Obama seeks to reassure faith in US credit

BEN FELLER

AP White House Correspondent

WASHINGTON — Eager to calm a ner­vous nation, Pres­i­dent Barack Obama on Mon­day dis­missed an unprece­dented down­grade in the nation’s credit rat­ing, insist­ing investors will stand by the United States even as stock mar­kets plunged. Obama said Wash­ing­ton can fix its ills by show­ing more polit­i­cal will.

“Mar­kets will rise and fall, but this is the United States of Amer­ica,” Obama said. “No mat­ter what some agency may say, we’ve always been and always will be a triple-A country.”

Investors did fun­nel money on Mon­day into Trea­surys, a sign of con­fi­dence in the United States as a safe long-term invest­ment even after Stan­dard & Poor’s had dropped the U.S. credit rat­ing down a notch. But the broader story was far more wor­ri­some: stock mar­kets kept tum­bling over con­cerns about the weak­en­ing U.S. econ­omy and the debt cri­sis in Europe.

The Dow Jones indus­tri­als plum­meted to its worst drop since Decem­ber 2008.

For Obama, a pres­i­dent seek­ing a sec­ond term from vot­ers des­per­ate for bet­ter times, the pres­sure for results is intense.

He is the first pres­i­dent to have a credit down­grade come on his watch. And whether blam­ing him is fair or not — he actu­ally pushed for the type of deal that might have pre­vented a down­grade — pres­i­dents are always accountable.

After say­ing noth­ing about the down­grade all week­end, Obama sought Mon­day to use it as lever­age against a Con­gress whose mem­bers are on an August vaca­tion. He said a down­grade ought to com­pel a smart com­pro­mise from the bipar­ti­san com­mit­tee of law­mak­ers that will soon be tasked with shap­ing up to another $1.5 tril­lion in dif­fi­cult deficit reduction.

Obama said he would offer his own rec­om­men­da­tions, although the White House sug­gested that would likely mean ideas Obama has already pre­sented in recent weeks. Obama on Mon­day said Con­gress should ask wealthy Amer­i­cans to pay more in taxes and should make adjust­ments in pro­grams like Medicare. Both ideas face fierce polit­i­cal opposition.

“I assure you, we will stay on it until we get the job done,” the pres­i­dent assured. But Con­gress remains in divided polit­i­cal hands, lim­it­ing Obama’s abil­ity to keep that promise.

Head­ing into a campaign-style eco­nomic tour before going on his own vaca­tion, Obama’s over­all rat­ing hov­ers below 50 per­cent in most polling. He is on far more per­ilous ground when it comes to pub­lic views on the key issue for vot­ers — his han­dling of the econ­omy — where his approval rat­ing is under 40 per­cent in most major recent surveys.

Obama’s aim is to keep heat on Con­gress to enact con­crete mea­sures, sep­a­rate from the gru­el­ing debt debate, which could help peo­ple in the short term.

He pressed law­mak­ers to extend a pay­roll tax cut and unem­ploy­ment ben­e­fits in Sep­tem­ber as a way to “put money in people’s pock­ets and more cus­tomers in stores.”

On a jit­tery day for the finan­cial world, it fell to Obama to deal with a down­grade that S&P had warned for weeks would come if Obama and Con­gress failed to agree on a major debt-reduction pack­age. The agency was dis­sat­is­fied with the deal law­mak­ers reached last week to cut more than $2 tril­lion from the debt over 10 years.

The admin­is­tra­tion has derided the down­grade as hav­ing no eco­nomic basis. S&P, though, has lit­tle faith in Washington’s abil­ity to over­come its par­ti­san woes on the debt.

“We didn’t need a rat­ing agency to tell us that the grid­lock in Wash­ing­ton over the last sev­eral months has not been con­struc­tive,” Obama said.

S&P has dropped the government’s rat­ing to AA+ from the top rat­ing, AAA. The agency attached a neg­a­tive out­look that means the rat­ing could be low­ered again.

Asked under what sce­nario the United States could regain its AAA rat­ing, David Beers, head of sov­er­eign rat­ings at S&P, told reporters on Mon­day, “We don’t antic­i­pate a sce­nario at the moment where the United States could quickly return to AAA.”

S&P offi­cials said that five coun­tries includ­ing Canada and Aus­tralia have lost their AAA rat­ings from S&P and then regained them. The short­est time that it took a coun­try to regain an AAA rat­ing was nine years and the longest time was 18 years.

Wall Street had its first chance to react to the down­grade on Mon­day. The Dow fell below 11,000 for the first time since Novem­ber. The sharp drop extended Wall Street’s almost unin­ter­rupted decline since late July, when the Dow was flirt­ing with 13,000.

Repub­li­can can­di­dates hop­ing to chal­lenge Obama next year have placed blame for the down­grade on Obama, tying it to his larger eco­nomic agenda.

For­mer Mass­a­chu­setts Gov. Mitt Rom­ney, who leads the GOP field in fundrais­ing and early polls, said the down­grade was a “deeply trou­bling indi­ca­tor of our country’s decline under Pres­i­dent Obama.” Rep. Michelle Bach­mann, R-Minn., who has shown strength in the early vot­ing state of Iowa, accused Obama of “destroy­ing” the U.S. credit rating.

Obama calmly sought to dis­miss all the talk of a dent to U.S. credit.

“Our prob­lems are emi­nently solv­able,” he said. “We know what we have to do to solve them. Our prob­lem is not con­fi­dence in our credit. The mar­kets con­tinue to reaf­firm our credit as among the world’s safest. Our chal­lenge is the need to tackle our deficits over the long term.”

Posted by AP News on Aug 8 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.