First, the Asian markets tanked. Then Europe. Then the Dow, S&P, Nasdaq and all the other indexes, as the financial situation across the world grew increasingly dire.
The nation’s political leaders — the ones whose intransigence was blamed for the credit downgrade that led to the global sell-off — responded by doing exactly what they’ve been doing, only more so.
As the markets headed lower in the morning, President Obama announced he would make a statement at the White House at midday to address the situation. Speaking to reporters in the state dining room, Obama reiterated his call to reduce the country’s deficit through a “common sense” compromise on tax reform.
“It’s not a lack of plans or policies that’s the problem here. It’s a lack of political will in Washington,” the president 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. And that’s what we need to change.”
A short while later, House Majority Leader Eric Cantor (R-Va.) made it clear that Republicans were not about to compromise, sending a memo to his caucus urging that they not give in to pressure to do so.
Cantor took direct aim at the president, saying the Obama administration’s “anti-business, hyper-regulatory, pro-tax increase agenda . . . has led to dangerous uncertainty in our economy.”
Turning to Obama’s call for tax reform, Cantor wrote: “Over the next several months, there will be tremendous pressure on Congress to prove that S&P’s analysis of the inability of the political parties to bridge our differences is wrong. In short, there will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree. As we have said from the beginning of the year, the new Republican Majority was elected to change the way Washington does business. We were not elected to raise taxes.”
On the presidential campaign trail, Republican leaders quickly denounced Obama, accusing him of failing to take responsibility for Friday’s decision by the Wall Street rating agency Standard & Poor’s to downgrade the country’s credit rating to AA+ for the first time in history
“It’s just blame, blame, blame. It’s a blame presidency,” Republican presidential front-runner Mitt Romney said during a campaign event in Concord, N.H. “Stop attacking and lead. . . . I don’t think I’ve seen a more partisan, blame-oriented presidency during my lifetime.”
Rep. Michele Bachmann (R-Minn.) accused Obama of being out of touch and misguided.
“After a weekend of hiding out at Camp David, pretending that the Standard and Poor’s ratings do not matter and hoping the markets wouldn’t notice, the president discovered he was wrong on both counts,” she said. “He came out just long enough today to again declare that raising taxes and cutting Medicare are his only solutions to our nation’s economic crisis.”
The hardening rhetoric raised fresh doubts about Washington’s ability to solve the country’s long-term deficit problem, even before Congress names a 12-member bipartisan “super committee” charged with developing a plan to reduce the deficit by at least $1.2 trillion over the next 10 years.
Though Obama pledged to “present my own recommendations over the coming weeks on how we should proceed,” his spokesman declined to specify what proposals the president would offer or when he would offer them.
During his remarks, Obama called on Congress to extend a payroll tax cut and unemployment insurance provisions enacted in January. Failure to do so, he said, “could mean 1 million fewer jobs and half a percent less growth.”
Obama’s attempt to reassure the public that the United States “always will be a triple-A country” fell flat, at least with the markets. When Obama started speaking, the Dow Jones Industrial Average was down about 410 points. By the time he finished it had dropped further, and it ended the day down 635 points, the largest single-day drop since 2008.
Sen. John Cornyn (R-Texas), a member of the Senate budget and finance committees, said in a statement that the Obama administration “continues to play the blame game, and now offers only the promise of a plan. Rather than condemning S&P officials or demagoguing House Republicans, the American people want to see this Administration, for the first time, pull its collective head out of the sand and take this crisis seriously.”
Obama’s Democratic allies fought back by blasting the tea party movement for infusing the GOP with a new spirit that would not allow compromise on tax increases. During a weekend appearance on NBC’s Meet the Press, Sen. John F. Kerry (D-Mass.) referred to the nation’s bond rating downgrade as the “tea party downgrade.”
Kerry’s critique drew immediate ire from tea party advocates.
“Blaming the tea party for America’s debt crisis and downgrade is like blaming the fireman for fires,” Sen. Rand Paul (R-Ky.) said. “While Democrats would like to lay blame on the tea party for the current economic failure, it is their president who has failed in leadership.”
Staff writer Philip Rucker contributed to this report.