August 8, 2011
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.”