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Obama turns to economy, urges Congress to unite

Speech focuses on creating jobs, reducing deficit

By Susan Milligan and Bryan Bender
Globe Staff / January 28, 2010

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WASHINGTON - President Obama pleaded with a bitterly divided Congress last night to join together to solve the nation’s deep economic problems and give the American people “a government that matches their decency.”

Delivering his first State of the Union address to Congress at one of the most politically treacherous moments of his term, Obama summoned the powerful rhetoric that helped get him elected as he sought to repair the relationship between an angry electorate and Washington.

He offered a list of specific steps aimed at improving the fiscal outlook - tax credits to create jobs, $30 billion in loans for small businesses, and breaks on college education debt - that he said would quickly bring relief to families who continue to suffer the effects of recession.

And he took pains to acknowledge deep anger that citizens are feeling about the slow economic recovery, endless partisan fighting in Washington, and the slow pace of change.

“We face more than a deficit of dollars right now. We face a deficit of trust - deep and corrosive doubts about how Washington works that have been growing for years,” Obama said. “Rather than fight the same tired battles that have dominated Washington for decades, it’s time for something new.”

The president focused heavily on creating jobs and reducing the national deficit, dedicating nearly two-thirds of his speech to economic issues. He also made impassioned but less specific pleas to save his proposed overhaul of the health care system and to pass climate-change legislation, signature issues of his first year in office.

Taking aim at the Washington culture, Obama called for tighter rules and enhanced disclosure of lobbying, including meetings between lobbyists and members of his own staff. Further, he said, all members of Congress should post their special spending items - known as earmarks - online, so that voters can easily see who is asking for the so-called pork barrel projects.

It was a new focus on an agenda that could appeal to both populists on the left, who have become disillusioned with Obama’s inabilities to deliver on goals he promised, as well as those on the right, whose anger at Washington helped spur the upset win last week of Republican Scott Brown in the Massachusetts Senate race.

The president sympathized with those angry at the Wall Street bank bailouts, something he said he hated and “was about as popular as root canal.”

“But when I ran for president, I promised I wouldn’t just do what was popular - I would do what was necessary,” Obama said, crediting the bailout with preventing a devastating financial meltdown and even higher unemployment.

Obama also listed targeted tax relief and initiatives aimed at job creation - what he called his administration’s “number-one focus in 2010” - hoping to score some easier victories in Congress on the economy, which is now the top agenda item for the president and midterm election candidates. Those offerings, too, reflect a shift in political strategy after Brown shocked Democrats in Washington by winning the seat held for nearly half a century by Edward M. Kennedy.

The economic proposals were largely aimed at the private sector, answering Republicans allegations that the Obama administration is ushering in a new era of “big government” while tapping the resources of the nation’s biggest employer, small business.

While the White House calculates that the $787 billion stimulus bill passed last year has created or saved as many as 2 million jobs and is expected to add another 1.5 million this year, the president wants to give tax credits to small businesses, which collectively provide the most jobs in the country.

The credits would be designed to encourage employers to hire more people and increase wages, Jason Furman, White House economic adviser, said earlier yesterday. Further, the president proposed taking $30 billion of the money recouped from the Troubled Asset Relief Program, which was used to bail out banks in 2008, and helping community banks make loans to small businesses.

Obama also said he will create, by executive order, a bipartisan commission to find ways to reduce the deficit. The Senate this week rejected a bill that would establish such a commission by law and force Congress to vote on its recommendations. Seven original GOP sponsors of the bill voted to kill it.

As expected, Obama said he would impose a three-year freeze on discretionary spending not related to security. While the idea appeals to some deficit hawks, Republicans have criticized it as a public relations move that will not significantly reduce the deficit.

Obama also called for a new IRA program, giving prime-time backing for a bill Representative Richard E. Neal of Springfield has been pushing for two years. The measure would provide assistance to help small businesses set up individual retirement accounts for their workers. The businesses would not make matching payments, but workers would have a chance to contribute to their own retirement at work.

“It’s a very common-sense solution,” Neal said.

The president renewed a call for action on key issues that he raised a year ago in his first joint address to Congress: health care, financial regulations, climate change, and changing the culture of Washington. But those ambitious goals remain unfinished or are imperiled. Obama, after making only a vague allusion to the political fallout from Brown’s election last week, called on both parties to set aside election-year politics and get to work.

“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,” he said. “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. Just saying no to everything may be good short-term politics, but it’s not leadership.”

Even as the president spoke passionately about unity, Republicans were live-blogging criticism of elements of his speech, questioning Obama’s job-creation record and commitment to spending cuts. The House minority whip, Eric Cantor of Virginia, immediately released a video response accusing the majority party of a “Democratic disconnect” with voters.

Brown, who has yet to be sworn in and did not attend the speech, called for broader tax cuts than Obama proposed but said he was looking forward to working with his colleagues on both sides of the aisle.

The president reiterated his desire to eliminate the military’s much criticized “don’t ask, don’t tell” policy but did not lay out a specific plan to end it. Gay-rights activists have urged the president to use his executive powers to stop discharges of openly gay service members, but he has declined to do so.

The president also called for passage of a sweeping climate change bill, a measure approved by the House but stuck in the Senate, where Senator John F. Kerry, a Massachusetts Democrat, is working on a bipartisan compromise. The president drew some skeptical murmurs when he noted that some question the science behind global warming.

Nuclear energy and oil and gas exploration, too, must be part of the nation’s energy mix, Obama said, drawing applause.

While energy has been a back-burner issue in a Congress consumed by health care and worried about job losses, Obama put the energy issue in the context of the economy, calling for “green jobs.”

“Clean-energy jobs will help get people out of the unemployment line and back on the assembly line,” said Representative Edward J. Markey, a Malden Democrat pushing the idea in the House.

Proposals

■  Pass a second jobs bill as the Senate’s first order of business.

■  Use $30 billion repaid by Wall Street banks to help community banks lend to small businesses.

■ Enact a tax credit for small business that hire workers or raise current wages.

■  Eliminate capital gains taxes on small-business investment and provide tax incentives for all businesses to invest in new plants and equipment.

■  Slash tax breaks for companies that move jobs overseas and extend them to companies that create jobs in the United States.