Saying he's heard the fears of an anxious nation, President Obama on Wednesday night told Americans he won't scrap the agenda that won him the White House, but he repackaged his push for health care reform and much of the rest of his priorities as means to boost the economy.
Mr. Obama, trapped between swelling deficits and calls for more spending on jobs, said he'll freeze the salaries of the highest-paid federal employees, will create a commission to offer ideas on tackling debt, and proposed a freeze on non-security discretionary spending in 2011.
But he said Congress must still spend money on a jobs package in 2010, and he challenged lawmakers to be bold in following through on what they started this year on health care reform and global warming and to rein in Wall Street excesses.
"I campaigned on the promise of change -- 'change we can believe in,' the slogan went. And right now, I know there are many Americans who aren't sure if they still believe we can change -- or at least, that I can deliver it," Mr. Obama said in his first State of the Union address.
"But remember this -- I never suggested that change would be easy, or that I can do it alone. Democracy in a nation of 300 million people can be noisy and messy and complicated. And when you try to do big things and make big changes, it stirs passions and controversy. That's just how it is."
Voters weren't the only uneasy audience Mr. Obama sought to soothe. He alluded to his party's stunning loss in Massachusetts -- in which Republican Sen.-elect Scott Brown destroyed Democrats' filibuster-proof majority -- but made it clear he's not giving up on his priorities. Instead, he called on both parties to set aside election-year politics and cooperate.
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"I know it's an election year. And after last week, it is clear that campaign fever has come even earlier than usual. But we still need to govern," he said.
"To Democrats, I would remind you that we still have the largest majority in decades, and the people expect us to solve some problems, not run for the hills. And if the Republican leadership is going to insist that 60 votes in the Senate are required to do any business at all in this town, then the responsibility to govern is now yours as well." At the same time, the president extended an open hand to the minority party, saying he'll work with Republicans where they can find common ground.
Virginia Gov. Robert F. McDonnell, delivering the Republican response, called on the president to go further and chuck much of his agenda and instead opt for a more modest set of priorities that doesn't expand the federal government.
"Top-down, one-size-fits-all decision making should not replace the personal choices of free people in a free market, nor undermine the proper role of state and local governments in our system of federalism. As our Founders clearly stated, and we governors understand, government closest to the people governs best," said Mr. McDonnell, who earned headlines last fall for trouncing his Democratic opponent in a state that went for Mr. Obama one year earlier.
Mr. Obama was repeatedly interrupted by applause during his 1-hour-and-10-minute speech, though as often as not it was one party applauding while the other sat silently. And while Mr. Obama called for bipartisanship, he also repeatedly tossed barbs at Republicans over their record during the Bush administration.
The president took a lecturing tone in his speech, admonishing Republicans not to abuse their newfound ability to filibuster in the Senate.
"Just saying no to everything may be good short-term politics, but it's not leadership," he said, drawing a bemused laugh from Senate Minority Leader Mitch McConnell, Kentucky Republican.
Indeed, a little more than a year after his inauguration, Mr. Obama and his fellow Democrats find themselves in a vastly different political climate as their $862 billion economic stimulus bill has not stemmed job losses, their efforts on global warming have stalled and their efforts to overhaul health care have been shelved.
Mr. Obama insisted there's still a path to get a health care reform bill passed.
"Do not walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job for the American people," he said.
But he didn't offer any direction to Hill leaders on how to overcome the deep divisions among Democrats, who are sparring with each other over how much of a hand government should have in delivering health care, its hefty price tag and the touchy topic of abortion funding.
In the Republican response, Mr. McDonnell agreed that Americans need affordable, high-quality health care but offered a different route to get it.
"Republicans in Congress have offered legislation to reform health care, without shifting Medicaid costs to the states, without cutting Medicare, and without raising your taxes. We will do that by implementing common-sense reforms, like letting families and businesses buy health insurance policies across state lines, and ending frivolous lawsuits against doctors and hospitals that drive up the cost of your health care," Mr. McDonnell said.
"And our solutions aren't 1,000-page bills that no one has fully read, after being crafted behind closed doors with special interests."
As for energy policy, Mr. Obama likewise reiterated his support for a cap-and-trade plan to combat global warming, urging the Senate to work through a deadlock on the issue as moderate Democrats from Rust Belt states are resisting the proposal approved by the House last summer. He also cited the need for new nuclear power plants and "making tough decisions about opening new offshore areas for oil and gas development."
The speech was remarkable for the number of times members of Congress outright laughed at a claim the president made including Republicans chuckling at Mr. Obama when he called for a spending freeze, but said it will only kick in next year.
At one point an unidentified man standing in the back row behind House Democrats shouted out "Mr. President," but those in front of him waved at him to be silent.
On spending, Mr. Obama said his second federal budget next week will call for halting government spending that's not related to defense or entitlements at current levels for three years. If approved by Congress, such a move would save taxpayers $250 billion over a decade, according to the White House.
Mr. Obama proposed spending increases in certain areas, such as education -- where he is asking for a 6 percent boost -- but said the money would come from eliminating unnecessary programs in other parts of the budget. The additional dollars would go toward elementary and secondary education programs, as well as an extension of the administration's Race to the Top program to reward states that adopt certain education reforms.
Mr. Obama repeated several proposals he made last year that haven't been passed, such as creating a tax credit for employers who make new hires and eliminating the capital-gains tax on new investments in small businesses. He said he wants to use $30 billion in Wall Street bailout funds that banks have paid back to encourage community banks to lend to small firms.
Saying the country needs to double its exports over the next five years, Mr. Obama urged cooperation on international trade deals with South Korea, Panama and Colombia. The U.S. will lose out on jobs if it "sits on the sidelines while other nations sign trade deals," he said.
In a nod to gay rights activists --some of whom have accused him of inaction after campaigning in support of their agenda -- Mr. Obama urged lawmakers to overturn the military's "don't ask, don't tell" policy banning gays and lesbians from serving openly.
"We find unity in our incredible diversity, drawing on the promise enshrined in our Constitution: the notion that we are all created equal, that no matter who you are or what you look like, if you abide by the law you should be protected by it; that if you adhere to our common values, you should be treated no different than anyone else," he said. Mr. Obama waded into another perennially thorny issue with comments on immigration reform, but he didn't offer any specifics.
"We should continue the work of fixing our broken immigration system -- to secure our borders, enforce our laws, and ensure that everyone who plays by the rules can contribute to our economy and enrich our nation," he said.
In keeping with his recently toughened, populist tone, Mr. Obama touted several measures he said would ease the pain of the recession on middle-class families. He called on lawmakers to nearly double the child and dependent care tax credit for families earning less than $85,000 a year and to provide a $1.6 billion boost in child care funding. He also proposed $102.5 million more in federal aid to families caring for elderly relatives.
Arguing that a financial regulatory overhaul is central to the interests of health of Main Street, Mr. Obama echoed his previous call for Congress to pass a bill that would expand the government's authority to break up troubled firms, tax the nation's biggest banks and limit the scope of their risk-taking.
One day after the Senate killed a bill that would have created a bipartisan task force on reducing the nation's debt, Mr. Obama said he will create by executive order a similar fiscal commission to come up with ideas for dealing with entitlement programs such as Social Security and Medicare. Unlike a congressional panel, the body would have no legal authority, however.
Mr. Obama went toe-to-toe with the Supreme Court majority that last week ruled First Amendment free speech protections extend to political ad spending by corporations and unions. The president told Congress to try to whittle down those protections.
"I don't think American elections should be bankrolled by America's most powerful interests, and worse, by foreign entities," Mr. Obama said. "They should be decided by the American people, and that's why I'm urging Democrats and Republicans to pass a bill that helps to right this wrong."
The challenge did not appear to sit well with Justice Samuel A. Alito Jr., who was part of the majority in that decision and who shook his head and muttered under his breath as the president criticized the ruling.
Mr. Obama also called for more transparency on earmarks, saying some lawmakers post their requests online but calling for all of them to do so on a single Web site. In fact, under rules congressional Democrats announced last year, all lawmakers do post their requests on their own Web sites already -- though sometimes they're tough to find.
"You have trimmed some of this spending and embraced some meaningful change. But restoring the public trust demands more. For example, some members of Congress post some earmark requests online. Tonight, I'm calling on Congress to publish all earmark requests on a single Web site before there's a vote so that the American people can see how their money is being spent," he said.
Mr. Obama reaffirmed his commitment to wind down the war in Iraq, saying the administration will pull all combat troops out of the country by August, but will continue to support the government there to promote peace.
He noted several diplomatic efforts, ranging from efforts to fight HIV/AIDS in the developing world to April's National Security Summit, where 44 nations discuss ways to secure nuclear materials. However, Mr. Obama said the world is more united on threats like Iran and North Korea, both of which "face growing consequences for violating international agreements in pursuit of nuclear weapons. He also announced a new initiative aimed at redesigning the nation's response to a bioterrorism attack just days after a congressional panel gave the administration an "F" on its preparedness for such a threat.
Mr. Obama will ask Congress to require lobbyists to disclose each contact they make within the administration as well as Congress and to put limits on lobbyist contributions to federal candidates. In addition, he will urge congressional leaders to work around a Supreme Court decision last week that struck down key campaign finance rules.