This post has been updated.

ON SATURDAY July 30th, with a potential federal default just three days away, Mitch McConnell, the Republican leader in the Senate, went before the press to declare, “We now have a level of seriousness with the right people at the table.” Approximately a day later, Republicans struck a deal with Democrats in Congress and President Barack Obama to raise the statutory ceiling on the federal debt and avoid a default that would have sent shockwaves through the global economy.

If it really took this long for the leaders to get serious, then it's hard not to conclude that the preceding months of partisan rhetoric, competing proposals and brinkmanship were an elaborate kabuki to appease the parties' respective bases, that would then give way to sensible bargaining. Indeed, the final deal looks remarkably similar to what knowledgeable insiders had long ago predicted would emerge. There was no grand bargain combining cuts to entitlements such as Medicare and Social Security with revenue-raising tax reform as America so desperately needs (though there were also no draconian and immediate cuts to spending as many tea-party warriors wanted).

Rather, 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.

Its key provisions are $917 billion in deficit reduction over the next decade (the precise timing is unclear), drawn mostly from domestic discretionary outlays. (Discretionary items must be approved annually by Congress. Entitlements, also called mandatory spending, proceed on autopilot unless the law changes.) In return, the debt ceiling rises immediately by $400 billion, about enough borrowing room for the Treasury to fund current spending until September. Then, it would rise another $500 billion unless both the House and Senate were to vote by super-majorities against doing so, which is highly unlikely.

Then comes the tricky part. The debt ceiling will rise by another $1.2 trillion to $1.5 trillion by December 23rd, enough to tide Treasury over until after next autumn's presidential election, a priority for Mr Obama. However, that requires one of two things to happen. A committee of 12 legislators composed equally from both parties and both chambers is to agree on $1.5 trillion of deficit cuts. Congress could then accept or reject but not amend the proposals by December 23rd. Approval would result in the debt ceiling rising by $1.5 trillion. If the committee fails to come up with at least $1.2 trillion in cuts or their proposal is rejected, spending would be automatically cut by enough to bring total cuts to $1.2 trillion, coming equally from defence and domestic outlays. The triggers would take effect in 2013, and result in a debt ceiling increase of $1.2 trillion. Payments to Medicare providers could be trimmed but Medicare, Social Security and Medicaid benefits would all be shielded. The thinking is that these cuts would inflict such pain on both Republican and Democratic pet priorities that they will labour mightily to come up with an alternative.

It is not a done deal. Passage in the Senate seems likely if only because its main elements were hammered out between Mr McConnell and Harry Reid, the Democratic majority leader. The House is trickier: conservative Republicans have defied their own leadership in the past on budget deals that did not meet their extreme demands, one of which has been a balanced budget amendment to the constitution. The deal, which could still change, does promise a vote in both chambers on such an amendment. However, the deal will not be nullified if the amendment is defeated as it almost certainly will be. (Amending the constitution is hard, requiring agreement by super majorities of both chambers and three-quarters of the states, an almost impossible hurdle for such a controversial idea.) Thus, John Boehner, the Republican speaker of the House, will almost certainly need a contingent of Democrats to get the deal approved, and many of those Democrats are angry that the deal does not raise taxes. Update: The deal has been approved by the House and Senate and signed by the president.



In fact, the absence of any tax increases makes it clear that this deal, whatever the misgivings of some in the tea party, is a Republican victory. This is the third time since last autumn's midterm elections that Republicans have succeeded in pushing Mr Obama to the brink and extracting a deal more favourable to them than to him: first, the two-year extension of all the Bush tax cuts last December weeks before they were due to expire; then steep cuts to this year's budget just as the government was on the verge of shutting down in April; now this deal. It is true that the congressional committee could propose both spending cuts and tax increases. That is clearly the hope of Mr Obama who said, in endorsing it on July 31st, “I'll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job.”

But if the committee deadlocks or their proposal is defeated, the default option of sweeping spending cuts is more painful to Democrats than to Republicans, who generally consider defence cuts a lesser evil than higher taxes. Mr Obama has one card left up his sleeve: he plans to campaign for re-election on a commitment to ensuring the rich pay more taxes when Mr Bush's tax cuts expire at the end of 2012. Such a move would raises taxes not just on the rich, the constituency Mr Obama wants to bear most of the burden, but also the middle class whom he has promised to protect.

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, it does not add significant new fiscal tightening: total discretionary spending would be a mere $7 billion lower in fiscal 2012 and $3 billion in fiscal 2013 than current levels, according to a Democratic Senate fact sheet. On the other hand fiscal policy is already set to tighten automatically. Mr Obama had hoped to extend the payroll tax cut as part of the deal. He may yet do so during the Congressional negotiations, but that seems a fading prospect. It is striking that last Friday's appallingly weak GDP data did nothing to shape the deal any further in the direction of near-term stimulus.

As for long-term fiscal consolidation, the deal also falls short. Total deficit reduction of $2.4 trillion is less than the $4 trillion that bipartisan groups and political leaders had more or less agreed was necessary to put the debt on a meaningful downward path relative to GDP. It's also the number Standard & Poor's, a credit rating agency, had suggested was necessary for America to avoid a downgrade to its AAA credit rating. And it's worth noting that now that GDP has been revised to be smaller than we'd realised, debt is larger as a share of GDP.

In the end, hopes for a grand bargain that addressed entitlements, taxes and near-term economic support ran aground on the harsh reality that all these things would require bridging profound philosophical differences that have developed over decades. The odds that the next few months will yield a different outcome seem low: further brinkmanship (albeit of a less terrifying sort than seen in the past weeks) is more likely. That has become the routine way that fiscal policy gets made in America. 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.