The Economy: On a day when the Dow 30 takes out a record high, the latest IBD/TIPP Poll shows the public turning gloomy. Wall Street obviously sees some reason to cheer, but what is it?

There are many possible answers to the question of why the stock market goes up or down on any day. None are certain, and the real reason may be something no one has thought of.

So with due caution, we suggest one possible cause for the recent run of the Dow 30 industrial average, which reached a new all-time high on Tuesday: the sequester.

More precisely, it's the fact that these automatic federal spending cuts not only failed to bring the nation to its knees, but also that they seem to be sticking.

Since the spending reductions went into effect starting March 1, the debate in Washington has shifted. Before, the question was how to prevent them.

Now, the arguments are more over how to make them work — adjusting them for the longer run so that they fit actual national priorities.

A hard-fought battle may be ahead, and Democrats will surely keep pushing for a new tax increase in exchange for any of the spending changes the Republicans want. But a sort of psychological barrier has been crossed. Washington has actually cut federal spending.

Not by much — just over 2% — but any cut is a departure from past behavior. It also bodes well that spending was cut without a tax hike as part of the package.

We can list other good reasons why the market would be up, including ample corporate profits and a Federal Reserve that encourages stock investing by squelching returns on cash and government bonds.

So why is Main Street in such a funk?

The new IBD/TIPP Economic Optimism Index for March, released Tuesday, showed a 5.1-point decline, to 42.2 from February's 47.3. This is a deeply gloomy outlook, 5.5 points below the 12-month average of 47.7 and below the 44.4 recorded when the economy fell into recession in December 2007 (readings below 50 indicate pessimism). In fact, 59% of the poll respondents believe the economy is in recession now.

We wouldn't call this irrational — not with unemployment still close to 8% and economic growth far below a normal recovery.

So Wall Street and Main Street could both be right, given what they see. The stock market could be looking ahead with the hope that fiscal discipline may be returning to Washington. The public may be noticing how Obama-era laws and regulation, like the new health-coverage rules, make companies risk-averse about expanding operations and payrolls.

If so, we hope Wall Street is right about the future, and that Main Street will soon see changes in politics and policy that lift its gloom.

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