Aug. 8, 2011— -- President Obama today expressed confidence in U.S. government finances, following a first-ever downgrade of the country's AAA credit rating by Standard & Poor's, and said he senses new urgency for a bipartisan debt-reduction deal later this year.
"No matter what some agency may say," Obama said, "we've always been and always will be a triple-A country."
But the president's remarks, his first since the downgrade, did little to calm volatile stock markets, which began tumbling from Monday's opening bell. As Obama spoke, the Dow Jones Industrial Average dipped below the 11,000 mark and continued to fall.
The president attributed the market upheaval to a "string of economic disruptions" around the world, and the debt ceiling debate brinksmanship that raised the specter of a U.S. default.
"All of this is a legitimate source of concern," he said. "But here's the good news: Our problems are eminently solvable, and we know what we have to do to solve them. With respect to debt, our problem is not confidence in our credit. The markets continue to reaffirm our credit as among the world's safest. Our challenge is the need to tackle our deficits over the long term."
Obama said he hoped the unprecedented downgrade of U.S. debt -- for right or for wrong -- would instill a "renewed sense of urgency" in Republican and Democratic leaders who are tasked with reaching a $1.5 trillion deficit reduction plan before the end of the year.
Meanwhile, finger-pointing over the downgrade has intensified, with Republicans and Democrats blaming each other for failing to take sufficient steps to bend the nation's long-term debt curve downward.
"The fact of the matter is that this is essentially a Tea Party downgrade," Obama adviser David Axelrod said Sunday on CBS' "Face the Nation."
"They are totally unreasonable and doctrinaire and not founded in reality," former Vermont Democratic Gov. Howard Dean, also appearing on CBS, added of House Republicans.
"I think they've been smoking some of that tea and not just drinking it," he said.
Democrats say GOP lawmakers' intransigence over increasing taxes pushed the debt-ceiling debate to the brink, and in doing so created a dim outlook for further debt reduction compromises in the future.
Republicans, however, insist Obama is to blame.
"The unprecedented downgrade is a direct result of Obama and [Treasury Secretary Timothy] Geithner's failure to cut the debt," Republican National Committee chairman Reince Priebus said. "For two and half years, Republicans warned of the dangers of Obama's reckless spending. All the while, he and Geithner proposed record deficits and absolutely no plan to cut spending."
Former Massachusetts Gov. Mitt Romney, running to unseat Obama, blasted the president for what he calls a failure of leadership.
"The president's failure to put the nation's fiscal and economic house in order has caused a massive loss of confidence that resulted in an embarrassing downgrade," Romney said. "In the Carter era, it was called 'malaise.' Under President Obama, it's called meltdown."
The partisan rhetoric from both parties after the downgrade underscores the political dynamic that Standard and Poor's cited as a major factor in its decision.
"We believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed," the company said in a statement, "and will remain a contentious and fitful process."
S&P also singled out Republican opposition to tax increases, specifically expiration of the Bush tax cuts at the end of 2012, as a contributor to its forecast. The company suggested additional tax revenue would be necessary for trimming the deficit and debt.
No Second Thoughts From S&P
"The majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the [debt-ceiling] act," S&P said.
Despite the explanation, Obama administration officials, lawmakers and financial industry leaders have hammered the company for what they say was an unnecessary move, based on a tenuous political calculus and slipshod economic analysis.
"They've handled themselves very poorly. And they've shown a stunning lack of knowledge about the basic U.S. fiscal budget math," Treasury Secretary Timothy Geithner told CNBC of the agency Sunday night. "And I think they drew exactly the wrong conclusion from this budget agreement."
Neither of the two other major U.S. credit rating agencies -- Moody's and Fitch -- has lowered its AAA rating for U.S. debt, although both have warned that future downgrades are possible.
David Beers, the head of the S&P's government debt-rating unit, told "Good Morning America" that he "absolutely" does not have second thoughts on downgrading the United States and warned that the nation's rating could get lowered below AA+ in the months ahead.