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the Dow Jones is down more than 12 percent from its July 17 high -- should cause state residents to think very hard about how their public leaders do business.

Critics have long warned that New York State's "borrow now, pay later" fiscal policies and back-loaded tax cuts would have consequences as soon as the Wall Street boom fueling much of the state's economy cooled.

The Dow's 4.2 percent dip the other day -- its biggest in nearly a year -- indicates that the day of fiscal sobriety may be at hand.

The tiny splash when Russian President Boris Yeltsin told his economic reformers to go jump in the lake sent ripples through emerging markets in Asia and Latin America. They, in turn, generated a tidal wave of doubt that finally reached U.S. shores, resulting in Thursday's 357-point Dow decline.

And as investors retrench while wondering if this will turn into a full-fledged bear market, New York State's revenue stream will contract. It's something officials at all levels of government should have expected. Not all of them did.

This year, the state balanced its books in part by shifting short-term borrowing into long-term debt. Yet it still has more bonded debt than any other state. And that's through the good times. What will happen now if the economic slowdown reduces the tax revenues Albany is hooked on?

And the slumping Dow has lessons for localities. It's a reminder that, while substituting state income-tax revenues for regressive property taxes -- as with the School Tax Relief (STAR) program -- makes sense, it is no cure-all. Localities also have to cut waste, not just rely on Albany to fund it from revenues that might fall as fast as they climbed.

But if New York and its localities now fear the overseas contagion, there's also a lesson for all Americans about the importance of foreign affairs. We in the world's biggest economy tend to exhibit a distinct lack of knowledge about -- and even less interest in -- what happens overseas.

Yet instability in Russia -- whose economy is insignificant in world terms -- now clearly is having an impact here. So are problems in Japan and Latin America. And their problems will cut U.S. exports and lower prices for foreign imports. Both phenomena will cost U.S. workers their jobs. That makes the world economy everybody's business.

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