Washington could stand a correction of its own

From Bloomberg View:

Thursday’s drop in the S&P 500 brought the fall since last month’s peak to more than 10 per cent, making this a correction. Such a reassuring term: It suggests not so much a setback as an overdue adjustment.

The problem is that despite a moderately paced, worldwide expansion, an unusual number of uncertainties cloud the picture. Some of these were unavoidable; some of them were made, and are still being made, in the U.S. capital. Monetary policy will have to contend for years with the legacy of the crash of 2008. The extraordinary measures undertaken to bring the economy back — bond-buying on an enormous scale and super-low interest rates — were vital to avoid an even worse recession, but now they must be unwound.

Added economic uncertainty arises from U.S. fiscal policy, if one can call it that, and from the country’s larger political dysfunction. The recent tax reform is expected to add as much as $1.5 trillion to public borrowing over the next 10 years.

After briefly shutting down the government, Democrats and Republicans came together to apply fiscal stimulus to an economy already at full employment. Neither party is even thinking about the alarming long-term trend of public debt. There’s no avoiding market volatility. But it’s a disgrace that Washington is doing all it can to make the problem worse.