The president and first lady also fielded questions submitted by middle and high school students to ABC News from across the country.
"If you were a superhero and you could have one superpower, what would it be?" Walters asked on behalf of one student.
"I've talked to Malia about this. We both agree that flying seems like it'd be a pretty good thing to be able to do," said President Obama. "Then, typically as an adult, I'll come up with something a little more obscure, like, I'd love to speak every foreign language there is. And she kind of looks at me and says, 'What kind of superpower is that?'"
Another student inquired whether the president believes reporters ask too many questions.
"No. I love reporters and I love all their questions," Obama said.
As for what he would do differently in a second term, Obama suggested he would try to be a more effective communicator.
"What I want to be able to do is to communicate to the American people my absolute confidence in our future," Obama said.
Walters said one child asked, "are we the number one superpower still?"
"Absolutely," Obama said. "And we will continue to be. We've had a tough couple a years, but we've had tougher times and we always come through, and we always emerge stronger, more unified, more effective than we were before."
As Americans gather to celebrate the holidays with their families and friends, the Obamas offered messages of hope and encouragement.
"I believe that the worst of this recession and crisis is behind us, I think better days are coming, but we're not there yet," Obama said. "And I just want people to have confidence in themselves and in the ability of America to remake itself."
Michelle Obama agreed, stressing the importance of rekindling family relationships at this time of year.
"I just hope that people find the time to draw each other close, to reach out to their family members, friends, and spend time," she said. "This is a rare time of year when people can create that space and to open their hearts, to find forgiveness where they need to, to know that in the end the things that are most important are ensuring the health and well being of the next generation our children. And in this time and others we'll be thinking about how everything we do affects the future."