D.C. could use a correction

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

It could be. The economy looks pretty healthy at the moment. Shares got pounded after better-than-expected numbers aroused fears of tighter monetary policy—and an economy needing to be restrained is a much better problem to have than an economy that’s threatening to tank. Asset prices looked high relative to earnings and other fundamentals; now they aren’t so high. Maybe all’s well.

Maybe. The problem is that despite a continuing, 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 from that disaster—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.

The recent tax reform is expected to add as much as $1.5 trillion to public borrowing over the next 10 years. Before that startling prospect had begun to be digested, Congress was discussing spending increases that will add significantly to borrowing this year and next.

More disturbing than the details of the short-term budget deal is what the negotiation said about the longer-term fiscal outlook. 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. In all, a more vivid display of fiscal irresponsibility would be hard to imagine.

President Donald Trump has shown, on the other hand, that he can rise to the challenge of doing the unimaginable.

There’s no avoiding market volatility. But it’s a disgrace that Washington is doing all it can to make the problem worse.