In State of the Union Speech, Obama Defiantly Sets an Ambitious Agenda

Michael D. Shear and Julie Hirschfeld Davis
State of the Union: Tonight, we turn the page
State of the Union: Tonight, we turn the page
Obama: Close tax loopholes that lead to inequality
Obama: Close tax loopholes that lead to inequality
State of the Union: Middle class economics
State of the Union: Middle class economics
State of the Union: Let's close loopholes
State of the Union: Let's close loopholes

WASHINGTON — President Obama claimed credit on Tuesday for an improving economy and defiantly told his Republican adversaries in Congress to "turn the page" by supporting an expensive domestic agenda aimed at improving the fortunes of the middle class.

Released from the political constraints of a sagging economy, overseas wars and elections, Mr. Obama declared in his sixth State of the Union address that "the shadow of crisis has passed," and he vowed to use his final two years in office fighting for programs that had taken a back seat.

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He called on Congress to make community college free for most students, enhance tax credits for education and child care, and impose new taxes and fees on high-income earners and large financial institutions.

"We have risen from recession freer to write our own future than any other nation on Earth," Mr. Obama said in an hourlong address to a joint session of Congress seen by an estimated 30 million people. "Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?"

Obama: No hacker should be able to shut down our networks
Obama: No hacker should be able to shut down our networks

Confident and at times cocky, the president used the pageantry of the prime-time speech for a defense of an activist federal government. He vowed to continue a foreign policy that combines "military power with strong diplomacy," and he called on Congress to lift the trade embargo on Cuba and pass legislation authorizing the fight against the Islamic State.

He said approval of a resolution granting him that power — something he has long argued he does not need to carry out the five-month-old campaign — would send an important signal. "Tonight, I call on this Congress to show the world that we are united in this mission," Mr. Obama said. "We need that authority."

Read MoreState of the Union: 'Shadow of crisis has passed'

"This effort will take time," he said of the battle to defeat the Islamic State, the Sunni militant group that is also known as ISIS or ISIL. "It will require focus. But we will succeed."

Mr. Obama met a skeptical but respectful Congress hours after vowing to veto Republican legislation that would restrict abortion and speed the approval of natural gas pipelines, the latest in a series of veto threats that reflect his eagerness to confront conservative ideology.

The president made no mention of the major losses that his party endured in congressional elections last fall, choosing to ignore the assertion by Republicans that voters had rejected his vision. In the speech, he promised that any attempt to roll back his health care law, an overhaul of regulations on Wall Street or his executive actions on immigration would also face vetoes.

Mr. Obama implied that the Republican economic agenda lacked an ambition equal to his own. At one point, he mocked the party's unshakable determination to force approval of the Keystone XL pipeline, which would carry 830,000 barrels of petroleum per day from Canada to the Gulf Coast. "Let's set our sights higher than a single oil pipeline," he chided.

Speaker John A. Boehner, behind the president, and a sea of Republican lawmakers facing him in the House chamber sat impassively as Democrats stood to applaud Mr. Obama's recitation of the brightening domestic picture during his presidency. The improvements include job growth, falling deficits and the slowing of the growth of health care costs.

"This is good news, people," Mr. Obama interjected at one such moment, looking out at the motionless Republicans.

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The president sought to cement an economic legacy that seemed improbable early in his first term, when the country was in near-economic collapse. The speech aimed to live beyond his presidency by helping to starkly define the differences between Democrats and Republicans ahead of the 2016 presidential election.

"The verdict is clear," Mr. Obama said. "Middle-class economics works. Expanding opportunity works. And these policies will continue to work, as long as politics don't get in the way."

Mr. Obama did highlight some potential areas of collaboration with Republicans. He called on Congress to approve a business tax overhaul, the granting of authority to strike trade deals, and a major initiative to repair crumbling roads and bridges.

But the president vowed to push forward with policies that have generated Republican opposition. He called for aggressive action to fight climate change and said he would not back down on changes to the nation's immigration system. He repeated his support for new regulations on Internet providers and for overriding state laws that limit competition for high-speed service.

In the official Republican response, Senator Joni Ernst, the freshman Republican from Iowa, said, "Americans have been hurting, but when we demanded solutions, too often Washington responded with the same stale mind-set that led to failed policies like Obamacare."

Hitting back at his political opponents and critics, Mr. Obama dismissed as "cynics" those who rejected the lofty vision he campaigned on, even as he said he recognized the criticism of his decade-old claim that there is not a "black America or a white America, but a United States of America." He urged members of both parties to reach for a better politics, "one where we spend less time drowning in dark money for ads that pull us into the gutter."

State of the Union: More than a collection of red & blue states
State of the Union: More than a collection of red & blue states

He called on his adversaries to "appeal to each other's basic decency instead of our basest fears," and he said he longed for a political reality free of "gotcha moments or trivial gaffes or fake controversies." He said a better politics would allow Republicans and Democrats to come together on reforming the criminal justice system in the wake of shootings in Ferguson, Mo., and Staten Island, N.Y.

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Mr. Obama's plans — which would offer free community college for millions of students, paid leave for workers and more generous government assistance for education, child care and retirement savings for the middle class — are to be financed in large part by $320 billion in tax increases over the next decade on higher income earners as well as a fee on large financial institutions.

The tax plan would raise the top capital gains tax rate to 28 percent, from 23.8 percent. It would also remove what amounts to a tax break for wealthy people who can afford to hold on to their investments until death. Mr. Obama also said he wanted to assess a new fee on the largest financial institutions — those with assets of $50 billion or more — based on the amount of risk they took on.

Those proposals would pay for the community college initiative, which would cost $60 billion over a decade, as well as an array of new tax credits intended for the middle class. They include a new $500 credit for families with two working spouses; a subsidy of up to $2,500 annually to pay for college; and the tripling, up to $3,000, of an existing tax break to pay for college.

"It's time we stop treating child care as a side issue, or as a women's issue," Mr. Obama said, "and treat it like the national economic priority that it is for all of us."

Mr. Obama said that the approach of walling off the United States from Cuba had been ineffective, and that it was time to try a new strategy. Seated in the first lady's box overlooking the House chamber, Alan P. Gross, the American prisoner freed in December as part of the new détente, repeatedly mouthed "thank you" when Mr. Obama recognized him.

The president argued that the United States had an opportunity to strike a deal with Iran to prevent its development of a nuclear weapon, and he made it clear that he opposed legislation — backed by some Democrats and Republicans — to impose new sanctions before those talks had played out.

"We lead best when we combine military power with strong diplomacy, when we leverage our power with coalition building, when we don't let our fears blind us to the opportunities that this new century presents," Mr. Obama said.

And after several high-profile cyberattacks, including one against Sony Pictures that his administration blamed on North Korea, Mr. Obama called for legislation to bolster protections against such computer-enabled assaults.

"No foreign nation, no hacker should be able to shut down our networks, steal our trade secrets or invade the privacy of American families, especially our kids," the president said. "If we don't act, we'll leave our nation and our economy vulnerable. If we do, we can continue to protect the technologies that have unleashed untold opportunities for people around the globe."