Markets Drop After Debt Ceiling Agreement
NEW YORK (CBSNewYork) -- When President Barack Obama signed the debt deal on Tuesday, it was supposed to signal to the world that America's finances were on the right track.
But Wall Street didn't buy it. The Dow had its worst day in two months on Tuesday, dropping more than 200 points and below the 12,000 mark.
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The deal approved by lawmakers increases America's debt ceiling by $2.4 trillion. It includes a trillion dollars in immediate spending cuts.
There was this notion that the debt deal in Washington would calm fears about the US economy. Instead, it seems to have exacerbated them.
"I think people were ignoring what was perhaps happening with the economy and this has really highlighted," said Steve Cosham, who teaches graduate-level finance. "I think the whole issue in washington was just masking the problem."
The problem is the negative jobs report on top of falling consumer confidence and slowing growth. All of these things contributed to the eight-day Dow slide.
"I look at this in a way in which I'm concerned that the way that this is structured, that the short-term cuts, as many economists have said, could very well create us the tip-back into a recession instead of creating the jobs we want to see," Sen. Robert Menendez (D) of New Jersey told CNN.
Another one and a half trillion dollars in cuts will take place over the next decade. Those will be decided on by a congressional committee this fall.
"Since you can't close the deficit with just spending cuts, we'll need a balanced approach where everything is on the table," said President Obama.
Both the House and the Senate are now on recess until next month.
The nation's credit rating may be downgraded due to debt. Do you prefer tax hikes or spending cuts to reduce the debt? Sound off in our comments section below…
