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Dow Plunges as Obama Calls for Payroll Tax Cut, Jobless Benefits

By Newsmax Wires   |   Monday, 08 Aug 2011 02:17 PM

President Barack Obama Monday blamed a downgrade in the United States' credit rating on political gridlock in Washington and said he would offer some recommendations on how to reduce federal deficits.

Obama stopped short of sharp criticism of Standard & Poor's for its downgrade of U.S. debt to AA-plus from AAA on Friday. Senior administration officials have accused S&P of going ahead with the downgrade despite a $2 trillion mathematical error.

"Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we have always been and always will be a triple-A country," Obama said.

As Obama spoke, stock markets were registering another steep decline, dropping more than 450 points in afternoon trading.

By the closing bell, the market had topped 634.76 points and the S&P and Nasdaq were down 6.7 percent.

Obama said in a White House appearance that he hopes S&P's downgrade of U.S. debt will give U.S. lawmakers a new sense of urgency to tackle long-term deficit spending and said he did not believe the reductions could be carried out with spending cuts alone.

A joint bipartisan congressional committee, to be formed under the legislation passed last week that averted a government default, is to report its recommendations in late November on how to cut $1.5 trillion in spending over a decade.

Editor's Note: Some experts fear that 50% unemployment, a 90% stock market crash, and 100% inflation are on the horizon. Watch the Aftershock Survival Summit Now, See the Evidence.

Obama said he would offer his own recommendations for fixing the problem and cited again the need to raise taxes on wealthier Americans and make modest adjustments to popular but expensive entitlement programs.

"Making these reforms doesn't require any radical steps. What it does require is common sense and compromise," Obama said.

He said U.S. problems are "imminently solvable" but that political gridlock has made compromise extremely difficult and has contributed to a picture of economic uncertainty.

Obama called on Congress to extend a payroll tax cut and unemployment benefits, saying if this is not soon it will lead to 1 million fewer jobs and less economic growth.

Eager to calm a nervous nation, Obama said Washington can fix its ills by showing more political will.

Investors did funnel money on Monday into Treasurys, a sign of confidence in the United States as a safe long-term investment even after Standard & Poor's had dropped the U.S. credit rating down a notch. But the broader story was worrisome: stock markets kept tumbling over concerns about the weakening U.S. economy and the debt crisis in Europe.

For Obama, a president seeking a second term from voters desperate for better times, the pressure for results is intense.

He is the first president to have a credit downgrade come on his watch. And whether blaming him is fair or not — he actually pushed for the type of deal that might have prevented a downgrade — presidents are always accountable.

After saying nothing about the downgrade all weekend, Obama sought Monday to use it as leverage against a Congress whose members are on an August vacation. He said a downgrade ought to compel a smart compromise from the bipartisan committee of lawmakers that will soon be tasked with shaping up to another $1.5 trillion in difficult deficit reduction.

Obama said he would offer his own recommendations, although the White House suggested that would likely mean ideas Obama has already presented in recent weeks.

"I assure you, we will stay on it until we get the job done," the president said.  But Congress remains in divided political hands, limiting Obama's ability to keep that promise.

Heading into a campaign-style economic tour before going on his own vacation, Obama's overall rating hovers below 50 percent in most polling. He is on far more perilous ground when it comes to public views on the key issue for voters — his handling of the economy — where his approval rating is under 40 percent in most major recent surveys.

Obama's aim is to keep heat on Congress to enact concrete measures, separate from the grueling debt debate that could be seen as helping people in the short term.

He pressed lawmakers to extend a payroll tax cut and unemployment benefits in September as a way to "put money in people's pockets and more customers in stores."

On a jittery day for the financial world, it fell to Obama to deal with a downgrade that S&P had warned for weeks would come if Obama and Congress failed to agree on a major debt-reduction package. The agency was dissatisfied with the deal lawmakers reached last week to cut more than $2 trillion from the debt over 10 years.

The administration has derided the downgrade as having no economic basis. S&P, though, has little faith in Washington's ability to overcome its partisan woes on the debt.

"We didn't need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive," Obama said.

S&P has dropped the government's rating to AA+ from the top rating, AAA. The agency attached a negative outlook that means the rating could be lowered again.

Asked under what scenario the United States could regain its AAA rating, David Beers, head of sovereign ratings at S&P, told reporters on Monday, "We don't anticipate a scenario at the moment where the United States could quickly return to AAA."

S&P officials said that five countries including Canada and Australia have lost their AAA ratings from S&P and then regained them. The shortest time that it took a country to regain an AAA rating was nine years and the longest time was 18 years.

Republican candidates hoping to challenge Obama next year have placed blame for the downgrade on Obama, tying it to his larger economic agenda.

Former Massachusetts Gov. Mitt Romney, who leads the GOP field in fundraising and early polls, said the downgrade was a "deeply troubling indicator of our country's decline under President Obama." Rep. Michelle Bachmann, R-Minn., who has shown strength in the early voting state of Iowa, accused Obama of "destroying" the U.S. credit rating.

Obama calmly sought to dismiss all the talk of a dent to U.S. credit.

"Our problems are eminently solvable," he said. "We know what we have to do to solve them. 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."

Editor's Note: Some experts fear that 50% unemployment, a 90% stock market crash, and 100% inflation are on the horizon. Watch the Aftershock Survival Summit Now, See the Evidence.


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