Appearing before reporters in the White House State Dining Room, Obama said the decision by Standard & Poor’s to reduce the government’s AAA credit rating Friday reflected doubts about “our political system’s ‘ability to act’ rather than skepticism that the government could meet its obligations.
He used the occasion to repeat his call for including revenue increases, as well as spending cuts, in long-term plans to reduce U.S. debt and deficits.
“We didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction,” Obama said. “And we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least.”
Obama added: “No matter what some agency may say, we’ve always been and always will be a triple-A country.”
He said he hopes the ratings downgrade “gives us a renewed sense of urgency” to tackle deficit reduction, and he said that, in the coming weeks, he would present his own recommendations on how to proceed.
Obama also spoke about the deaths this past weekend of 30 U.S. military personnel in a helicopter crash in Afghanistan, saying that U.S. political leaders should be worthy of their sacrifice.
The stock market declines followed emergency action in the United States and Europe to help contain a debt crisis engulfing Italy and Spain, the continent’s fourth- and fifth-largest economies, and the unprecedented downgrade of the U.S. credit rating by Standard & Poor’s.
S&P acted again Monday morning, downgrading the debt of housing finance giants Fannie Mae and Freddie Mac and a host of other institutions that rely on federal guarantees.
Like the United States, these entities have lost their AAA rating and now are rated AA+. S&P is expected to announce later Monday which states and localities would also face downgrades, as well as companies that could be downgraded.
Immediately following Obama’s remarks, U.S. markets continued to lose ground. As he began speaking, the Dow Jones industrial average was down 426 points, or 3.7 percent, to 11,018, and the Standard & Poor’s 500 index had declined 58 points, or 4.8 percent, to 1,141.
At day’s end, the Dow had plunged 635 points, ending at 10,810, down about 5.6 percent. The Standard & Poor’s index tumbled 80 points to about 1120, down about 6.7 percent. The tech-heavy Nasdaq lost 175 points, ending the day at 2,358, down 6.9 percent.