BREAKING: Senate Passes Debt Deal, 74-26

The deed is done. The bill passed the upper chamber with ease, 74-26. Seven (mostly liberal) Democrats joined a sizable contingent of 19 conservative Republicans in opposing it. Twenty-eight Republicans joined 46 Democrats in voting "yea." President Obama will speak later this afternoon and sign the compromise legislation into law less than 12 hours before the August 3rd soft "deadline." The economy is saved! Or is it?

It’s August 2, the deadline by which the Treasury Department said the country would default without an increase in the debt ceiling. A deal to do just that passed the House last night and is expected to glide through the Senate today. Things are looking up, right? Not so fast. U.S. stock futures are down and world stocks hit a one-month low on Tuesday, according to Reuters, suggesting that the lack of a deficit-reduction deal is far from the only thing weighing on investors’ minds. Japan’s Nikkei index, Hong Kong’s Hang Seng, and Bombay’s Sensex each fell over 1 percent on Tuesday. European stocks were also down by midday.

Data released by the Commerce Department Tuesday morning showed that consumer spending in June unexpectedly fell for the first time in two years as personal income increased just 0.1 percent, suggesting that economic growth may remain sluggish in the third quarter, according to Reuters. Markets cheered briefly Monday morning on news that a deficit-reduction agreement was reached over the weekend, but fell within 30 minutes after data showed that manufacturing growth hit a two-year low in July. The Dow, S&P 500, and Nasdaq all closed down for the day.

In short, the economy is still limping along, markets are very soft, and our national credit rating fate remains murky. I'm very cautiously optimistic that this deal will do no harm economically, and will help set the trajectory for a successful political debate leading up the all-important 2012 election. It's tolerable, though profoundly imperfect -- but not disastrous. Many smart conservatives disagree with that assessment. We shall see. But remember this: We're all terrorists now.

In recent days, the debt ceiling deal — which just passed the Senate and is about to be signed by the President — has sparked a fair amount of handwringing among liberals who worry that the fight shows the left has lost the larger argument over the proper role and scope of government in our society. Jared Bernstein and Kevin Drum have both argued that until liberals can make headway in that argument, the playing field in such fights will be dramatically tilted against them. It’s hard not to agree with these folks when you look at findings like this one from the internals of the new CNN poll:

As you may know, the agreement would cut about one trillion dollars in government spending over the next ten years with provisions to make additional spending cuts in the future. Regardless of how you feel about the overall agreement, do you approve or disapprove of the cuts in government spending included in the debt ceiling agreement? Approve: 65 / Disapprove: 30

Sixty five percent approve of deal’s spending cuts. But it gets worse. Of the 30 percent who disapprove, 13 percent think the cuts haven’t gotten far enough, and only 15 percent think the cuts go too far. One sixth of Americans agree with the liberal argument about the deal.