In fact, as the Center on Budget and Policy Priorities Pau Van de Water blogs, a new analysis from economists at Goldman Sachs Research says that a debt downgrade "seems unlikely," and that medium-term deficit out look would change "only modestly, if at all."
In the final analysis, Goldman says, "the super committee process is important to market participants because it provides a signal as to how successful future fiscal consolidation efforts might be." But a badbudget deal could augur worse for the future than no deal at all.
For example, as Bob Greenstein and Jim Horney have explained, the most recent Republican offer would make further fiscal consolidation more difficult to achieve by essentially taking revenues off the table for future rounds of deficit reduction. Adopting the new Republican proposal—or any other proposal that is unbalanced or makes it more difficult to raise additional revenues in the future—would be worse than no agreement at all.
That was written before the latest brilliant plan to punt on the revenue side of this until next year was floated. That was about the Republican plan to "raise revenue" by dramatically increasing the burden on low and middle income taxpayers in order to make the Bush tax cuts permanent.
Any thought that Republicans are going to offer up something better than that next year, if this cockamamie put-taxes-off-until-later idea flies, is delusional at best. They will never give up on making the Bush tax cuts permanent and they will never agree to revenue increases that would actually make a trade for the Social Security, Medicare and Medicaid cuts they demand worth it, in terms of politics or policy.
A Catfood Commission II failure would create far less damage for the nation than the kinds of bad deals we've seen offered by so far—by Republicans and Democrats. With what they've produced so far, failure is the best option.