While blaming Republicans for last week's decision by a top ratings agency to downgrade U.S. debt, President Obama on Monday said the GOP and Democrats must overcome their "lack of political will" and to push through long-term deficit solutions that will both raise taxes and change Medicare.
Mr. Obama seized on the decision by the agency as a symptom of beltway dysfunction.
"The fact is, we didn't need a ratings agency to tell us we need a balanced, long-term approach to deficit reduction," he said. "It's not a lack of plans or policies that's the problem here — it's the lack of political will in Washington. It's the insistence of drawing lines in the sand."
Stocks plunged Monday, the first day of trading since S&P's announcement late Friday that it was cutting the country's AAA rating to AA-plus. The Dow Jones Industrial Average had fallen more than 500 points, or 4.8 percent, within an hour of Mr. Obama speaking from the White House state dining room Monday afternoon.
Not surprisingly, the downgrade has also fueled considerable partisan finger-pointing. Democrats are blaming Tea Party-backed Republicans for resisting tax increases in the latest debt ceiling deal, while the GOP complains that Democrats should have agreed to cut even more federal spending.
Mr. Obama, who had initially called for the debt ceiling to be raised without any conditions, said Monday he had feared the danger of "a debate where the threat of default was used as a bargaining chip."
After months of talks, he and congressional Democrats and Republicans reached a last-second deal that reduces future spending by about $1 trillion over 10 years, in exchange for an immediate debt increase.
It also establishes a 12-member committee, evenly divided between Republicans and Democrats, to come up with another $1.5 trillion in long-term deficit reduction proposals. The committee's report is due by Thanksgiving, the full Congress would be required to act by Christmas, and the law calls for deep cuts to automatically go into effect if they fail to act.
The head of the Republican National Committee has called on the president to fire Treasury Secretary Timothy F. Geithner, who has agreed to stay on through Mr. Obama's re-election campaign. There was speculation that Mr. Geithner would step down once the debt-ceiling debate was resolved.
For his part, Mr. Obama called on Congress to extend unemployment insurance and the payroll tax cut, as well as pursue tax reform that would "ask those who can afford it to pay their fair share."
"There will always be economic factors we can't control," Mr. Obama said. "But how we respond to those tests, that's entirely up to us. Markets will rise and fall but this is the United States of America. No matter what some agency may say, we've always been and always will be a AAA country."
In the wake of its downgrade of the nation's crediting rating, S&P on Monday downgraded mortgage giants Fannie Mae and Freddie Mac, citing their reliance on the U.S. government.
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