Obama will call economic fairness 'the defining issue of our time' in tonight's speech. | REUTERS Obama: 'No bailouts, no handouts and no cop-outs'

President Barack Obama called economic fairness “the defining issue of our time” in his State of the Union address Tuesday, casting himself as a defender of middle-class Americans and setting the agenda for his reelection campaign.

“It’s time to apply the same rules from top to bottom: No bailouts, no handouts and no cop-outs. An America built to last insists on responsibility from everybody,” Obama told a joint session of Congress. “Let’s never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that does the same.”


The election-year address gave Obama a high-profile platform to counter the GOP presidential candidates who have been pummeling him, virtually unanswered, for months. That included defending his support of Warren Buffett’s proposal that his secretary should not be taxed at a higher rate than he is.

“You can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense,” Obama said.

After touting accomplishments such as the end of the war in Iraq, the killing of Osama bin Laden and the successful restructuring of General Motors, Obama shifted to his main message, picking up the economic inequality themes first sketched out in his Teddy Roosevelt-channeling speech in Osawatomie, Kan., last month: an economy in which each American “gets a fair shot, does their fair share and plays by the same set of rules.”

The president stood before a sharply divided Congress and asserted that he “will work with anyone in this chamber” to improve the economy, but he won’t stand for gridlock.

“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,” he warned.

“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,” he 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. What’s at stake are not Democratic values or Republican values, but American values. We have to reclaim them.”

Obama’s proposals fall into four major areas: manufacturing, skills, energy and values.

He introduced incentives aimed at boosting domestic manufacturing, including ending tax deductions for companies that outsource jobs and creating new tax credits for companies that shift jobs onto U.S. soil from overseas. He also proposed a global minimum tax, which would tax American companies at a consistent rate on profits earned overseas.

In the interest of what he characterized as fairness for all Americans, Obama called for an end to government subsidies and tax deductions for Americans making $1 million annually, while reiterating his pledge not to raise taxes on families making less than $250,000. “Send me these tax reforms and I will sign them right away,” he said.

Obama reiterated his call for Wall Street to play by the same rules to which other Americans must abide, announcing the creation of a new Mortgage Crisis Unit to be headed by New York Attorney General Eric Schneiderman, who was one of the first lady’s guests at the speech. The unit will investigate mortgage misconduct and illegal activities. He also announced the creation of a Financial Crimes Unit that enables U.S. attorneys to pursue large-scale financial fraud, and called on Congress to approve tougher penalties for fraud so that companies no longer see fines as simply a cost of doing business.

Obama in recent months has derided a “do-nothing” Congress, launching a series of modest “We Can’t Wait” initiatives that he has enacted alone. He also infuriated Republican lawmakers by ramming through the recess appointments of Richard Cordray — who was another of the first lady’s guests for the speech — to lead the nation’s new consumer watchdog agency and three new members of the National Labor Relations Board.

In response, he called for a ban on “insider trading” by members of Congress, up or down votes on presidential nominations within 90 days and other efforts to “lower the temperature” of partisan divide in Washington.

To strengthen the U.S. workforce, Obama called for a consolidation of job training programs. “It’s time to turn our unemployment system into a reemployment system that puts people to work,” he said.

Building a better workforce begins with primary and secondary education, and Obama wants to incentivize teachers to do a good job and to give schools flexibility. He called on states to require that all students stay in high school until they graduate or turn 18.

He called on Congress to keep interest rates on student loans from doubling, and extend the tax credit for middle-class families paying to put their children through college. While the Obama administration has made efforts to expand federal financial aid programs, colleges must also do their part, Obama said, and keep costs down. “Let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury — it’s an economic imperative that every family in America should be able to afford.”

Without mentioning it by name, Obama reiterated his longstanding support of the DREAM Act, which would create a path to citizenship for young people brought into the country without documentation but who have completed at least some college.

Though they are at their highest in the last 16 years, U.S. energy production levels must rise so that the country is less dependent on foreign sources of oil, Obama said. “This country needs an all-out, all-of-the-above strategy that develops every available source of American energy — a strategy that’s cleaner, cheaper and full of new jobs,” he said to a mix of cheers and boos. Last week, Obama denied a request to build the Keystone XL pipeline, citing potential environmental threats — a decision that drew near-universal ire from Republicans on Capitol Hill.

The United States will defend itself and its allies, Obama said, and that includes guarding against the threat of a nuclear Iran.

“Let there be no doubt: America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal,” he said, noting that his preference is still to find a peaceful resolution to a conflict that is quickly heating up.

Republicans attacked Obama’s message as divisive and out-of-touch with life for ordinary Americans.

“On these evenings, presidents naturally seek to find the sunny side of our national condition. When President Obama claims that the state of our union is anything but grave, he must know in his heart that this is not true,” Indiana Gov. Mitch Daniels said in the official GOP response.

Daniels immediately picked up the class warfare charge again.

“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. As in previous moments of national danger, we Americans are all in the same boat. If we drift, quarreling and paralyzed, over a Niagara of debt, we will all suffer, regardless of income, race, gender or other category,” Daniels said.

Republican presidential candidate Mitt Romney said he was disturbed by what he took as Obama’s argument that the country is on an upward trajectory.

“Here in Florida, as I go around and talk to people — yesterday with eight people that are out of work or have lost their homes, 9.9 percent unemployment here, home values down, foreclosures up,” Romney said in an appearance on NBC after the speech, during a break from campaigning ahead of the state’s Jan. 31 primary. “People are very concerned. The idea that we’re on the right track is something which is very foreign to the people here.”

Newt Gingrich, meanwhile, said ahead of the speech that expected Obama would use his third State of the Union speech to pin blame on his predecessor and “explain it was all George W. Bush’s fault.”

On Wednesday, Obama will begin a three-day trip to five swing states – Iowa, Arizona, Nevada, Colorado and Michigan – where he will roll out the details of many of the proposals he put forward in the speech Tuesday.