New Castle News
NEW CASTLE —
After the voters delivered their message last Tuesday, Wall Street provided one of its own.
In the days after the election, the Dow dropped about 400 points. It wasn’t so much a reaction to Barack Obama’s re-election (that outcome came as no great surprise). Rather, it was a response to the status quo.
By that we mean a divided government that cannot resolve its differences. Washington continues to operate at a huge deficit with no negotiated resolution in sight.
There is, however, a mechanism in place to slash spending. It’s dubbed the “fiscal cliff” that’s scheduled to kick in after the first of the year.
The cliff refers to budget cuts and tax increases that automatically will go into effect unless Congress approves other plans. This is a consequence of the deal struck earlier this year as part of a failed effort to reach a budget agreement.
That deal created the fiscal cliff as a threat to force Republicans and Democrats to set aside some of their differences and reach an accord. But it didn’t work. Now, most economists say the impact of the fiscal cliff will be so great that it will drive the nation’s economy back into recession.
And that’s the reason the Dow plummeted last week. Investors were telling Washington to get its act together or else.
Fortunately, now that the election is over, there have been some acknowledgements in Washington that leadership is needed — and this will involve a compromise between the two parties.
Neither Republicans nor Democrats can claim a mandate from last week’s vote totals. Government remains divided. That means any progress on deficit reduction requires give and take.
The two parties won’t automatically fall into line. Substantial differences exist, philosophical and political. There’s more than one way to reduce a deficit. Some are real and some are wishful thinking.
And it’s a reliance on the latter that plays a large part in America’s debt problem. Overly optimistic revenue projections and lowball cost estimates for programs are commonplace within both parties.
There’s one area citizens can watch to determine if Washington is serious about deficit reduction. We refer to meaningful spending cuts.
There’s a lot of rhetoric out there about restructuring taxes, closing loopholes and reducing budgetary waste and fraud. But spending must be reined in throughout the budget. It’s as simple as that.
We know that’s not what most politicians want to talk about, and we know it won’t be easy. Every dollar government spends has a constituent. Yet unless meaningful steps are taken to control the expansion of programs, there will be no deficit reduction.