Obama Vows Fight to Restore Broad-Based Prosperity

by Kate Andersen Brower and Catherine Dodge - Jan 25, 2012 7:51 AM GMT+0700

President Barack Obama vowed to restore the promise of broad-based U.S. prosperity and “fight obstruction with action” in dealing with Congress, as he runs for re-election with the economy still struggling to recover from the recession.

Obama’s State of the Union address tonight sets out both his policy priorities and his campaign themes. In excerpts released by the White House, he combines a call to rebuild the U.S. economy on a stronger foundation with a promise to confront critics who stand in the way.

“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,” Obama will say, according to the excerpts. “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.”

In the speech, scheduled to begin at 9 p.m. Washington time before a joint session of Congress, the president will lay out what he calls a “blueprint” for revitalizing the economy, emphasizing a rebirth for U.S. manufacturing, bolstering domestic energy production and training workers. He also will call for the wealthiest Americans to pay more taxes.

“What’s at stake are not Democratic values or Republican values, but American values,” Obama will say.

Election Effect

Obama is unlikely to get major legislative initiatives enacted before the November election, which will also decide control of the House and the Senate. He also is constrained by efforts to reduce the nation’s long-term debt. Last year’s deficit of $1.3 trillion was third-highest as a share of the economy since 1945.

Obama said over the weekend that tonight’s address will serve as a “bookend” to one he delivered Dec. 6 in Osawatomie, Kansas, that invoked the populism of President Theodore Roosevelt. Economic inequality has left millions of Americans feeling that “the basic bargain that made this country great has eroded,” he said.

As he did then, Obama tonight says renewing the promise of the U.S. as a place where hard work is rewarded is “the defining issue of our time.”

Buffett Rule

Obama will “lay out some specifics” on the so-called Buffett rule -- named for billionaire investor Warren Buffett -- which would require people with incomes of more than $1 million a year to pay at least the same percentage rate in taxes as middle-class households, White House senior adviser David Plouffe said on NBC’s “Today” program. In a New York Times op- ed essay in August, Buffett said that in 2010 he paid a lower tax rate -- 17.4 percent -- than “any of the other 20 people in our office.”

When Obama announced the proposal in September, he said that “Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett.” The secretary, Debbie Bosanek, will be a guest at the speech tonight.

House Speaker John Boehner, an Ohio Republican, told reporters today that he expects the speech will be a “rerun of what we’ve heard over the last three years: more spending, higher taxes and more regulation.”

Romney’s Returns

The administration today used the release of tax returns by Republican presidential candidate Mitt Romney to underscore the points Obama will make on taxes and fairness.

Romney’s returns showed he earned $21.6 million in 2010 and paid 13.9 percent of that in income taxes, using the preferential rate on investment income and charitable deductions to pay a smaller share of his earnings than top wage earners typically do.

Plouffe said that the preferential rate on investment income, which is not available to typical wage-earners, was “a good example of the tax reform we need.”

Obama and his wife, Michelle, reported $1.7 million in adjusted gross income in 2010 and paid the top marginal tax rate of 35 percent on most of their earnings, according to tax returns released by the White House last year.

Romney delivered what his campaign called a “pre-buttal” to Obama’s speech while campaigning today in Florida.

Florida Campaigning

With a large sign behind him saying “Obama Isn’t Working,” Romney kept his focus on the incumbent president as he spoke in Tampa at what he said was a gypsum-manufacturing plant that was closed in 2008 because of the economic downturn.

“Do we want a president who will try to explain again why his policies haven’t worked?” Romney asked. “Do we want a president who will keep promising that this time he will get it right? Do we want a president who will keep telling us why he’s right and why we’re all wrong? Or do we want the sense of excitement that comes with a new leader?”

The Republican response to the State of the Union is being delivered by Indiana Governor Mitch Daniels, who will say that Democratic “extremism” has stifled domestic energy development and private sector job growth. He also said the U.S. needs a “dramatically simpler tax system” and fewer regulations.

“It’s not fair and it’s not true for the president to attack Republicans in Congress as obstacles on these questions,” Daniels says in excerpts released by Republican congressional leaders.

To spur manufacturing jobs, Obama has promised to seek new tax proposals that reward companies for bringing jobs home and investing in America. He also pledged to end tax breaks for companies that move jobs overseas. Details are likely to come in the budget he’ll submit to Congress on Feb. 13.

Energy Production

Obama also will devote a section of his speech to U.S. energy production. In a video to supporters over the weekend, he said economic growth can be “fueled by homegrown and alternative energy sources.”

Early in his administration Obama announced a target of reducing oil imports by a third by 2025. Since he took office, U.S. natural gas production averaged 1.89 trillion cubic feet a month through October. That’s 13 percent higher than the average during President George W. Bush’s two terms, according to Energy Department data. Crude oil production is 2 percent higher, the department said.

Last March, he called for new incentives to boost production of oil, natural gas and biofuels, tougher fuel- efficiency standards for vehicles and greater reliance on cleaner sources of energy, including nuclear power.

Signs of Rebound

In talking about the economy, Obama may point to signs of a rebound.

The unemployment rate in December dropped to 8.5 percent, a three-year low, and employers expanded payrolls by 200,000, an indication that the job market is gaining momentum. Employers added 853,000 jobs in the second half of 2011, compared with 782,000 in the first six months. Manufacturing output climbed 0.9 percent, the biggest gain since December 2010, according to Federal Reserve data.

Gross domestic product, the value of all goods and services produced, rose at a 3 percent annual rate in the final three months of 2011 after advancing 1.8 percent in the previous quarter, according to the median forecast of 64 economists surveyed by Bloomberg News before the Commerce Department’s Jan. 27 release.

Obama will leave tomorrow morning for a three-day trip to Iowa, Arizona (BEESAZ), Nevada (STPINV), Colorado and Michigan (MBASMI), all battlegrounds in the election. He’ll use the stops to highlight the main points of his address on manufacturing, energy and education.

Obama’s Guests

The administration has invited more than 20 guests to sit with first lady Michelle Obama at the Capitol. The list includes people representing topics Obama may touch on in his speech, including a teacher, college student, a General Motors Co. plant manager, and a veteran of the war in Iraq.

Also among the guests is Admiral William McRaven, the commander of U.S. special operations, which includes the Navy SEALs who conducted the raid last May that killed Osama bin Laden.

To counter the president, Boehner invited representatives of businesses affected by Obama’s denial of a permit for TransCanada Corp. (TRP)’s Keystone XL pipeline.

Obama’s campaign plans to use social media to spread the messages in his speech. The president plans an online video chat Jan. 30 on the White House page on Google (GOOG) Plus and the whitehouse.gov website.

To contact the reporters on this story: Kate Andersen Brower in Washington at kandersen7@bloomberg.net; Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net