The decision by Standard & Poor's to downgrade U.S. debt underscores the need for a major agreement on deficit reduction, President Obama said Monday.
The president said U.S. debt remains world-class in the eyes of the markets despite S&P's downward revision of U.S. debt to an AA+ rating.
But despite his apparent swipe at S&P’s decision, the president said it’s up to the so-called "supercommittee" established by the debt-ceiling law to produce a deficit-reduction plan that can forestall a future slide in U.S. creditworthiness.
"I realize that after what we just went through, there's some skepticism that Republicans and Democrats on the so-called 'supercommittee,' this joint committee that's been set up, will be able to reach a compromise," Obama said. "But my hope is that Friday's news will give us a renewed sense of urgency."
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The president's comments came against the backdrop of steep losses on Wall Street, which reopened trading Monday morning for the first time since the credit downgrade was announced.
The Dow Jones Industrial Average tumbled 200 points out the gate and continued to slide from there. The blue-chip stock index had fallen by more than 500 points by early afternoon, following triple-digit losses last week.
The S&P 500 and NASDAQ stock indexes were both down by more than 5 percent by mid-afternoon.
In an ironic twist, investors rushed into the Treasury bonds that were just downgraded Monday, driving down the yield on 10-year bonds as they sought a safe haven from the stock-market slide. In the continued search for safety, gold climbed to yet another new high, reaching more than $1,700 an ounce.
Investor concern was exacerbated by Europe’s debt crisis, which has now spread to Italy, and the S&P’s decision Monday to downgrade the credit rating of the mortgage giants Fannie Mae and Freddie Mac.
Obama said the new deficit supercommittee needs to produce a serious agreement to reduce the deficit in order to calm the markets and prevent further downgrades to U.S. credit.
To that end, the president said his administration would take an active role in the new round of debt talks, including by offering its own recommendations, which Obama said would include "tax reform that will ask those who can afford to pay their fair share" and "modest adjustments" to Medicare and other entitlements.
The members of the supercommittee must be named by Aug. 16. Once the panel is formed, lawmakers will begin talks aimed at producing a deficit-reduction agreement tied to a second hike in the debt ceiling.
The committee, which must complete its work by late November, will consist of 12 total members — three House members and three senators appointed by Republicans, and three House members and three senators appointed by Democrats.
The president avoided assigning blame for the downgrade with the new crop of conservative members of the House, as his advisers had done over the weekend.
But Obama took a thinly-veiled swipe at those lawmakers nonetheless, saying the S&P downgrade was due to a congressional debate in which "the threat of default was used as a bargaining chip" and due to an "insistence on drawing lines in the sand."
—Last updated at 2:57 p.m.