(Chip Somodevilla, Getty…)
With markets rattled by the downgrade in the U.S. credit rating, President Obama sought to reassure the public that America remains a "Triple A country" and voiced hope that the news will prod the two parties to reach agreement on a long-term plan to cut the nation's deficit.
Obama, in an afternoon speech that was part pep talk, said the country is still a safe bet for investors.
"That doesn't mean we don't have a problem," the president said, speaking from the State Dining Room.
He said that rising deficits can't be ignored. In the second round of deficit reduction talks that will play out this fall, he recommended an approach that would combine spending cuts with tax revenue increases along with what he called "modest adjustments" to popular entitlement programs like Medicare. Obama could not persuade Congress to adopt that formula in the debt negotiations that were concluded last week.
"I realize that after what we just went through, there's some skepticism that Republicans and Democrats … will be able to reach a compromise," he said. "My hope is that Friday's news [from Standard & Poor's] will give us a renewed sense of urgency."
He mentioned that various commissions and congressional leaders have put out plans that mirror his own.
"So it's not a lack of plans or policies that are the problem here," he said. "It's a lack of political will in Washington. 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."
Obama's remarks on the downgrade were the first he has delivered since S&P's surprise announcement Friday that it was bumping the U.S. credit rating to AA+. U.S. stocks swooned in the wake of the downgrade; as Obama spoke, the Dow was down more than 400 points.
In a blog post earlier in the day, Vice President Joe Biden's former economic adviser, Jared Bernstein, wrote that the Dow "is bouncing around like a manic depressive on a bad acid trip."
With the economic recovery stalled, Obama also reiterated his plan for jump-starting job growth and kindling consumer spending. He called for a renewal of a payroll tax cut that expires at the end of the year. And he also said he wants to extend unemployment benefits.
If Congress fails to take these steps, he said, the consequences would be stark: 1 million fewer jobs and half a percentage point less growth.
He also recited a familiar litany of economic proposals, including repair of roads, bridges and ports.
"I know we're going through a tough time right now," he said. "We've been going through a tough time for the last two-and-a-half years. I know a lot of people are worried about the future."
A new poll shows the worries run deep.
A CNN poll released Monday shows that 60% believe the U.S. remains in a downturn with conditions continuing to worsen, compared with 36% who believed that in April. Only 24% believed things are going well in the U.S., compared with 75% who believe things are going badly, the poll showed.
In his remarks, Obama opted not to bash S&P. That represented a change in tone. Over the weekend, White House officials denounced the rating agency, accusing S&P of basing its decision on political grounds that are open to question. Yet at the same time, they also seized on a helpful thread in the S&P analysis, a suggestion that revenue increases should be part of a deficit reduction package.
Each party used the downgrade to score points against the other. David Axelrod, an Obama campaign strategist, described S&P's action as a "tea party downgrade." For his part, Republican presidential frontrunner Mitt Romney said the downgrade reflected a "failure" in Obama's leadership.
Still, the downgrade will do nothing to arrest a growing public pessimism about the state of the economy.