Obama in State of the Union: We need to 'fix our politics'

President Barack Obama called on the American people to "fix our politics" in his final State of the Union address.

Laying out his vision for the country's economic and social future, the president — who has often expressed frustration in his inability to work with a Republican-controlled Congress — said Tuesday night that Americans would be able to achieve a more perfect union if only they could break through the rancor of partisan politics.

"The future we want  —  opportunity and security for our families; a rising standard of living and a sustainable, peaceful planet for our kids  —  all that is within our reach. But it will only happen if we work together. It will only happen if we can have rational, constructive debates," the president said. "It will only happen if we fix our politics."

In his address, a full copy of which was posted online about 10 minutes before he delivered it, the president recalled his original election promise of "change."

"We live in a time of extraordinary change — change that's reshaping the way we live, the way we work, our planet and our place in the world," Obama said. "It's change that promises amazing medical breakthroughs, but also economic disruptions that strain working families. It promises education for girls in the most remote villages, but also connects terrorists plotting an ocean away. It's change that can broaden opportunity, or widen inequality."

"And whether we like it or not, the pace of this change will only accelerate," he added, recalling major national changes from wars, depressions, immigration waves and pushes for civil rights.

These changes, Obama said, were made to "work for us" instead of being opposed outright.

"Each time, there have been those who told us to fear the future; who claimed we could slam the brakes on change, promising to restore past glory if we just got some group or idea that was threatening America under control," he said. "And each time, we overcame those fears. We did not, in the words of Lincoln, adhere to the 'dogmas of the quiet past.' Instead we thought anew, and acted anew. We made change work for us, always extending America's promise outward, to the next frontier, to more and more people."

"And because we did — because we saw opportunity where others saw only peril — we emerged stronger and better than before," Obama said.

As for his vision for politics, Obama explained that he is not calling for Americans to agree on everything, but emphasized that "democracy does require basic bonds of trust between its citizens."

He asked the citizenry not to give in to cynicism, to avoid thinking that "change isn't possible and politics is hopeless." If those feelings take over, he cautioned, the powerful and the wealthy will gain greater control over the country.

"As frustration grows, there will be voices urging us to fall back into tribes, to scapegoat fellow citizens who don't look like us, or pray like us, or vote like we do, or share the same background," he said, potentially referencing the perceived rancor on the campaign trail. "We can't afford to go down that path. It won't deliver the economy we want, or the security we want, but most of all, it contradicts everything that makes us the envy of the world."

On the economy

Addressing the economy, Obama said there is one "basic fact," and it's that "the United States of America, right now, has the strongest, most durable economy in the world."

The president highlighted the country's record streak for private-sector job growth, the strength of the auto industry, and the fact that manufacturing has created almost 900,000 new jobs over the past six years. "And we've done all this while cutting our deficits by almost three-quarters," he said.

Obama criticized those doubting the strength of the U.S. — suggesting "anyone claiming that America's economy is in decline is peddling fiction" — and instead suggested that more changes were behind public unease.

"What is true  —  and the reason that a lot of Americans feel anxious  —  is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and haven't let up," he said.

The president explained that his goal for the past seven years has been to grow the economy in a way that works better for every citizen, and he said his administration "made progress," but he charged that the country needs to do more.

Read More Three things Obama should focus on in 2016

He pointed to technology replacing some jobs and companies increasingly able to locate anywhere in the world as reasons why workers have "less leverage for a raise." Part of this trend, he said, is that wealth and income are becoming more concentrated at the top.

"All these trends have squeezed workers, even when they have jobs; even when the economy is growing. It's made it harder for a hardworking family to pull itself out of poverty, harder for young people to start on their careers, and tougher for workers to retire when they want to," he said, referencing a dominate theme on the campaign trail to replace him. "And although none of these trends are unique to America, they do offend our uniquely American belief that everybody who works hard should get a fair shot."

Larry Mishel, president of the Economic Policy Institute, took issue with the president's assessment of the root causes in wage stagnation. Instead of blaming technological improvements, Mishel told CNBC, Obama would have done well to point to "policy choices over many decades that worked to lessen the ability of the typical workers to get a good deal from their employer: lowered minimum wage, rules that make it harder to collectively bargain, bad trade deals, excessive unemployment and failure to enforce wage standards."

Touting the bipartisan reform of No Child Left Behind as "an important start," Obama said Americans can agree that increasing economic opportunity requires better education and training. He called on the country to "build on that progress" by providing pre-kindergarten for everyone, extending computer science classes and more.

He also renewed his calls to make college more affordable "because no hardworking student should be stuck in the red." While saying that his administration has already reduced the burden of student loans, Obama said the country should seek to cut the cost of college, and he pledged to keep fighting for a free two years of community college for responsible students.

Obama also called for "benefits and protections that provide a basic measure of security."

President Barack Obama delivers his State of the Union address before a joint session of Congress on Capitol Hill in Washington, Tuesday, Jan. 12, 2016.
Evan Vucci | AP
President Barack Obama delivers his State of the Union address before a joint session of Congress on Capitol Hill in Washington, Tuesday, Jan. 12, 2016.

"It's not much of a stretch to say that some of the only people in America who are going to work the same job, in the same place, with a health and retirement package, for 30 years, are sitting in this chamber," Obama said to the assemblage of government leaders, calling Social Security and Medicare "more important than ever."

Henry Aaron, a senior fellow at the Brookings Institution specializing in health care reform and social programs, said the president's comments on Social Security and Medicare stood out to him. In fact, he told CNBC, the angle of strengthening those programs (however unspecific Obama may have been) reflects a position that the Democrats will want to take on the campaign trail.

"I think the Democrats are going to stick with that, and that's a winning position," Aaron said. "It's hard to find any group in the U.S. who doesn't overwhelmingly support both programs. That includes Bernie Sanders' left and the Tea Party's right."

While calling for America to strengthen those programs, Obama also touted the Affordable Care Act (also known as Obamacare). "Nearly eighteen million have gained coverage so far," he boasted. "Health care inflation has slowed. And our businesses have created jobs every single month since it became law."

Although Obama admitted it was unlikely that lawmakers would agree on health care "anytime soon," he said that there should be other ways for bipartisan efforts to improve economic security. Even if a hardworking American struggles to hold down a job, he or she should still be able to save for retirement — "that's the way we make the new economy work better for everyone," he said.

Obama recognized House Speaker Paul Ryan's interest in tackling poverty, and he said he'd welcome a "serious discussion" about strategies like expanding tax cuts for low-income workers without kids. Whether conservatives will take up the president's offer to work together remains to be seen.

"The president's description of the changes facing the American economy and their effect on workers was good and important. And I applaud the president for focusing so heavily on poverty," reflected Michael Strain, the deputy director of economic policy studies at the American Enterprise Institute. "Whether the president's solutions are best will — hopefully — be the subject of much debate in this year's presidential election."

Read MoreOpinion: Obama's 'big miss' on manufacturing

Although he expressed his hopes for bipartisan efforts, the president acknowledged that there are areas where agreement is less likely, including the government's role in "making sure the system's not rigged in favor of the wealthiest and biggest corporations." Obama said he believes the private sector is the "lifeblood of our economy," adding that there are outdated regulations and red tape that should be cut, but he called for stricter regulations in some regards.

"After years of record corporate profits, working families won't get more opportunity or bigger paychecks by letting big banks or big oil or hedge funds make their own rules at the expense of everyone else; or by allowing attacks on collective bargaining to go unanswered," he said. "Food stamp recipients didn't cause the financial crisis; recklessness on Wall Street did."

Obama doubled down on his criticism of corporations and financial firms while also hinting at others' campaign talking points, saying "immigrants aren't the reason wages haven't gone up enough; those decisions are made in the boardrooms that too often put quarterly earnings over long-term returns."

"It's sure not the average family watching tonight that avoids paying taxes through offshore accounts," he added.

The president said he plans to "lift up" businesses who are "doing right by their workers" over the next year, spreading those practices across the country.

Assessing the economic portion of Obama's speech, David Wessel, director at the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy, said the president "raised the right issues."

"He is referring to very tough challenges, the sort that aren't solved by a single new government program," Wessel said. "I thought his plea at the end for 'a better politics' was well put and inspiring: Obama at his best."

Andy Green, managing director for economic policy at the Center for American Progress also applauded the president's speech, saying Obama "really captured the mood of the nation when he emphasized how far too many Americans feel that the system is rigged in favor of the wealthiest and large corporations."

"Ultimately, whether it's the lack of accountability from the 2008 financial crisis, the almost daily attacks on collective bargaining rights, or the seemingly never-ending search for tax loopholes, giveaways, and offshore havens, the public's feeling that the system is rigged is a deep and serious threat to the trust so essential to the proper functioning of our democratic system," Green said, adding that the president was "absolutely right" in emphasizing that "recklessness" on Wall Street led to the financial crisis.

"It's a problem that has been years in the making and will requires years to address, but accountability in the face of massive distortions of wealth and power must continue to be a priority for this president and whoever comes next," Green said.

On the future

In the second part of his speech, Obama turned to ways the country can leverage technology and innovation to its benefit.

Recalling the space race, the president noted that the country has in recent years "protected an open Internet," and launched "next-generation manufacturing hubs." But looking ahead, Obama announced that he had initiated a new national effort to cure cancer.

Led by Vice President Joe Biden, that initiative will aim to "make America the country that cures cancer once and for all."

Read More While Obama gives speech, Biden unveils cancer mission

And on the subject of future actions against climate change, Obama pitched it as a business opportunity.

"Even if the planet wasn't at stake; even if 2014 wasn't the warmest year on record  —  until 2015 turned out even hotter  —  why would we want to pass up the chance for American businesses to produce and sell the energy of the future?" he asked.

Obama used his address to announce the results of the government's investment in clean energy, deeming wind power cheaper than "dirtier, conventional power" in fields from Iowa to Texas, and touting tens of millions of dollars each year in solar savings (while that industry now employs more Americans than coal).

"We're taking steps to give homeowners the freedom to generate and store their own energy  —  something environmentalists and Tea Partiers have teamed up to support. Meanwhile, we've cut our imports of foreign oil by nearly sixty percent, and cut carbon pollution more than any other country on Earth," he stated. "Gas under two bucks a gallon ain't bad, either."

Read MoreObama: Climate change is an economic imperative

Calling for an acceleration to the country's transition away from dirty energy, Obama said he will push to change the way the U.S. manages its oil and coal resources, so they "better reflect the costs they impose on taxpayers and our planet."

"None of this will happen overnight, and yes, there are plenty of entrenched interests who want to protect the status quo," he said. "But the jobs we'll create, the money we'll save, and the planet we'll preserve  —  that's the kind of future our kids and grandkids deserve."

— Reuters and CNBC's Jacob Pramuk and Fred Imbert contributed to this report.