President Barack Obama offered Americans a populist economic vision in his State of the Union address Tuesday, seeking to draw a contrast with his eventual Republican rival and demonstrating the widening policy gulf between the two political parties.
Mr. Obama's laundry-list of initiatives—steep tax increases on wealthier Americans, fresh investigations into the mortgage crisis and support for domestic manufacturing—was aimed at buttressing a re-election message that posits him as defender of Americans beset by inequality in the tax code and broader economy.
"It's time to apply the same rules from top to bottom: No bailouts, no handouts and no copouts," Mr. Obama said. "An America built to last insists on responsibility from everybody."
The themes he trumpeted before a joint session of Congress are ones Americans will hear throughout the year as the president works to convince voters he deserves a second term. He also called for a new potential fix for underwater homeowners and legislation intended to discourage companies from shipping jobs overseas.
He offered few details on his initiatives, even as he tried to rally the nation. Using rhetoric that was softer than he employed in a recent fiery speech in Kansas, Mr. Obama's speech featured appeals to "fair play" rather than attacks on "breathtaking greed." And some of his ideas, such as boosting domestic energy production and revamping government, were designed to appeal to Republicans.
But for the most part, his policies were starkly at odds with Republican orthodoxy. Besides a year-end extension of a temporary payroll tax cut, most of Mr. Obama's ideas will have a slim chance of passing. Others he can enact unilaterally, such as the creation of a government task force designed to crack down on China by enforcing trade laws.
If there was any doubt Mr. Obama's address was intended as a campaign speech, he made a point of including policies that appeal to many possible constituencies: Hispanics, women, anti-Wall Street groups, labor and environmentalists. Two hours before delivering the speech, he sent an email to his campaign supporters saying, "Tonight, we set the tone for the year ahead."
Republicans accused him of playing class warfare and said their goal is to free the economy from the shackles imposed by his administration. They criticized Mr. Obama's speech as an election-year blueprint.
Indiana Gov. Mitch Daniels said in the formal GOP response that Mr. Obama doesn't deserve to be re-elected because even though he didn't cause the economy's problems, "he was elected on a promise to fix them, and he cannot claim that the last three years have made things anything but worse."
"We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves," Mr. Daniels said.
Lawmakers' reactions in the chamber appeared less antagonistic than in recent addresses. That was in part because Mr. Obama paid tribute to some bipartisan ideas, but also because Republicans seemed determined not to be baited into discourtesy. They clapped politely and occasionally cheered, as when Mr. Obama touted an "all of the above" energy policy.
Instead, the differences between the two parties were subtler, though no less stark. In an unusually political gesture for such a speech, Mr. Obama invited billionaire Warren Buffett's personal assistant, Debbie Bosanek, to sit with first lady Michelle Obama in the House visitor gallery to underscore his tax proposal that sparked a bitter fight between him and congressional Republicans last year.
Mr. Buffett made a national figure out of Ms. Bosanek after noting her effective tax rate is higher than his, largely because of his relatively low tax rate for capital gains compared with her regular salaried income. Mr. Obama then proposed the so-called "Buffett Rule," which would require a minimum tax rate for Americans making more than $1 million a year.
Republicans countered the invitation by having House Speaker John Boehner (R., Ohio) host executives involved in the construction of the Keystone XL pipeline, which Mr. Obama recently delayed over Republican objections.
The president fleshed out his "Buffett rule" Tuesday night, proposing that households earning more than $1 million a year face a minimum 30% federal income tax, with no deductions allowed for mortgage interest, health care, retirement savings or child-care benefits. Charitable contributions and state and local governments would still qualify for tax breaks. Few Americans pay an effective tax rate that high.The proposal harks back to the original Alternative Minimum Tax, which was crafted in 1969 to crack down on the use of deductions and other tax benefits employed by just 155 households.
The White House's goal as Mr. Obama faces a tough re-election fight is to tap widespread anti-Wall Street sentiment and voter anger about economic disparity without scaring independents.
With the economy still struggling and the unemployment rate at 8.5%, the president's re-election campaign is aiming to define the 2012 election as a choice between two visions, rather than a referendum on Mr. Obama, which Republicans would prefer.
Mr. Obama's aggressive approach to the wealthy and Wall Street carries some risk. Fewer than half of Americans believe it is extremely or very important for the federal government to reduce the income and wealth gap between the rich and poor, according to a Gallup poll last month. And while a majority of those are Democrats, just 43% of independents agree.
Mr. Obama tried to persuade Americans the economy is improving, citing 22 months of job growth. "The state of our union is getting stronger," he said.
To buttress his overall message, in addition to his call for higher taxes, Mr. Obama called on Congress to pass legislation to toughen antifraud laws governing the financial industry.
The president also said he would direct the Justice Department to launch a special unit of state attorneys general and federal prosecutors to investigate the packaging of risky mortgages into securities that were bundled and sold by Wall Street.
Mr. Obama asked Congress to provide funding to people who have kept up their mortgage payments so that they can refinance at lower interest rates, funded by fees levied on banks.
The president advanced several ideas aimed at discouraging companies from shipping jobs overseas, all of which need congressional approval. Most notable: he would require that all companies pay a minimum tax on overseas profits, an effort to offset any advantage for companies who want to set up operations in lower-tax countries.
He also proposes to bar companies from deducting as a business expense costs associated with shutting U.S. operations to move them abroad. And he would create a new tax credit to cover moving expenses for companies that bring jobs back to the U.S.
Administration officials said the president would next month propose a fuller framework for a revamp of the unwieldy corporate-tax code, including the ideas put forth Tuesday.
Mr. Obama peppered his speech with some more centrist initiatives, including weighing in squarely in favor of natural gas use, a position that could irritate environmentalists, as well as a hefty emphasis on education.
Aiming to control college costs, Mr. Obama said he would cut federal funding to colleges that raise tuition too high.
A year ago, Mr. Obama opened with a call for unity in the wake of the Tucson, Ariz., shooting that gravely wounded Rep. Gabrielle Giffords (D., Ariz.).
This year, he made a similar plea—and on his way into the House chamber, he warmly greeted Ms. Giffords, who is resigning this week to continue her recovery.
Mr. Obama opened and closed his address with a reminder of his most popular achievement, finding and killing Osama bin Laden. He said the troops who carried it out should serve as a model for the political system.
"When you're in the thick of the fight, you rise or fall as one unit, serving one nation, leaving no one behind," he said.
Mr. Obama will continue to amplify his economic message by spelling out their details during a three-day trip through five battleground states he begins Wednesday.
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