A top US official said the Dow Jones Industrial Average's 600 points plunge on Monday was not due to the downgrade of America's credit rating, but reflects the deep unease in the market about conditions in other parts of the world and the strength of the economic recovery.
"Today was an obviously very rough day in the markets. I think it reflects a deep unease about conditions not in the United States in particular, but in other parts of the world and questions about the strength of economic recovery more generally," Jack Lew, the Director of the Office of Management of Budget, White House, told the 'Charlie Rose Show' on TV channel PBS.
"It is quite striking that on a day when the market obviously took a real hit, when there was a flight to safety, money went into US Treasury bonds," he said adding that it is a mark of the enduring belief in the markets that the United States is a safe haven.
Lew alleged that Standard & Poor's, which downgraded the USA's credit rating from AAA to AA+, was analytically quite flawed.
"Actually it didn't even do the math right. It made a $ 2 trillion error. And when you correct their math, it actually puts the United States into the category of countries that they rate as AAA," he said.
The top White House official said that he does not believe the market is reacting to the announcement made by S&P last week.
"I think were that the case, you wouldn't have seen a flight to treasuries today," he said in response to a question.
"I think that there are a lot of things happening. There were developments in Europe over the weekend. Europe is trying to take actions to gets its fiscal house in order. I think that the irony of today is that notwithstanding Standard & Poor's decision on Friday, the safest place in the world to put your money was US Treasury bonds," he said.
Lew said the US needs to strike a delicate balance.
"We need to be on a medium and long-term path toward bringing our spending under control, but we still have a very delicate economic situation where were we to throw the brakes on right now, it would hurt.
"None of the cuts that are going to take place this year or next year are of a level that are macro-economically significant," he said.
"It is important that we also take some actions to continue to promote economic growth. You know, for example, we have a payroll tax holiday that expires at the end of the year; we need to extend that for another year.
"Clearly the economy needs that. We have long-term unemployment benefits that expire at the end of the year; we need to extend that again as well," he said.
"I think it's going to be a challenging environment in Congress, but I think that it will happen, yes. I think the need for it is clear. I think that the choice between an economic policy that will reduce growth or increase growth right now, we really need to make the decision to increase growth," he said.