckless path has been avoided. Meeting such a low standard should hardly be considered a vote of confidence in America's fundamental fiscal and political maturity."
no comment untill now