9 Aug 2011

US deficit needs to be tackled - Obama

3:39 pm on 9 August 2011

US President Barack Obama has sought to reassure world financial markets by saying he knows America's budget deficit needs to be tackled.

Mr Obama on Monday blamed a downgrade in America's credit rating from AAA to AA+ by Standard Poor's on Friday on political gridlock in Washington.

He said he hoped the downgrade will give lawmakers a new sense of urgency in tackling the US deficit of $US1.5 trillion over the next decade.

The president described America's problems as eminently solvable and said he would propose tax reforms to get people who can afford to, to pay their share.

Mr Obama said America would survive. ''Markets will rise and fall. But this is the United States of America. No matter what some agency may say, we've always been and always will be a triple-A country.

He said he hoped the credit downgrade would give American politicians ''a renewed sense of urgency'' in the need to tackle the deficit and debt.

The president called on Republicans and Democrats on Capital Hill to avoid party-political positioning over the issue.

''It is not a lack of plans or policies that is the problem. It is a lack of political will in Washington, an insistence on drawing lines in the sand. That is what we need to change.''

Mr Obama said he would put forward a new plan, including higher taxes for the biggest earners and reduced spending on Medicare.