Obama targets economy, taxes in address

President Obama Addresses The Nation During State Of The Union Address
(Pool, Getty Images)

WASHINGTON — — With the presidential election in full swing and Congress mired in gridlock, President Barack Obama used his third State of the Union address Tuesday to sound a populist message on the economy, outlining a series of policies he said would give the middle class "a fair shot" at prosperity.

Highlighting the nation's widening gap between rich and poor, Obama told a joint session of Congress that the nation must do more to reverse the decades-long slide of manufacturing jobs, streamline an unwieldy federal tax code and make college more affordable for millions of American workers.

"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 said. "Or we can restore an economy where everyone gets a fair shot and everyone does their fair share and everyone plays by the same set of rules."

The president's hourlong address included broad goals — such as new energy and education policies — but his words were inseparable from the politics of the 2012 presidential election. Obama renewed calls for higher taxes on the wealthy, for instance, playing directly on recent scrutiny faced by GOP rival Mitt Romney.

Republicans, who have had an increasingly sour relationship with the White House, dismissed the speech as politically driven. Maryland GOP Rep. Roscoe G. Bartlett said Obama should have proposed a more bold tax plan and Rep. Andy Harris, a Baltimore County Republican, said "the president said nothing new tonight."

In broad terms, the president challenged universities to hold down tuition rates and threatened to withhold federal funding if they did not. He proposed a fee on banks that would pay to help homeowners refinance mortgages. He suggested increasing taxes on companies that ship jobs overseas and setting a lower rate for manufacturers that keep positions in the country.

White House officials insisted that the address was not a campaign speech, but the proposals — many of which would require congressional approval — were targeted directly at the same middle-class, independent voters who swept Obama into office in 2008 and who will decide in November whether to give him a second term.

"As long as I'm president, I will work with anyone in this chamber to build on this momentum," he said, touting recent signs that the economy is improving. "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."

Mei Xu, president of Rockville-based Chesapeake Bay Candle, said the tax changes Obama proposed that are aimed at bringing back overseas jobs are "a very important step to create a culture that says, 'We are for small businesses.'" The candle maker, which manufacturers many of its products in Asia, opened a plant in Glen Burnie that is expected to bring 100 jobs to the area this year.

"The government has turned around and realized that we have a lot of blue-collar workers" looking for manufacturing work, Xu said.

The focus on the nation's struggling housing market was welcome news for Baltimore Rep. Elijah E. Cummings, who has been among the most vocal members of Congress on the foreclosure crisis. The president said he intends to craft legislation that would save "responsible" homeowners $3,000 a year by allowing them to refinance at lower rates.

Obama also vowed to create a unit of state and federal prosecutors to investigate abusive lending practices and "hold accountable those who broke the law."

Home values in Maryland communities reassessed by the state at the end of 2011 fell an average of 17 percent over three years, in part because of foreclosures.

"Voters don't feel like people were punished for all the harm that they did with regard to these mortgages," said Cummings. Still, he said he would have liked to see the president "go a little bit further" and said he would withhold judgment until he more details of the plan are available.

Cummings separately criticized Republicans for the partisan squabbles that nearly forced the government to shut down several times last year.

That heavily partisan dynamic on Capitol Hill is sure to affect the ideas Obama outlined Tuesday, just as it stymied the administration's jobs proposal last year. If anything, the ability to push legislation through a divided Washington will get tougher as the focus increasingly shifts to the presidential election.

Hours before Obama began his address, Romney released tax returns from 2010 documenting that he had earned nearly $22 million and paid an effective tax rate of about 14 percent. That rate is lower than many Americans pay because much of his income comes from investments, not salary.

Democrats, including Obama, have criticized the fact that the two forms of income are taxed differently, arguing that it gives an unfair advantage to the wealthy. The president proposed a minimum 30 percent tax rate for people making more than $1 million a year.

In the Republican response to Obama's speech Tuesday, Indiana Gov. Mitch Daniels criticized the administration for frequently drawing a distinction.

"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," said Daniels, a former director of the U.S. Office of Management and Budget who last year flirted with a presidential run. "As in previous moments of national danger, we Americans are all in the same boat."

In that political context, the only legislation that appears to have momentum in Washington is a proposal to extend a 2 percentage point reduction in the payroll tax that Congress first approved in 2010. That legislation would also maintain jobless benefits for the long-term unemployed and continue current payment rates for doctors who care for Medicare patients.

Congress fumbled a year-long extension of those policies in December, instead keeping them in place only through February.

A panel tasked with finding a way to pay for a longer extension held its first meeting Tuesday. Republicans have proposed trimming federal worker compensation as part of a broader plan to fund the tax cut, but two Maryland Democrats on the committee — Sen. Ben Cardin and Rep. Chris Van Hollen — have opposed that idea.

Maryland is home to 286,810 federal workers, roughly one-tenth of the state's workforce.

On Tuesday night, the Maryland Democratic Party hosted more than 100 viewing parties in homes, businesses and colleges across the state. They were sanctioned by President Obama's presidential campaign.

At Zella's Pizzeria near Hollins Market in Southwest Baltimore, clapping and cheering erupted from the crowd of roughly 50 people gathered as a flat-screen TV above the bar showed the president entering the House Chamber shortly after 9 p.m. Many in the crowd wore round, blue stickers with Obama's "rising sun" logo and "2012" printed on them.

Richard Tabuteau, an attorney from Baltimore, was satisfied to hear the president emphasizing some of his economic achievements early on in the speech.

"I'm happy," he said, after Obama mentioned the number of jobs the U.S. economy has added during his tenure. "Lots of people just forget as the years go on."

Deborah Woolford, from southern Park Heights, said she too was pleased with how the president was reviewing his accomplishments and hoped Obama would continue "hammering" his achievements until November.

"Don't make it a one-night stand," she said.

Obama will take his message on the road this week in a five-state swing, offering more detail on the proposals he unveiled Tuesday. The president will separately travel to Cambridge, Dorchester County, this week to address a meeting of House Democrats, though it is not clear if that address will be public.

The sales pitch to voters will be difficult. Unemployment remains high at 8.5 percent, public opinion polls show that most Americans feel the country is on the wrong track and even Obama seemed to acknowledge that current political realities will make advancing his ideas tough.

"None of these reforms can happen unless we also lower the temperature in this town," Obama said. "We need to end the notion that the two parties must be locked in a perpetual campaign of mutual destruction, that politics is about clinging to rigid ideologies instead of building consensus around common-sense ideas."

Sun reporter Steve Kilar contributed to this article.