Obama has compared himself favorably to Ronald Reagan, yet this answer is the anti-Reagan answer. Ronald Reagan would have told this child that the reason he wanted to be president was because the country was such a great place and anyone could succeed, and that he wanted to help make it an even better place for future generations.
Unfortunately, as others have said already, I think Obama gave an honest answer. I think he really does think this country isn't great or as great as it once was. It's sort of a peculiar answer, coming from someone who is black, because life and opportunities have never been better in American history for those who are not white. Indeed, Barack Obama's own story shows American greatness: you can be born under less than ideal circumstances and raised in a less than ideal setting but still succeed through your own efforts. I don't think telling that to a seven-year-old would have taken Obama off his message that he wants to set America back on the right track. It's just disturbing that Obama doesn't see this country as great.
Just as an aside, Jesse Taylor at Pandagon is making me giggle with his desperate attempts to dismiss criticism of Obama or Obama's flatlining in the polls. Weak. Very weak.