Obama talks deficit, doubts

WASHINGTON – Acknowledging Americans’ frustration with the slow pace of the nation’s economic recovery, President Barack Obama dedicated more than half of his first State of the Union address Wednesday night to pocketbook themes, from jobs to tax breaks to taming the national debt.

Throughout the 70-minute speech, the president strained to signal that he understands how angry, disappointed and even cynical the American people are over their economic insecurity and Washington’s failure to deliver change they can believe in.

Americans “face more than a deficit of dollars right now,” Obama said. “We face a deficit of trust, deep and corrosive doubts about how Washington works that have been growing for years.”

Even so, he insisted, because of the indomitable spirit of the American people, “I have never been more hopeful about America’s future than I am tonight. Despite our hardships, our union is strong. We do not give up. We do not quit. We don’t allow fear or division to break our spirit. In this new decade, it’s time the American people get a government that matches their decency, that embodies their strength.”

He returned repeatedly to one of the hallmarks of his 2008 presidential candidacy – the notion that he’d change the culture of Washington – in a populist-sounding bid about repairing the public trust along with the nation’s treasury.

“I am not naive. I never thought the mere fact of my election would usher in peace, harmony and some post-partisan era,” Obama said. “But what frustrates the American people is a Washington where every day is Election Day. … So no, I will not give up on changing the tone of our politics.”

He revived his campaign theme that Republicans and Democrats must work together for the nation’s good – as he said previous generations did for centuries – to do “what’s best for the next generation.”

That, he said, is the legacy that today’s leaders in Washington must seize: “We don’t quit. I don’t quit. Let’s seize this moment – to start anew, to carry the dream forward, and to strengthen our union once more.”

At the same time, he urged congressional Democrats not to chicken out on their agenda for fear of a backlash at the polls – and hinted that they should consider hardball tactics to force bare-majority votes on big issues through Congress.

“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.”

Virginia Gov. Bob McDonnell, who in November was elected his state’s first Republican governor in eight years, gave the official Republican response.

He said that under Obama, “the federal government is simply trying to do too much.” He said one plan Obama detailed in his speech, a three-year freeze on nonsecurity discretionary spending, is “a laudable step, but a small one.”

McDonnell called for limited government and lower debt. He criticized the Democrats’ approach to overhauling health care: “All Americans agree we need a health care system that is affordable, accessible and high quality. But most Americans do not want to turn over the best medical care system in the world to the federal government.”

For his part, on health care Obama said, “I take my share of the blame for not explaining it more clearly to the American people. I know that with all the lobbying and horse-trading, this process left most Americans wondering what’s in it for them.”

He didn’t detail how he intends to revive the plan but said it’s absolutely necessary. “I will not walk away from these Americans. And neither should the people in this chamber.”

While domestic programs dominated his delivery, the president turned briefly to foreign policy. He defended his decision to send more troops to Afghanistan even as he vowed that despite the recent spasms of violence and political unrest in Iraq, “this war is ending and all of our troops are coming home.”

He called for a broader international coalition to halt the nuclear ambitions of Iran and North Korea. He underscored threats the U.S. faces from al-Qaida. He also touted his own leadership in forging global alliances to combat worldwide problems from climate change to AIDS.

On the economy, Obama said the economic stimulus passed last year helped stave off a depression and that the economy is turning around, even as jobs lag. While more than 3.5 million net jobs have been lost since Obama took office, Obama said it could have been worse. He argued that the stimulus had saved or created 2 million jobs and is on track to save or create another 1.5 million by year’s end.

The president also outlined several plans for short- and long-term economic improvement, some of which the administration had leaked in the days leading up to the speech.

He called for using up to $30 billion from federal bailout funds repaid by big banks to help community banks lend money to small businesses.

He promoted other small-business tax incentives to encourage hiring.

He said he’s issuing an executive order to create a commission to recommend ways to cut the debt, after the Senate fell short of the bipartisan votes needed to do so.

As expected, he announced plans for a three-year freeze on nonsecurity discretionary spending. Critics say the $250 billion it could save over a decade is less than a third of what last year’s economic stimulus, now projected to cost $862 billion, will add to the deficit over the same period, and that the freeze won’t affect a $154 billion jobs bill Congress is considering, and which Obama called on the Senate to pass.

He said he’d find $20 billion in budget cuts to propose next week for fiscal year 2011. He also called for more tax credits for the middle class, including for parents and people who build their savings. He said that passing financial reform legislation is essential if Wall Street is to change.

The speech came as the president’s once-high job approval ratings have slid to less than 50 percent, and as Democrats brace for big losses in midterm elections.

Obama also urged Congress to require lobbyists to disclose all professional contacts with lawmakers and the administration, and to publish all of their own spending requests for earmarks, or pet projects, on a Web site for voters’ review.

The president reiterated but broke no new ground on his support for liberalized immigration policy, cap-and-trade emissions control legislation and ending the military’s ban on openly gay soldiers.