Debt deal offers only small blessings for US economy

By REUTERS
August 1, 2011 06:17

WASHINGTON - The tentative US deal to avoid a crushing debt default is at best a mild relief for the US economy that nearly stalled in the first half of the year and has yet to show signs of any realistic pickup.

The plan for $2.4 trillion in spending cuts over a decade, if backed by lawmakers, would help lift some of the uncertainty that has weighed on investors, businesses and consumers unsettled by talk about a possible new and deep US financial meltdown.

Still, it does not decisively remove the threat that the nation's AAA credit rating could be downgraded, an action that would raise borrowing costs across the board, and the prospect of further cuts ahead will cut short any celebrating.

"This will have minimal impact on the economy. The cuts are not there for the first couple of years, which really makes you wonder if they're really going to happen at all," said Peter Morici, an economics professor at the University of Maryland.


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