If last week’s debt-ceiling/deficit reduction agreement staved off financial disaster — and the Washington politicians assured us that it would — then what are we supposed to call the economic earthquake that rocked Wall Street two days after the president signed the legislation?

Time was, a loss of 512 points in the Dow Jones Industrial Average would have been called a stock market “crash.” Nowadays, it’s just another heart-clutching moment amid the endless onslaught of bad economic news.

Coming in the wake of the landmark deficit deal struck by Congress and President Obama, Thursday’s plunge of the Dow caught even expert market-watchers off guard because everyone expected the deal to calm the markets after weeks of uncertainty.

If Washington had failed to raise the debt ceiling by Aug. 2, the experts said, investors would lose confidence in America’s financial stability, markets would panic, stock prices would plummet.

Thank goodness that didn’t happen.

Yes, the government avoided the nightmarish specter of “default” and blithely continued borrowing money to pay its bills. Unfortunately, the process for achieving that result was so horrifying that investors reacted not much differently than they would have if things had gone the other way.

There were other factors, of course. The European debt crisis. Lingering unemployment. Virtually nonexistent economic growth. But it’s difficult to avoid the conclusion that Washington’s dysfunctional performance in the days and weeks leading up to the debt-ceiling deal shattered hopes in this country and others that the U.S. government had the capacity to deal seriously with the ever-rising national debt and annual budget deficits.

It wasn’t just that the deal Obama and Congress came up with didn’t amount to much — $2 trillion worth of budget cuts against a debt that’s well on its way to $15 trillion and expected to reach the upper 20s in coming years. The real confidence breaker was the unseemly exhibition of rancor and recrimination that our politicians served up in lieu of serious governing.

Before the debt-ceiling fiasco, the economy was struggling but the stock market was humming along in good order. Although employment and growth numbers were consistently disappointing, corporate profits were encouraging and investors seemed to take the position that Washington’s reluctance to deal with deficits and debt was something they could live with.

When the politicians actually tried to address the problem, however — and proved in spectacular fashion that they were incapable of accomplishing anything — despair took hold.

Doing nothing but holding out hope that something might be done is one thing; demonstrating conclusively that nothing will or can be done is something else entirely.

The stock market stopped its free fall on Friday but did not embark on anything that might be described as a decisive comeback from Thursday’s downward surge. Adding insult to injury, bond rating agency Standard & Poor’s downgraded the United States’ credit rating – another setback that the debt-ceiling deal was supposed to avert. If investors are afraid to invest in our economy and consumers are afraid to consume, as most indicators suggest, where do we look for economic recovery? Are we doomed to stagnant economic growth, or worse, to perpetual recession?

Republican Sen. Olympia Snowe, home in Maine for the congressional recess, visited with the MaineToday Media editorial board on Friday and told us she was sorely disappointed by the recent failures of Congress and the White House but still believes the country can get back on track.

The key is restoring confidence, Snowe said, particularly on the part of business, and there are measures the government can take to erase the uncertainty that has slowed growth and led to last week’s market turmoil.

Snowe has long advocated tax reform and regulatory reform as ways to encourage business investment and says that progress on those issues could pave the way to payroll expansion and economic growth. She says a constitutional amendment to require the federal government to balance its budget would also boost economic confidence by restraining spending and minimizing the debilitating debates about budget deficits.

We remain skeptical about the balanced budget amendment — we fear it would simply give Congress an excuse to raise taxes — but we agree wholeheartedly with Snowe’s ideas on reconfiguring the tax code and easing regulations.

Lowering tax rates — especially the growth-smothering corporate tax rate — while closing loopholes that allow too much revenue to slip through the cracks would boost the economy and better position the government to address the debt problem.

And regulation reform is crucial. The maze of regulations that business must navigate strangles expansion and inhibits hiring.

Snowe has been pushing a package of reforms in the Senate. If Congress and the president truly want to take action to improve the economy, regulation reform would be a good place to start.

Sen. Snowe waxed nostalgic about earlier times in her congressional career, when members would work together to solve problems. Now, she says, the legislative process has taken a back seat to political posturing, and the country is suffering as a result.

“Unfortunately,” she said, “everything is concentrated in political messaging, and the art of governing and legislating has been virtually lost.”

Not lost forever, we hope. For if the art of governing is obsolete, so, we fear, is our system of government.