President Obama, in his first public remarks on the unprecedented downgrade of the U.S. credit rating, sought Monday to assure shaken investors and the public that the American economy remains a good bet even as financial markets continued to tumble. “Markets will rise and fall,” he said. “But this is the United States of America. No matter what some agency may say, we’ve always been and always will be a triple-A country.”
Standard & Poor’s reduced the government’s rating from AAA to AA+ on Friday, citing the inability of the president and lawmakers to broker a long-term deficit reduction plan while raising the nation’s $14.3 trillion debt ceiling.
The financial markets apparently took little comfort in the president’s remarks, however.
Soon after Obama finished speaking from the State Dining Room of the White House, the Dow Jones industrial average plummeted 600 points. By the time trading ended a few hours later, the Dow had dropped 634 points — its steepest one-day loss since December 2008.
Obama said the first-ever downgrade created a “renewed sense of urgency” for deeper spending cuts and new tax revenue that will be explored by a yet-to-be-formed congressional committee in coming months.
The president didn’t go as far as his Democratic allies in blaming the Tea Party for the downgrade. Instead, he linked the predicament to congressional gridlock.
“It’s a lack of political will in Washington,” he said. “It’s the insistence on drawing lines in the sand — a refusal to put what’s best for the country ahead of self-interest or party or ideology. That’s what we need to change.”
Both Republican and Democratic congressional leaders will appoint six members to a super committee tasked with finding deeper spending cuts and new revenue over the next decade.
As he did during the debate over the debt ceiling, Obama called for “tax reform” and “modest adjustments to health care programs” as part of a “balanced approach” to bring down the deficit by trillions of dollars.
White House press secretary Jay Carney said Monday that Obama would release his own debt plan, rooted in the $4 trillion “grand bargain” the president negotiated with House Speaker John Boehner, R-Ohio, but declined to provide further details about the reach of the blueprint.
If the credit downgrade affects voters’ pocketbooks, it could have significant political repercussions for Obama, whose approval rating is hovering around 40 percent in most polls and who has faced widespread criticism for his handling of the economy. Since the nation’s credit rating has never been downgraded, analysts said it’s difficult to calculate the impact it will have.
Unlike S&P, Moody’s Investors Service and Fitch Ratings did not downgrade the U.S. credit rating. S&P went further Monday, extending its downgrade to mortgage titans Freddie Mac and Fannie Mae as well as other institutions heavily dependent on government debt.
Still, Obama said the downgrade issue was “eminently solvable,” calling yet again on Congress to break its standstill over ways to reduce federal spending and the budget deficit.
“Our problem is not confidence in our credit,” Obama said. “Our challenge is the need to tackle our deficits over the long term.”
