Sliding markets deaf to Obama credit defense

President Barack Obama has insisted that the United States would always be a "triple-A country," but his bid to soothe investors failed to stop a Wall Street panic over the US debt downgrade going global. Obama said US economic woes were "eminently solvable" if politicians stopped squabbling, but Republicans immediately rejected his renewed call for higher taxes on the wealthy, stirring fears of another damaging spending showdown. The president made his first public comments on the first-ever decision by ratings agency Standard & Poor's on Friday to downgrade the AAA credit rating on US sovereign debt to AA+ with a negative outlook. The gency argued that political brawling in Washington between Obama and Republicans, including the ultra-conservative Tea Party faction, could leave the United States unable to solve its fiscal crisis. But Obama, who has seen his 2012 reelection bid seriously complicated by the latest economic panic, countered that investors still saw the US economy as one of the safest investments in the world. "No matter what some agency may say, we have always been and always will be a triple-A country," Obama said. But he conceded that partisan feuding in Washington was hampering efforts to fix the economy, and called on all sides to unite on a "balanced" approach to ease the deficit, forecast to hit $1.6 trillion this year. "Here's the good news. Our problems are eminently solvable. And we know what we have to do to solve them," Obama said at the White House. But the downgrade, along with wider fears about the European debt situation and global economic prospects, triggered a huge sell-off on Wall Street. The Dow Jones Industrial Average tumbled 5.6 percent to finish at 10,809.85 in the steepest one-day drop since the financial crisis of 2008. The broader S&P 500 fell 6.7 percent to 1,119.46, while the tech-heavy Nasdaq dropped 6.9 percent to 2,357.69. The market turmoil sparked by the US debt downgrade and the European debt crisis then ripped again through Asia, with Tokyo, Sydney, Seoul and Hong Kong all suffering heavy losses. Standard & Poor's justified its downgrade from AAA to AA+ on US debt by saying that "brinksmanship" in Washington was preventing the United States from taking the serious steps needed to solve its debt woes. Obama said in a speech at the White House the debt solution lay in a mixture of tax rises on the most affluent Americans and modest cuts to state-run health programs plagued by rising costs, like Medicare for the elderly. He called for an extension of support for the unemployed and of a payroll tax cut, and said Washington should put people to work on repairing crumbling transport infrastructure. He took a similar approach when striving for a "grand bargain" during a debate over raising the US government's borrowing authority which nearly triggered a debt default last week. Republicans however refuse to countenance tax rises and Obama's Democratic allies balk at any cuts to Medicare. "Making these reforms doesn't require any radical steps. What it does require is common sense and compromise," Obama said, warning political players not to draw lines in the sand or prioritize self interest or ideology. But within minutes of Obama's speech, covered by television news networks alongside a split screen showing stock indices sliding, Republicans reaffirmed their positions. Mitch McConnell, the top Republican in the Senate, said he disagreed with Obama's call for "tax hikes on American families and job creators." But McConnell said he did believe the congressional committee "can and should" focus on reforming social programs. Eric Cantor, leader of the Republican majority in the House of Representatives, also ruled out tax rises in a memo to his membership. "There will be pressure to compromise on tax increases. We will be told that there is no other way forward. I respectfully disagree," Cantor said. Later, at a Democratic fundraising event, Obama argued that he had inherited deep problems in the US economy when he took office in 2009, and said that turbulence elsewhere was adversely affecting the US recovery. "The truth of the matter is, is that we now live in a global economy where everything is interconnected, and that means that when you have problems in Europe and in Spain and in Italy and in Greece, those problems wash over into our shores," he said.