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Defiant Obama challenges Congress on sticky issues

By Dan Lothian, Jessica Yellin and Tom Cohen
updated 10:42 AM EST, Wed January 25, 2012
STORY HIGHLIGHTS
  • NEW: Obama heads out on a three-day, five-state trip Wednesday
  • President Obama praises U.S. troops as a model for teamwork
  • Obama calls keeping alive the American dream "the defining issue of our time"
  • The Republican response criticizes the speech as divisive

Washington (CNN) -- President Barack Obama launches a three-day swing through key election states Wednesday after declaring in what could be his final State of the Union address that the nation was strengthening but must confront the defining issue of preserving the American dream.

In the speech Tuesday night to a joint sitting of Congress, Obama offered both his administration's priorities for the coming year and his campaign messaging for his re-election bid in November.

Read the president's speech

He defended a long list of his trademark policies -- tax increases on the wealthy, Wall Street reform, health care reform, government stimulus spending -- to applause from fellow Democrats while also offering proposals of interest to Republicans, such as corporate tax breaks and expanded oil and gas development.

President Obama's SOTU speech pt. 1
President Obama's SOTU speech pt. 2
'Americans don't envy the rich'
Obama: Human dignity can't be denied
Obama: No tax break for outsourcing jobs
'I won't walk away from clean energy'
Obama: Oil production not enough

Declaring "the state of our union is getting stronger," Obama said America had come too far in its still sluggish recover from economic recession "to turn back now."

With unemployment still above 8% and economic uncertainty lingering, Obama framed the challenges facing the country as a choice between opportunity for some or giving everyone a chance to prosper.

"The defining issue of our time is how to keep that promise alive," the president said. "No challenge is more urgent. No debate is more important. We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules."

He continued by saying, "What's at stake aren't Democratic values or Republican values, but American values, and we have to reclaim them."

iReporters react: Hope or dis-union?

The Republican response chided Obama for not addressing the nation's $15 trillion debt more forcefully, presenting a stark contrast in policy proposals and outlook to the president's more optimistic assessment of what has been accomplished and what is needed.

"It was irresponsible for him not to recognize the dire circumstances our country is in because of our debt," conservative Sen. Jim DeMint, R-South Carolina said. "He spent his speech making some more promises from government."

CNN Senior Political Analyst David Gergen described it as a "politically shrewd speech" likely to satisfy Obama's Democratic base while winning over some independents.

The annual evening of political pageantry, with senators and representatives joining Cabinet members, Supreme Court justices, military leaders and others in the packed House chamber, included a poignant touch with Democratic Rep. Gabrielle Giffords in attendance the night before she will resign due to her brain injury from last year's shooting attack in her native Arizona.

A champion of bipartisan politics, the still unsteady Giffords repeatedly was helped in rising to applaud Obama's speech by her Republican colleague from Arizona, Rep. Jeff Flake.

"It was the least I could do," Flake, a staunch conservative and frequent critic of the president, said. Asked if fellow Republicans thought he stood up so often to support what Obama was saying, Flake said in reference to Giffords: "I think most people would understand I support my colleague and friend."

Obama began and ended the 65-minute speech by praising U.S. troops for unity and teamwork that can serve as a model for facing the country's problems.

'Time to take on illegal immigration'
President hugs Gabby Giffords
Obama: Osama bin Laden is not a threat

He called for lowering corporate taxes and providing incentives for U.S. manufacturers to bring overseas jobs back to America, while ending tax breaks for businesses that continue to outsource. At the same time, Obama said, every multinational company should pay a basic minimum tax, while giving American manufacturers a tax cut.

"It's time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America," Obama said, adding a challenge to Congress he repeated throughout the night to send him a bill that he pledged to sign "right away."

He also challenged Congress to act on comprehensive immigration reform, a major election-year issue for the important Hispanic-American vote. Short of a major overhaul, he called for legislation like the DREAM Act that provides children of illegal immigrants who go to college or serve in the military a path to possible citizenship.

In response to Republican criticism of his energy policy, Obama said to applause he was ordering his administration to open up 75% of potential offshore oil and gas resources. At the same time, he also said U.S. oil production was at the highest level in eight years, countering GOP claims he was stifling oil development.

On income taxes, Obama repeated his longstanding call for the wealth to pay more in taxes, including a specific proposal for millionaires to have a tax rate of 30%. Earlier Tuesday, millionaire Republican presidential candidate Mitt Romney revealed his actual tax rate was lower than 15%.

Obama enters the House chamber
Obama: I will defend American jobs
Obama's 'bad milk' joke

Obama's presidency so far has been mostly defined by the ideological battle between Democrats and Republicans over the role of government in American society.

Bolstered by the conservative tea party movement that helped deliver the House majority in 2010, Republicans have pushed for shrinking government to ease mounting federal deficits and debt.

Obama and Democrats argue that deficit reduction must include both spending cuts and revenue increases in a balanced approach that maintains the essential role of government in American prosperity and opportunity.

The partisan divide has led to repeated congressional showdowns over budget and tax issues, with public dissatisfaction with Congress at historically low levels and the U.S. credit rating downgrade.

In his speech, Obama described the possibilities offered by what he called a "blueprint for an American economy that's built to last."

"Think about the America within our reach: A country that leads the world in educating its people," Obama said. "An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we're in control of our own energy, and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off, and responsibility is rewarded."

At the same time, he repeated his readiness to work with Republicans to build on economic recovery that has started but still struggles to take off.

"But I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place," Obama said.

"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that does the same," he continued. "It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no cop-outs. An America built to last insists on responsibility from everybody."

Obama: 'Manufacturers hiring again'
GOP slams Obama's economic record
Cain offers Tea Party response to Obama

Read the GOP's response

In the official GOP response, conservative Indiana Gov. Mitch Daniels said that "it's not fair and it's not true for the president to attack Republicans in Congress as obstacles."

"No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others," Daniels said. "As in previous moments of national danger, we Americans are all in the same boat. If we drift, quarreling and paralyzed, over a Niagara of debt, we will all suffer, regardless of income, race, gender, or other category. If we fail to shift to a pro-jobs, pro-growth economic policy, there will never be enough public revenue to pay for our safety net, national security, or whatever size government we decide to have."

In particular, Daniels called for "a dramatically simpler tax system of fewer loopholes and lower rates" and "a pause in the mindless piling on of expensive new regulations that devour dollars that otherwise could be used to hire somebody."

Former House Speaker Newt Gingrich, who is surging in Republican presidential polls after his primary victory Saturday in South Carolina, said at a campaign event in Sarasota, Florida, that if elected president, his first acts would be to sign executive orders undoing policies of the Obama administration.

"Our goal is, in the executive orders that we sign on the first day, that by the time President Obama lands in Chicago, we will have dismantled about 40% of his administration," Gingrich said to cheers.

Obama heads to Iowa, Arizona and Nevada on Wednesday to kick off a three-day tour of five states considered key for the November election. He will speak during the day at manufacturing plant in Iowa and an Intel campus in Arizona.

In his speech Tuesday night, Obama proposed now familiar steps as well as some new ones. The list included:

• A tax code in which the Bush tax cuts expire and the wealthy pay more;

• More refinancing for homeowners in trouble;

• More clean energy incentives;

• Enhanced education and job training initiatives, and,

• The creation of a China task force to monitor trade violations.

Obama and Democrats want to avoid the November election being a referendum on the president and his stewardship of the economy.

Instead, they seek a contrast campaign between a GOP they hope to define as allied with wealthy interests that brought near financial collapse in 2008 versus a president who will fight for working Americans.

Obama's address drew on themes from the Kansas speech he delivered in early December that focused on restoring equal opportunity for all, rather than an economy where the wealthy and reckless such as irresponsible Wall Street investors get ahead.

Democratic sources acknowledge that to succeed in November, Obama has to make the case that his policies have begun to make a difference, with the economy showing signs of improvement.

According to the administration, the economy has added nearly 3.2 million private-sector jobs over the last 22 months, and American manufacturing is creating jobs for the first time since the late 1990s. The American auto industry is coming back, adding 100,000 jobs in the last year, and U.S. oil production is at the highest level in eight years.

Republicans argue that Obama's policies have stymied growth by increasing regulations and delaying opportunities such as the Keystone XL oil pipeline from Canada in order to appease some of his liberal support base.

"Extremism that stifles the development of homegrown energy, or cancels a perfectly safe pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy," Daniels said. "It must be replaced by a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private sector jobs that restore opportunity for all and generate the public revenues to pay our bills."

CNN's Ed Payne contributed to this report.

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