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President Obama's State of the Nation Address; Post-Speech Analysis; Republican Response

Aired January 24, 2012 - 21:00   ET


WOLF BLITZER, CNN ANCHOR: Our coverage continues right now.

All right. You're looking at live pictures there. There's the secretary of state, Hillary Clinton. She is now on the floor of the United States House of Representatives. The Joint Session of the Senate and the House.

The president of the United States, getting ready to delivery his third state of the Union address.

We want to welcome our viewers in the United States and around the world. And I'm Wolf Blitzer, I'm up here on Capitol Hill. Gloria Borger is here. John King is with me as well.

John, as we see the attorney general, members of the Cabinet, coming in, this -- set the scene for us. How important, politically, especially politically, in this re-election year, for the president, is this speech?

JOHN KING, ANCHOR, JOHN KING, USA: It's very important for the president to try to persuade the American people, yes, you feel it, times are tough. Yes, maybe you're in a state with high foreclosure, maybe you're still in a state with very high unemployment.

The president is trying to make the case tonight that things are getting better and that his approach deserves a chance. He will make a case that if things aren't better, perhaps it's because there's dysfunction in Washington. And as you watch Secretary Clinton shaking hands, Secretary Panetta shaking hands, the president will make the case that a do-nothing Congress is to blame, not just him if you have frustration with Washington.

So he's trying to set the tone, Wolf, for what we know will be a very competitive election year for the president almost no matter who the Republicans nominate, just because the Democratic incumbent, whether you're a Democrat, Republican or independent. In this economy, in this political environment, with the economic anxiety across the country, any president would face a tough environment.

So this president's chance tonight is to set the table, to try to urge Congress to do some big things, the jobs bill, the payroll tax cut extension, some other things in the months ahead. But I think all of us know, they're well aware that the White House, the Republicans and the Democrats in the leadership here on Capitol Hill will tell you, they don't expect any big grand things to get done in this election year. The payroll tax perhaps, a few other things.

So what the president is mostly doing tonight is framing his side of the debate for a very contentious election year.

BLITZER: And we're looking at Gabrielle Giffords, the congresswoman from Arizona who was shot a year ago. She just announced she's going to be retiring from the Senate. And there's Hillary Clinton, the secretary of state, giving her a little kiss.

One of the most emotional moments so far and probably it will be the most emotional moment of the evening when she was just introduced to a rousing standing ovation and members of the House and Senate literally shouting, Gabby, Gabby, Gabby, a very, very exciting moment for all of us. And we're all so thankful that she is here on the floor of the U.S. Congress, U.S. House of Representatives.

More members of the cabinet walking in right now.

Jessica Yellin is over at the White House.

Jessica, what is the single most important thing the president of the United States needs to accomplish tonight?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: He needs to convince the American people that he has a vision for improving the economy that can work and that has already started to work. So he will not only lay out that vision but tout his accomplishments. And he'll start ticking off data to convince people that he's gotten the economy going even though it's not where it needs to be yet.

And the person that is at that speech who's very important to making this case is Debbie Bosanek, if that's how you pronounce it. It's Warren Buffet's secretary who is getting a tax rate that is higher than her boss, Warren Buffet, the billionaire, and he is going to make the case that she is the example of an unfair society where she's got to get a different tax rate. And she -- it's the same day that Mitt Romney released his tax returns, Wolf. And this is an important contrast, it's sort of subtle.

But he'll make this case over and over throughout the speech, that he stands for a fairer society where people like her will get a fairer shake if you stick with him as president into the future versus the Republican Party, who might not back the middle class in the same way, Wolf.

BLITZER: Yes, and so every time he mentions the -- what he calls the inequality of the tax system in the United States, he won't mention Mitt Romney but that will be the subliminal message, if you will. He wants people to remember that Mitt Romney and his tax returns just released was paying an annual of about 14 percent for the income, mostly dividends, capital gains, interests, but still, 14 percent, it's not 25 or 30 percent.

Dana Bash is there inside the chamber.

Dana, that was an electric moment when Congresswoman Gabrielle Giffords was introduced.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: You know, I have sat in this chamber many, many times for many speeches, presidents under -- Democratic presidents, Republican presidents, and you see applause and you hear applause, and sometimes it's genuine.

Wolf, there is -- I've never felt anything like that. I mean you could actually feel it. It was absolutely genuine. Republicans and Democrats alike, standing up applauding and looking at her. And just -- you know, the emotion was absolutely overwhelming. You could feel it. It was palpable throughout this entire room.

BLITZER: It was. And we saw her husband, Mark Kelly, sitting with the first lady in the gallery, a very, very emotional moment. And as I said, we wish her obviously a very, very speedy recovery.

It's amazing, Gloria Borger, as we saw her tonight, she looked great. You know what, she was obviously focusing. And this is Paul Irving, the House sergeant of arms.

PAUL IRVING, HOUSE SERGEANT AT ARMS: Mr. Speaker, the president of the United States.


BLITZER: We're going to listen in and hear what the president is saying to these members, but I just want to alert everyone, I think he's going to go over and personally welcome Congresswoman Gabrielle Giffords. Let's listen in to hear what the president says.

There, you saw the president of the United States and Congresswoman Gabrielle Giffords. We knew he would embrace her and give her a warm hug and that's Congresswoman Debbie Wasserman Schultz, one of Congresswoman Giffords' best friends.

We did hear the president say to Leon Panetta, the secretary of defense, you did a good job. We're going to check out what he's talking about, see what Leon Panetta did, why he justified a shout-out like that from the president. You did a good job. Maybe he'll make some sort of announcement in his speech tonight about what the secretary of defense and presumably the Defense Department did.

We'll stand by. We'll update you. We're checking our sources right now.

There's Mark Kelly, the husband of Congresswoman Gabrielle Giffords. Let's listen in.

REP. JOHN BOEHNER (R), SPEAKER OF THE HOUSE: Members of Congress, I have the high privilege and distinct honor of presenting to you, the president of the United States.

OBAMA: Thank you so much. Thank you very much. Thank you. Thank you. Please, be seated.

Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans, last month I went to Andrews Air Force Base and welcomed home some of our last troops to serve in Iraq. Together, we offered a final, proud salute to the colors under which more than a million of our fellow citizens fought, and several thousand gave their lives.

We gather tonight knowing that this generation of heroes has made the United States safer and more respected around the world.


For the first time in nine years, there are no Americans fighting in Iraq.


For the first time in two decades, Osama bin Laden is not a threat to this country.


Most of Al Qaida's top lieutenants have been defeated. The Taliban's momentum has been broken. And some troops in Afghanistan have begun to come home.

These achievements are a testament to the courage, selflessness, and teamwork of America's armed forces. At a time when too many of our institutions have let us down, they exceed all expectations. They're not consumed with personal ambition. They don't obsess over their differences. They focus on the mission at hand. They work together.

Imagine what we could accomplish if we followed their example.


Think about the America within our reach: a country that leads the world in educating its people; an America that attracts a new generation of high-tech manufacturing and high-paying jobs; a future where we're in control of our own energy; and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off and responsibility is rewarded.

We can do this. I know we can, because we've done it before. At the end of World War II, when another generation of heroes returned home from combat, they built the strongest economy and middle class the world has ever known.


My grandfather, a veteran of Patton's Army, got the chance to go to college on the G.I. Bill. My grandmother, who worked on a bomber assembly line, was part of a workforce that turned out the best products on Earth.

The two of them shared the optimism of a nation that had triumphed over a depression and fascism. They understood they were part of something larger, that they were contributing to a story of success that every American had a chance to share: the basic American promise that if you worked hard, you could do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement.

The defining issue of our time is how to keep that promise alive. No challenge is more urgent. No debate is more important. 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, 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 aren't Democratic values or Republican values, but American values. And we have to reclaim them.

Let's remember how we got here. Long before the recession, jobs and manufacturing began leaving our shores. Technology made businesses more efficient, but also made some jobs obsolete. Folks at the top saw their incomes rise like never before, but most hard- working Americans struggled with costs that were growing, paychecks that weren't, and personal debt that kept piling up.

In 2008, the house of cards collapsed. We learned that mortgages had been sold to people who couldn't afford or understand them. Banks had made huge bets and bonuses with other people's money. Regulators had looked the other way, or didn't have the authority to stop the bad behavior.

It was wrong. It was irresponsible. And it plunged our economy into a crisis that put millions out of work, saddled us with more debt, and left innocent, hard-working Americans holding the bag.

In the six months before I took office, we lost nearly 4 million jobs. And we lost another 4 million before our policies were in full effect. Those are the facts.

But so are these. In the last 22 months, businesses have created more than 3 million jobs.


Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s. Together, we've agreed to cut the deficit by more than $2 trillion. And we've put in place new rules to hold Wall Street accountable, so a crisis like this never happens again.


The state of our union is getting stronger, and we've come too far to turn back now.

As long as I'm president, I will work with anyone in this chamber to build on this momentum. 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.


No, we will not go back to an economy weakened by outsourcing, bad debt, and phony financial profits. Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that's built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

This blueprint begins with American manufacturing.

On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen.

In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world's number-one automaker.


Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs.

We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.


What's happening in Detroit can happen in other industries. It can happen in Cleveland and Pittsburgh and Raleigh. We can't bring every job back that's left our shore. But right now, it's getting more expensive to do business in places like China. Meanwhile, America is more productive.

A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home.


Today, for the first time in 15 years, Master Lock's unionized plant in Milwaukee is running at full capacity.


So we have a huge opportunity at this moment to bring manufacturing back. But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.

(APPLAUSE) We should start with our tax code. Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it.

So let's change it. First, if you're a business that wants to outsource jobs, you shouldn't get a tax deduction for doing it.


That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home.


Second, no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.


From now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America.


Third, if you're an American manufacturer, you should get a bigger tax cut. If you're a high-tech manufacturer, we should double the tax deduction you get for making your products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.

So my message...


My message is simple. It is time to stop rewarding businesses that ship jobs overseas and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I will sign them right away.


We're also making it easier for American businesses to sell products all over the world. Two years ago, I set a goal of doubling U.S. exports over five years. With the bipartisan trade agreements we signed into law, we're on track to meet that goal ahead of schedule.


And soon there will be millions of new customers for American goods in Panama, Colombia, and South Korea. Soon, there will be new cars on the streets of Seoul imported from Detroit, and Toledo, and Chicago.


I will go anywhere in the world to open new markets for American products. And I will not stand by when our competitors don't play by the rules. We've brought trade cases against China at nearly twice the rate as the last administration, and it's made a difference.


Over a thousand Americans are working today because we stopped a surge in Chinese tires. But we need to do more. It's not right when another country lets our movies, music, and software be pirated. It's not fair when foreign manufacturers have a leg up on ours only because they're heavily subsidized.

Tonight, I'm announcing the creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China. There will be more inspections...


There will be more inspections to prevent counterfeit or unsafe goods from crossing our borders. And this Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing financing or new markets like Russia. Our workers are the most productive on Earth, and if the playing field is level, I promise you: America will always win.


I also hear from many business leaders who want to hire in the United States but can't find workers with the right skills. Growing industries in science and technology have twice as many openings as we have workers who can do the job. Think about that: openings at a time when millions of Americans are looking for work.

It's inexcusable. And we know how to fix it.

Jackie Bray is a single mom from North Carolina who was laid off from her job as a mechanic. Then Siemens opened a gas turbine factory in Charlotte and formed a partnership with Central Piedmont Community College. The company helped the college design courses in laser and robotics training. It paid Jackie's tuition, then hired her to help operate their plant.

I want every American looking for work to have the same opportunity as Jackie did. Join me in a national commitment to train 2 million Americans with skills that will lead directly to a job.


My administration has already lined up more companies that want to help. Model partnerships between businesses like Siemens and community colleges in places like Charlotte, and Orlando, and Louisville are up and running. Now you need to give more community colleges the resources they need to become community career centers, places that teach people skills that businesses are looking for right now, from data management to high-tech manufacturing.

And I want to cut through the maze of confusing training programs so that from now on people like Jackie have one program, one website, and one place to go for all the information and help that they need. It is time to turn our unemployment system into a re- employment system that puts people to work.


These reforms will help people get jobs that are open today. But to prepare for the jobs of tomorrow, our commitment to skills and education has to start earlier.

For less than 1 percent of what our nation spends on education each year, we've convinced nearly every state in the country to raise their standards for teaching and learning, the first time that's happened in a generation.

But challenges remain. And we know how to solve them.

At a time when other countries are doubling down on education, tight budgets have forced states to lay off thousands of teachers. We know a good teacher can increase the lifetime income of a classroom by over $250,000. A great teacher can offer an escape from poverty to the child who dreams beyond his circumstance.

Every person in this chamber can point to a teacher who changed the trajectory of their lives. Most teachers work tirelessly, with modest pay, sometimes digging into their own pocket for school supplies, just to make a difference.

Teachers matter. So instead of bashing them, or defending the status quo, let's offer schools a deal. Give them the resources to keep good teachers on the job, and reward the best ones. And in return, grant schools flexibility: to teach with creativity and passion; to stop teaching to the test...


... and to replace teachers who just aren't helping kids learn. That's a bargain worth making.


We also know that when students don't walk away from their education, more of them walk the stage to get their diploma. When students are not allowed to drop out, they do better. So tonight, I am proposing that every state, every state, requires that all students stay in high school until they graduate or turn 18.


When kids do graduate, the most daunting challenge can be the cost of college. At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July. (APPLAUSE)

Extend the tuition tax credit we started that saves millions of middle-class families thousands of dollars. And give more young people the chance to earn their way through college by doubling the number of work-study jobs in the next five years.


Of course, it's not enough for us to increase student aid. We can't just keep subsidizing skyrocketing tuition. We'll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down.

Now, recently, I spoke with a group of college presidents who've done just that. Some schools redesign courses to help students finish more quickly. Some use better technology. The point is, it's possible.

So 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 is an economic imperative that every family in America should be able to afford.

And let's also remember that hundreds of thousands of talented, hard-working students in this country face another challenge: the fact that they aren't yet American citizens. Many were brought here as small children, are American through and through, yet they live every day with the threat of deportation. Others came more recently, to study business and science and engineering, but as soon as they get their degree, we send them home to invent new products and create new jobs somewhere else. That doesn't make sense.

I believe as strongly as ever that we should take on illegal immigration. That's why my administration has put more boots on the border than ever before. That's why there are fewer illegal crossings than when I took office.

The opponents of action are out of excuses. We should be working on comprehensive immigration reform right now.


But if election-year politics keeps Congress from acting on a comprehensive plan, let's at least agree to stop expelling responsible young people who want to staff our labs, start new businesses, defend this country. Send me a law that gives them the chance to earn their citizenship; I will sign it right away.


You see, an economy built to last is one where we encourage the talent and ingenuity of every person in this country. That means women should earn equal pay for equal work.


It means we should support everyone who's willing to work and every risk-taker and entrepreneur who aspires to become the next Steve Jobs.

After all, innovation is what America has always been about. Most new jobs are created in startups and small businesses. So let's pass an agenda that helps them succeed. Tear down regulations that prevent aspiring entrepreneurs from getting the financing to grow.


Expand tax relief to small businesses that are raising wages and creating good jobs. Both parties agree on these ideas. So put them in a bill, and get it on my desk this year.


Innovation also demands basic research. Today, the discoveries taking place in our federally financed labs and universities could lead to new treatments that kill cancer cells but leave healthy ones untouched, new lightweight vests for cops and soldiers that can stop any bullet.

Don't gut these investments in our budget. Don't let other countries win the race for the future. Support the same kind of research and innovation that led to the computer chip and the Internet, to new American jobs and new American industries.

And nowhere is the promise of innovation greater than in American-made energy. Over the last three years, we've opened millions of new acres for oil and gas exploration. And tonight, I'm directing my administration to open more than 75 percent of our potential offshore oil and gas resources.


Right now -- right now, American oil production is the highest that it's been in eight years. That's right, eight years. Not only that, last year, we relied less on foreign oil than in any of the past 16 years.


But with only 2 percent of the world's oil reserves, oil isn't enough. 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.

We have a supply of natural gas that can last America nearly 100 years.

(APPLAUSE) And my administration will take every possible action to safely develop this energy. Experts believe this will support more than 600,000 jobs by the end of the decade. And I'm requiring all companies that drill for gas on public lands to disclose the chemicals they use, because America will develop this resource without putting the health and safety of our citizens at risk.

The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don't have to choose between our environment and our economy.

And, by the way, it was public research dollars -- over the course of 30 years -- that helped develop the technologies to extract all this natural gas out of shale rock, reminding us that government support is critical in helping businesses get new energy ideas off the ground. Now...


... what's true for natural gas is just as true for clean energy. In three years, our partnership with the private sector has already positioned America to be the world's leading manufacturer of high-tech batteries. Because of federal investments, renewable energy use has nearly doubled, and thousands of Americans have jobs because of it.

When Bryan Ritterby was laid off from his job making furniture, he said he worried that, at 55, no one would give him a second chance. But he found work at Energetx, a wind turbine manufacturer in Michigan. Before the recession, the factory only made luxury yachts. Today, it's hiring workers like Bryan, who said, "I'm proud to be working in the industry of the future."

Our experience with shale gas, our experience with natural gas, shows us that the payoffs on these public investments don't always come right away. Some technologies don't pan out; some companies fail. But I will not walk away from the promise of clean energy. I will not walk away from workers like Bryan.


I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We've subsidized oil companies for a century. That's long enough.


It's time to end the taxpayer giveaways to an industry that rarely has been more profitable and double down on a clean energy industry that never has been more promising. Pass clean-energy tax credits. Create these jobs.


We can also spur energy innovation with new incentives. The differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change, but there's no reason why Congress shouldn't at least set a clean energy standard that creates a market for innovation.

So far, you haven't acted. Well, tonight, I will.

I'm directing my administration to allow the development of clean energy on enough public land to power 3 million homes. And I'm proud to announce that the Department of Defense, working with us, the world's largest consumer of energy, will make one of the largest commitments to clean energy in history, with the Navy purchasing enough capacity to power a quarter of a million homes a year.


Of course, the easiest way to save money is to waste less energy. So here's a proposal: Help manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings. Their energy bills will be $100 billion lower over the next decade, and America will have less pollution, more manufacturing, more jobs for construction workers who need them.

Send me a bill that creates these jobs.


Building this new energy future should be just one part of a broader agenda to repair America's infrastructure. So much of America needs to be rebuilt. We've got crumbling roads and bridges, a power grid that wastes too much energy, an incomplete high-speed broadband network that prevents a small-business owner in rural America from selling her products all over the world.

During the Great Depression, America built the Hoover Dam and the Golden Gate Bridge. After World War II, we connected our states with a system of highways. Democratic and Republican administrations invested in great projects that benefited everybody, from the workers who built them to the businesses that still use them today.

In the next few weeks, I will sign an executive order clearing away the red tape that slows down too many construction projects. But you need to fund these projects. Take the money we're no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.


There's never been a better time to build, especially since the construction industry was one of the hardest hit when the housing bubble burst. Of course, construction workers weren't the only ones who were hurt. So were millions of innocent Americans who've seen their home values decline. And while government can't fix the problem on its own, responsible homeowners shouldn't have to sit and wait for the housing market to hit bottom to get some relief.

And that's why I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust.


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 do the same. It's time to apply the same rules from top to bottom: no bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.

We've all paid the price for lenders who sold mortgages to people who couldn't afford them and buyers who knew they couldn't afford them. That's why we need smart regulations to prevent irresponsible behavior.


Rules to prevent financial fraud, or toxic dumping, or faulty medical devices, these don't destroy the free market. They make the free market work better.

Now, there's no question that some regulations are outdated, unnecessary, or too costly. In fact, I've approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.


I've ordered every federal agency to eliminate rules that don't make sense. We've already announced over 500 reforms, and just a fraction of them will save business and citizens more than $10 billion over the next five years.

We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain a spill, because milk was somehow classified as an oil. With a rule like that, I guess it was worth crying over spilled milk.


Now, I'm confident a farmer can contain a milk spill without a federal agency looking over his shoulder.




But I will not back down from making sure an oil company can contain the kind of oil spill we saw in the gulf two years ago.


I will not back down from protecting our kids from mercury poisoning or making sure that our food is safe and our water is clean. I will not go back to the days when health insurance companies had unchecked power to cancel your policy, deny your coverage, or charge women differently from men.


And I will not go back to the days when Wall Street was allowed to play by its own set of rules. The new rules we passed restore what should be any financial system's core purpose: getting funding to entrepreneurs with the best ideas, and getting loans to responsible families who want to buy a home, or start a business, or send their kids to college.

So if you are a big bank or financial institution, you're no longer allowed to make risky bets with your customers' deposits. You're required to write out a living will that details exactly how you'll pay the bills if you fail, because the rest of us are not bailing you out ever again.


And if you're a mortgage lender or a payday lender or a credit card company, the days of signing people up for products they can't afford with confusing forms and deceptive practices, those days are over. Today, American consumers finally have a watchdog in Richard Cordray, with one job: to look out for them.


We'll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people's investments. Some financial firms violate major antifraud laws because there's no real penalty for being a repeat offender. That's bad for consumers, and it's bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.

And tonight, I'm asking my attorney general to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

Now, a return to the American values of fair play and shared responsibility will help protect our people and our economy. But it should also guide us as we look to pay down our debt and invest in our future.

Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile.


People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let's agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay. Let's get it done.


When it comes to the deficit, we've already agreed to more than $2 trillion in cuts and savings. But we need to do more, and that means making choices.

Right now, we're poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans. Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households.

Right now, Warren Buffett pays a lower tax rate than his secretary.

Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else, like education and medical research, a strong military and care for our veterans? Because if we're serious about paying down our debt, we can't do both.

The American people know what the right choice is. So do I. As I told the speaker this summer, I'm prepared to make more reforms that rein in the long-term costs of Medicare and Medicaid and strengthen Social Security, so long as those programs remain a guarantee of security for seniors.

But in return, we need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes.


Tax reform should follow the Buffett rule: If you make more than a million dollars a year, you should not pay less than 30 percent in taxes.

And my Republican friend Tom Coburn is right: Washington should stop subsidizing millionaires.

In fact, if you're earning a million dollars a year, you shouldn't get special tax subsidies or deductions. On the other hand, if you make under $250,000 a year -- like 98 percent of American families -- your taxes shouldn't go up. You're the ones struggling with rising costs and stagnant wages.


You're the ones who need relief.

Now, 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. We don't begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it's not because they envy the rich. It's because they understand that when I get a tax break I don't need and the country can't afford, it either adds to the deficit or somebody else has to make up the difference, like a senior on a fixed income, or a student trying to get through school, or a family trying to make ends meet.

That's not right. Americans know that's not right. They know that this generation's success is only possible because past generations felt a responsibility to each other, and to the future of their country, and they know our way of life will only endure if we feel that same sense of shared responsibility. That's how we'll reduce our deficit. That's an America built to last.


Now, I recognize that people watching tonight have differing views about taxes and debt, energy and health care. But no matter what party they belong to, I bet most Americans are thinking the same thing right about now: Nothing will get done in Washington this year, or next year, or maybe even the year after that, because Washington is broken. Can you blame them for feeling a little cynical?

The greatest blow to our confidence in our economy last year didn't come from events beyond our control. It came from a debate in Washington over whether the United States would pay its bills or not. Who benefited from that fiasco?

I've talked tonight about the deficit of trust between Main Street and Wall Street. But the divide between this city and the rest of the country is at least as bad, and it seems to get worse every year.

Now, some of this has to do with the corrosive influence of money in politics. So together, let's take some steps to fix that. Send me a bill that bans insider trading by members of Congress; I will sign it tomorrow.


Let's limit any elected official from owning stocks in industries they impact. Let's make sure people who bundle campaign contributions for Congress can't lobby Congress, and vice versa, an idea that has bipartisan support, at least outside of Washington.

Some of what's broken has to do with the way Congress does its business these days. A simple majority is no longer enough to get anything -- even routine business -- passed through the Senate.


Neither party has been blameless in these tactics. Now both parties should put an end to it.

(APPLAUSE) For starters, I ask the Senate to pass a simple rule, that all judicial and public service nominations receive a simple up-or-down vote within 90 days.


The executive branch also needs to change. Too often, it's inefficient, outdated, and remote.


That's why I've asked this Congress to grant me the authority to consolidate the federal bureaucracy so that our government is leaner, quicker, and more responsive to the needs of the American people.


Finally, none of this can happen unless we also lower the temperature in this town. 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 commonsense ideas.

I'm a Democrat. But I believe what Republican Abraham Lincoln believed, that government should do for people only what they cannot do better by themselves, and no more.


That's why my education reform offers more competition and more control for schools and states. That's why we're getting rid of regulations that don't work. That's why our health care law relies on a reformed private market, not a government program.

On the other hand, even my Republican friends who complain the most about government spending have supported federally financed roads, and clean-energy projects, and federal offices for the folks back home.

The point is, we should all want a smarter, more effective government. And while we may not be able to bridge our biggest philosophical differences this year, we can make real progress.

With or without this Congress, I will keep taking actions that help the economy grow. But I can do a whole lot more with your help, because when we act together, there's nothing the United States of America can't achieve.


That's the lesson we've learned from our actions abroad over the last few years. Ending the Iraq war has allowed us to strike decisive blows against our enemies.

From Pakistan to Yemen, the Al Qaida operatives who remain are scrambling, knowing that they can't escape the reach of the United States of America.


From this position of strength, we've begun to wind down the war in Afghanistan. Ten thousand of our troops have come home. Twenty- three thousand more will leave by the end of this summer. This transition to Afghan lead will continue, and we will build an enduring partnership with Afghanistan, so that it is never again a source of attacks against America.


As the tide of war recedes, a wave of change has washed across the Middle East and North Africa, from Tunis to Cairo, from Sana'a to Tripoli.

A year ago, Gadhafi was one of the world's longest-serving dictators, a murderer with American blood on his hands. Today, he is gone.

And in Syria, I have no doubt that the Assad regime will soon discover that the forces of change cannot be reversed and that human dignity cannot be denied.


How this incredible transformation will end remains uncertain, but we have a huge stake in the outcome. And while it's ultimately up to the people of the region to decide their fate, we will advocate for those values that have served our own country so well. We will stand against violence and intimidation. We will stand for the rights and dignity of all human beings, men and women, Christians, Muslims, and Jews. We will support policies that lead to strong and stable democracies and open markets, because tyranny is no match for liberty.

And we will safeguard America's own security against those who threaten our citizens, our friends, and our interests. Look at Iran. Through the power of our diplomacy, a world that was once divided about how to deal with Iran's nuclear program now stands as one. The regime is more isolated than ever before. Its leaders are faced with crippling sanctions. And as long as they shirk their responsibilities, this pressure will not relent. 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.


But a peaceful resolution of this issue is still possible, and far better. And if Iran changes course and meets its obligations, it can rejoin the community of nations.

The renewal of American leadership can be felt across the globe. Our oldest alliances in Europe and Asia are stronger than ever. Our ties to the Americas are deeper. Our iron-clad commitment -- and I mean iron-clad -- to Israel's security has meant the closest military cooperation between our two countries in history.


We've made it clear that America is a Pacific power, and a new beginning in Burma has lit a new hope.

From the coalitions we've built to secure nuclear materials, to the missions we've led against hunger and disease, from the blows we've dealt our enemies, to the enduring power of our moral example, America is back. Anyone who tells you otherwise, anyone who tells you that America is in decline or that our influence has waned, doesn't know what they're talking about.


That's not the message we get from leaders around the world who are eager to work with us. That's not how people feel from Tokyo to Berlin, from Cape Town to Rio, where opinions of America are higher than they've been in years.

Yes, the world is changing. No, we can't control every event. But America remains the one indispensable nation in world affairs. And as long as I'm president, I intend to keep it that way.


That's why, working with our military leaders, I've proposed a new defense strategy that ensures we maintain the finest military in the world, while saving nearly half a trillion dollars in our budget. To stay one step ahead of our adversaries, I've already sent this Congress legislation that will secure our country from the growing danger of cyber threats.


Above all, our freedom endures because of the men and women in uniform who defend it.


As they come home, we must serve them as well as they've served us. That includes giving them the care and the benefits they have earned, which is why we've increased annual V.A. spending every year I've been president.


And it means enlisting our veterans in the work of rebuilding our nation. With the bipartisan support of this Congress, we're providing new tax credits to companies that hire vets. Michelle and Jill Biden have worked with American businesses to secure a pledge of 135,000 jobs for veterans and their families. And tonight, I'm proposing a Veterans Job Corps that will help our communities hire veterans as cops and firefighters, so that America is as strong as those who defend her.


Which brings me back to where I began. Those of us who've been sent here to serve can learn a thing or two from the service of our troops. When you put on that uniform, it doesn't matter if you're black or white, Asian, Latino, Native American, conservative, liberal, rich, poor, gay, straight. When you're marching into battle, you look out for the person next to you, or the mission fails. When you're in the thick of the fight, you rise or fall as one unit, serving one nation, leaving no one behind. You know, one of my proudest possessions is the flag that the SEAL team took with them on the mission to get bin Laden. On it are each of their names. Some may be Democrats; some may be Republicans. But that doesn't matter. Just like it didn't matter that day in the Situation Room, when I sat next to Bob Gates, a man who was George Bush's defense secretary, and Hillary Clinton, a woman who ran against me for president.

All that mattered that day was the mission. No one thought about politics. No one thought about themselves.

One of the young men involved in the raid later told me that he didn't deserve credit for the mission. It only succeeded, he said, because every single member of that unit did their job: the pilot who landed the helicopter that spun out of control; the translator who kept others from entering the compound; the troops who separated the women and children from the fight; the SEALs who charged up the stairs. More than that, the mission only succeeded because every member of that unit trusted each other, because you can't charge up those stairs into darkness and danger unless you know that there's somebody behind you watching your back.

So it is with America. Each time I look at that flag, I'm reminded that our destiny is stitched together like those fifty stars and those thirteen stripes. No one built this country on their own. This nation is great because we built it together. This nation is great because we worked as a team. This nation is great because we get each other's backs. And if we hold fast to that truth, in this moment of trial, there is no challenge too great; no mission too hard. As long as we're joined in common purpose, as long as we maintain our common resolve, our journey moves forward, and our future is hopeful, and the state of our union will always be strong.

Thank you, God bless you, and may God bless the United States of America.

BLITZER: The president of the United States speaking to a joint session of Congress, speaking for well over an hour on a wide range of issues, mostly domestic issues, mostly issues involving jobs, jobs, and jobs.

There's Gabby Giffords, the congresswoman from Arizona who was injured almost exactly a year ago, badly injured in a gun attack, the president going down and receiving some members of his Cabinet, members of the Joint Chiefs of Staffs, leaders of Congress right now.

And he will be walking out of the chamber.

I want to go around and get some initial thoughts from all of our correspondents and analysts.

Gloria Borger, what do you think?

GLORIA BORGER, CNN CORRESPONDENT: Well, I thought what the president gave us tonight was a laundry list of things he wants to do that he believes government can actually help with in terms of energy, education, manufacturing.

And most important, what he did was he laid down a marker about tax reform. And he said that if you make more than a million dollars a year, Wolf, you should not pay less than 30 percent in taxes. That stands in stark contrast to the news we heard about Mitt Romney and his great wealth and his 14 percent tax rate. Laid down the marker.

BLITZER: Yes. He obviously didn't mention Mitt Romney by name or anything, but that was obviously a point there.

John King, what did you think?

KING: Wolf, no question that the American people are going to have a very, very clear contrast this November on so many issues.

The president defended his plan to try to raise taxes on the rich. He defended more government intervention. He didn't use the word stimulus, but more government spending to help the economy, keep teachers on payrolls, spending on infrastructure.

He defended his health care law. And he defended those new financial regulations, the Dodd-Frank bill passed after the big meltdown of 2007 and 2008, said he would not go back repeatedly and saying he will not go back on policy. And he also on foreign policy said America is back, and directly rebutted -- said anyone who says otherwise don't know what they're talking about.

Guess what? Go down that list I just mentioned, look at any of the Republican candidates running for president, and you will hear just the opposite. The American public got an sense tonight of the very clear contrast they will have to decide between now and November.

BLITZER: Yes. He definitely was referring to the Republican presidential candidates when he said that, if anyone says our influence has waned, he says don't know what they're talking about.

Jessica Yellin is over at the White House.

I would say a pretty defiant president of the United States, Jessica.

YELLIN: Defiant. And I think you heard him try to inoculate himself, Wolf, against some of the attacks Republicans will lodge against him during the course of this campaign about the collapse of the housing market, about -- over this Keystone XL pipeline that he didn't support, and over some of the job losses.

He proposed a new housing program. He talked about the natural gas industry that he is propping up -- or that he plans to expand. And he emphasized that the actual oil industry, that it has expanded under him, which is something that I think you will hear about when he's hitting the campaign trail.

And then he emphasized the auto industry and how he's helped bolster that, a big, big, big message you will hear him push in Michigan. And then this theme about Congress and emphasizing the ethics themes, something that he seemed to lecture Congress on a bit there, but it was a subtle way to sort of distance himself from Congress without actually taking them to task while he's standing right in front of them tonight -- Wolf.

BLITZER: All right, Jessica.

Dana Bash is inside the chamber as we see the president getting ready to leave.


He' doing some gripping and grinning before he heads out.

I just want to say that this morning, John Boehner told a few of us that he and most Republicans and the president and most Democrats are from different planets. And you definitely saw that tonight, just even in the dynamic of this room, of this House chamber.

The president making clear that his solution for the most part is to invest public money. And every time he said that, you saw Republicans basically sitting on their hands, stone cold, no applause at all.

One thing I definitely want to point out, though, there was a very interesting dynamic when you're talking about bipartisanship. And that had to do with Gabby Giffords. She was sitting next to Jeff Flake, a Republican congressman from her home state of Arizona.

Every time she wanted to get up to demonstrate applause or to stand up with her fellow Democrats, he helped her up. So, many, many times, he was probably the only Republican standing in the room because he was helping his fellow Democrat stand up.

Ironically, if Gabby Giffords had not been shot, she might have been running for the U.S. Senate against Jeff Flake. It was certainly a moment to watch over and over again as he helped her stand up.

BLITZER: A very emotional moment for all of us, everyone watching.

David Gergen, you served for four presidents. What do you think? What kind of grade would you give the president for this State of the Union address?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: It was a politically shrewd speech, Wolf, in the sense that I think it will help mobilize the Democrats. It will win over some independents.

I think he successful reframed the conversation after the Republican debates. He had a very different take, a very different agenda, as has been suggested, far more government intervention to solve problems, far more spending. He moved away from talking about deficits that occupied our time so much.

Republicans are going to have -- as John King said, there's a huge, sharp contrast. I did think that, as on many occasions, if the speech had been 30 percent shorter, it would have been 30 percent more powerful. But Bill Clinton gave long State of the Union addresses. They were very, very popular. We will have to see. I may be wrong.

BLITZER: Yes. There's no doubt.

And we're awaiting the Republican response from Mitch Daniels, the governor of Indiana.

Paul Begala, speaking of Bill Clinton, you wrote -- helped write, at least, several of his State of the Union addresses. Did this president need an editor to cut it down a little bit today?

PAUL BEGALA, CNN POLITICAL ANALYST: Oh, I'm weird this way. I loved it, and particularly that conclusion, Wolf. My goodness, that was worth staying for. It was really powerful.

The whole tone was much more populist than this president has generally been. It suggests that he kind of relishes now the idea of stepping up and being campaigner in chief. The other thing that struck me, though, both at the beginning and then that powerful conclusion -- I'm talking about that SEAL Team Six -- was now how authentically and comfortably and confidently he inhabits the role of commander in chief.

Every new president, you can almost see it in their eyes. When those guys at Marine One salute them, they -- first, they kind of don't know what to do. No longer. This president is very comfortable being the commander in chief, and he talked about it with such power tonight. I thought it was very moving.

And, politically, I thought it was a great speech, but just as a citizen, I love seeing my commander in chief being that powerful.

BLITZER: He's walking out of the chamber right now, the president of the United States.

Ari Fleischer, you worked for President George W. Bush. You served in Congress earlier. You worked in Congress. What did you think of that speech?

ARI FLEISCHER, CNN CONTRIBUTOR: Wolf, there was hardly anything in the speech I liked.

But let me start with the one thing I the liked and liked a lot. And that was, I salute the president, the courageous decision to authorize the mission to get bin Laden. President Obama deserves the credit for that. And he got it tonight.

But the rest of it, it was this whole emphasis, this whole reason for being in government is to spend other people's money, is to take from those who have money and to redistribute it to others that he thinks should have the money instead.

This is his whole raison d'etre. This is everything he seeks to do in the presidency, the body language, the emotion. There was really very little to nothing there on reducing the debt, very little to nothing there on saving Social Security or on Medicare, or, as we're about to hear from Mitch Daniels on what Mitch has called the red menace of death, really just passing mentions.

It wasn't the emphasis of this speech tonight. You get the sense what he really wants to talk about is how to spend more of other people's money on this program, on that program, on this program, because the federal government, through the creation of a lot of their entitlements and more spending programs, know how to do things better than everybody else. That's what I heard tonight.

BLITZER: And let me get Roland Martin to weigh in as well.

Roland, a lot of those lines really appealed to what we call the Democratic base. You saw a lot of those liberal Democrats standing up and applauding enthusiastically.

ROLAND MARTIN, CNN CONTRIBUTOR: Yes, but the lines also appealed to American people.

Look, we can talk about the people in the room, but the president basically is saying is, Congress, get your butt to work. Paul is right. The close there was absolutely strong. Any preacher would love to have that kind of close, when said it's the mission that matters.

And I will tell you, Ari, if you're out there, Republican or Democrat, and you're trying to keep your home, you like what the president had to say. If you're a Republican or a Democrat and you want your kids in college and you want that tax credit, you have no problem with what the president had to say.

And so I think this is not a question of let's focus on the debt or whatever. This was a president saying, I'm speaking to the American people, and, Congress, it's time for you to stop playing games and be like our military, be about one nation, one accord. Let's move together.

BLITZER: Candy Crowley...


BLITZER: Hold on, Ari. I just want to bring Candy in for a second.

Candy, a lot of themes the president is going to be delivering in the course of the next many months leading up to November, we heard today.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: We did. This was the blueprint. You will hear bits and pieces of it as he moves forward, as a matter of fact, as he starts tomorrow, and he's got a couple, three days of campaigning or going out and talking to the American public, however you would like to look at it. And you will hear these themes again, energy, and education, moving forward for fairness.

I thought that the speech itself, there certainly were some things intended, I think, and Jessica spoke to this, intended to kind of draw the sting from Republicans. I thought one of the more interesting lines in it was about, it's time to apply the same rules from top to bottom, no bailouts, no handouts, and no cop-outs, sort of addressing that fairness issue I think that Republicans keep bringing up and saying is really about envy.

So, I thought that was good. And I agree with both Paul and Roland that I thought it was totally interesting that he wrapped the entire economic speech at both ends with -- beginning with the Iraq war is over and ending with, and, by the way, Osama bin Laden is dead, because the truth is this president gets higher marks for his handling of foreign policy now than he does for his handling of the economy.

I thought that was a very astute political move of him.


Ari Fleischer, you wanted to make another point.


I think Roland's point about how the public will receive the speech, in 2008, the public loved Barack Obama's speeches. In 2009, they really liked them. In 2010, they liked them. In 2011, they didn't like them.

Now in 2012, the people have heard so much of this before, yet the economy is bad, debt is sky-high, spending is out of control, and unemployment is terrible. This is the big problem Barack Obama has in 2012. It goes beyond the beauty of words tonight and to the fact that what he has done hasn't worked; in fact, it's aggravated a lot of the problems we have.


MARTIN: Wolf, can I please make a comment here?

BLITZER: Go ahead.

MARTIN: This is very simple.

I wasn't speaking about a speech. I was speaking about policy. Look, I grew up in Houston. That's an oil and gas city, an oil and gas state. Me and my brother and sister, all three of us in college at one time. If you're a parent watching right now, you heard the president talk about policy when it comes to keeping kids in school, a policy when it comes to keeping your home being foreclosed. That's not a speech. That's policy, Ari.

BLITZER: All right, guys, hold on for a second, because we're about to get the Republican response.

Mitch Daniels is the governor of Indiana. He is going to be delivering the Republican response right now. It's always much more difficult to deliver an effective response, because it's usually not before an audience. There won't be any applause.

Let's listen.

GOV. MITCH DANIELS (R ), INDIANA: Greetings from the home of Super Bowl XLVI.

The status of loyal opposition imposes on those out of power some serious responsibilities: to show respect for the presidency and its occupant, to express agreement where it exists.

Republicans tonight salute our president, for instance, for his aggressive pursuit of the murderers of 9/11 and for bravely backing long overdue changes in public education. I personally would add to that list admiration for the strong family commitment that he and the first lady have displayed to a nation sorely needing such examples.

On these evenings, presidents naturally seek to find the sunny side of our national condition. But 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.

The president did not cause the economic and fiscal crises that continue in America tonight, but he was elected on a promise to fix them, and he cannot claim that the last three years have made things anything but worse. The percentage of Americans with a job is at the lowest in decades. One in five men of prime working age and nearly half of all persons under 30 did not go to work today.

In three short years, an unprecedented explosion of spending, with borrowed money, has added trillions to an already unaffordable national debt. And yet the president has put us on a course to make it radically worse in the years ahead.

The federal government now spends one of every four dollars in the entire economy. It borrows one of every three dollars it spends. No nation, no entity, large or small, public or private, can thrive, or survive intact, with debts as huge as ours.

The president's grand experiment in trickle-down government has held back rather than sped economic recovery. He seems to sincerely believe we can build a middle class out of government jobs paid for with borrowed dollars. In fact, it works the other way: A government as big and bossy as this one is maintained on the backs of the middle class and those who hope to join it.

Those punished most by the wrong turns of the last three years are those unemployed or underemployed tonight and those so discouraged they've abandoned the search for work altogether. And no one's been more tragically harmed than the young people of this country, the first generation in memory to face a future less promising than their parents did.

As Republicans, our first concern is for those waiting tonight to begin or resume the climb up life's ladder. We do not accept that ours will ever be a nation of haves and have-nots. We must always be a nation of haves and soon-to-haves.

In our economic stagnation and indebtedness, we're only a short distance behind Greece, Spain, and other European countries now facing economic catastrophe. But ours is a fortunate land. Because the world uses our dollar for trade, we have a short grace period to deal with our dangers. But time is running out if we're to avoid the fate of Europe and those once-great nations of history that fell from the position of world leadership.

So 2012 is a year of true opportunity, maybe our last, to restore an America of hope and upward mobility and greater equality. The challenges aren't matters of ideology or party preference. The problems are simply mathematical, and the answers are purely practical.

An opposition that would earn its way back to leadership must offer not just criticism of failures that anyone can see, but a positive and credible plan to make life better, particularly for those aspiring to make a better life for themselves. Republicans accept this duty gratefully.

The routes back to an America of promise and to a solvent America that can pay its bills and protect its vulnerable start in the same place. The only way up for those suffering tonight, and the only way out of the dead end of debt into which we've driven, is a private economy that begins to grow and create jobs, real jobs, at a much faster rate than today. Contrary to the president's constant disparagement of people in business, it's one of the noblest of human pursuits. The late Steve Jobs -- what a fitting name he had -- created more of them than all those stimulus dollars the president borrowed and blew.

Out here in Indiana, when a businessperson asks me what he can do for our state, I say, "First, make money. Be successful. If you make a profit, you'll have something left to hire someone else, and some to donate to the good causes we love."

The extremism that stifles the development of homegrown energy, or cancels a perfectly safe pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy. It must be replaced by a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private-sector jobs that restore opportunity for all and generate the public revenues to pay our bills.

That means a dramatically simpler tax system of fewer loopholes and lower rates, a pause in the mindless piling on of expensive new regulations that devour dollars that otherwise could be used to hire somebody. It means maximizing on the new domestic energy technologies that are the best break our economy has gotten in years.

There's a second item on our national must-do list: We must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three- quarters of a century, respectively, it's not surprising they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too.

Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us. Now, we can't, so the dollars we have should be devoted to those who need them most.

The mortal enemies of Social Security and Medicare are those who, in contempt of the plain arithmetic, continue to mislead Americans that we should change nothing. Listening to them much longer will mean that these proud programs implode, and take the American economy with them. It'll mean that coming generations are denied the jobs they need in their youth and the protection they deserve in their later years.

It's absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. There are smart ways and dumb ways to do this: The dumb way is to raise rates in a broken, grossly complex tax system, choking off growth without bringing in the revenues we need to meet our debts. The better course is to stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth.

It's not fair and it's not true for the president to attack Republicans in Congress as obstacles on these questions. They and they alone have passed bills to reduce borrowing, reform entitlements, and encourage new job creation, only to be shot down time and time again by the president and his Democratic Senate allies.

This year, it falls to Republicans to level with our fellow citizens about this reality: If we fail to act to grow the private sector and save the safety net, nothing else will matter much. But to make such action happen, we also must work, in ways we Republicans have not always practiced, to bring Americans together.

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. If we fail to shift to a pro-jobs, pro- growth economic policy, there'll never be enough public revenue to pay for our safety net, national security, or whatever size government we decide to have. As a loyal opposition, who put patriotism and national success ahead of party or ideology or any self-interest, we say that anyone who will join us in the cause of growth and solvency is our ally, and our friend. We will speak the language of unity. Let us rebuild our finances, and the safety net, and reopen the door to the stairway upward; any other disagreements we may have can wait.

You know, the most troubling contention in our national life these days isn't about economics, or policy at all. It's about us, as a free people. In two alarming ways, that contention is that we Americans just can't cut it anymore.

In word and deed, the president and his allies tell us that we just cannot handle ourselves in this complex, perilous world without their benevolent protection. Left to ourselves, we might pick the wrong health insurance, the wrong mortgage, the wrong school for our kids; why, unless they stop us, we might pick the wrong light bulb.

A second view, which I'll admit some Republicans also seem to hold, is that we Americans are no longer up to the job of self- government. We can't do the simple math that proves the unaffordability of today's safety net programs, or all the government we now have. We will fall for the con job that says we can just plow ahead and someone else will pick up the tab. We will allow ourselves to be pitted one against the other, blaming our neighbor for troubles worldwide trends or our own government has caused.

2012 must be the year we prove the doubters wrong. The year we strike out boldly not merely to avert national bankruptcy, but to say to a new generation that America is still the world's premier land of opportunity. Republicans will speak for those who believe in the dignity and capacity of the individual citizen; who believe that government is meant to serve the people rather than supervise them; who trust Americans enough to tell them the plain truth about the fix we are in, and to lay before them a specific, credible program of change big enough to meet the emergency we are facing.

We will advance our positive suggestions with confidence, because we know that Americans are still a people born to liberty. There is nothing wrong with the state of our union that the American people, addressed as free-born, mature citizens, cannot set right. Republicans in 2012 welcome all our countrymen to a program of renewal that rebuilds the dream for all, and makes our "city on a hill" shine once again.

BLITZER: So we've now heard two aspects of the State of the Union. One from the president of the United States. A very different one from Mitch Daniels, the Republican governor of Indiana. We're going to continue our coverage right now with ANDERSON COOPER 360 -- Anderson.

COOPER: Coverage is going to continue until the midnight hour. If you're just joining us on this, you have been watching the president's State-of-the-Union address. Senior presidential advisor David Plouffe joins us shortly. So does Tea Party Republican, Senator Jim DeMint. President Obama tonight in his third annual message to Congress, laying out his economic agenda and his political road map for campaign 2012, demanding action from Congress, outlining steps he's taking that don't need legislation, that don't need Congress. The state of the union, he said, is getting stronger.

Indiana Governor Mitch Daniels just moments ago giving the Republican response. We'll show you exclusively how a panel of undecided voters -- Democrats, independents and Republicans -- reacted to what they heard in real-time with dial testing. As I said, we are live to the midnight hour. So is our panel: chief political correspondent and host of CNN's "STATE OF THE UNION," Candy Crowley; senior political analyst, David Gergen; chief national correspondent, John King, host of "JOHN KING USA"; chief political analyst, Gloria Berger; Democratic strategist Paul Begala; political analyst Roland Martin; and former Bush White House press secretary Ari Fleischer. The gang's all here.

Just quickly, Candy Crowley, any surprises tonight?

CROWLEY: I don't think any surprises. I think it was, you know, a solid speech. Again, I think the idea of book-ending it with two foreign policy achievements -- the end of the war in Iraq and the death of Osama bin Laden -- made it a very sort of solid speech and a reminder to voters, "Hey, by the way, remember, here's the two things I did." And as I mentioned before, this is a president who gets higher marks right now for his foreign policy than he does for the economy.

COOPER: It was a populist speech, David Gergen. But was it possible? I mean, a lot of the things he's suggesting, that states require that students have to stay in high school until 18...

GERGEN: Yes. Well, it's a nice call, but no, much of this will not happen.

I think this was far more designed to be an agenda for his second term too, to take it to the public. To find out on the hostings. Take it into the debates in October. I did not. But I agree with Candy: I don't think there were any surprises there.

I just think it was politically deft from his standpoint. And that is I think he showed Democrats that he's willing to fight. That he's got some fresh ideas. I think he was deft in the way he shifted the emphasis away from deficits and away from jobs, onto things like energy and skills and manufacturing. He's trying to shake this up and also keep the focus on fairness.

I must also tell you that I thought Mitch Daniels just gave one of the best rebuttals I've ever heard. You can understand now why so many sort of leading conservatives really wanted Mitch Daniels in the race. A sensible voice. A principled conservative, sensible voice, and didn't engage in the hyper-rhetoric we've been hearing in these debates.

COOPER: Ari Fleischer, do you agree about Mitch Daniels? FLEISCHER: I sure did. And Anderson, as you know, I'm neutral on the Republican presidential race, but I'm a Mitch Daniels and/or a Paul Ryan guy. If either one of them was in, I think you'd see tremendous more energy on the Republican side and see that real disciplined focus on what I think are the core issues of the country for that basis, the economic issues, and you see it in a friendly and inclusive way, as well.

That was the point I was making about the things that Governor Daniels emphasized tonight, very different from the issues that President Obama focused on tonight. A different emotional attachment on those issues. One really sees staving off this debt is the biggest issue we face.

And for example, let's just yield for a second and raise the Bush tax rates on the wealthy. That gets you $700 billion over ten years. And we have $25 billion -- trillion of debt over the same period of time. It's a pittance, but to President Obama, he seemed to think it's the solution. We're in so much debt that we can't even start to fathom. Taxes doesn't go far enough. Of course it's a spending problem.

MARTIN: Anderson, you have a great segment, "Keeping Them Honest." And I've got to keep Ari honest here. It's a little hard to hear Mitch Daniels talk about the deficit when he was the budget director under President Bush, when that was a surplus that turned into a deficit. We're talking about those Bush tax cuts, which contributed to our deficit. Let's not -- let's not be dishonest about that.

Here's the one thing, though, where you talk about the response. I also thought it was interesting when Mitch Daniels talked about a pro-poverty plan, if you will, from the president. That was always so striking there. The first time, frankly, you heard poverty come up tonight from either President Obama or even Governor Mitch Daniels.

What is going to be interesting going forward, you talk about obviously what is the next step? And I do think, though, that the president has to go beyond just the battleground states. I do believe that he should take his message to some of the core, some of the red states in the country, some of the poorer states in this country and begin to say, "Look, show me how their plans have turned out for you. Show me how they have made your life better. And are you going to have health care under their plans? Are you going to have a better education under those plans?"

I don't know if he wants to go there, but frankly, I think he should.

COOPER: Paul Begala, was there -- there wasn't much talk about reducing the deficit in this speech, which is something certainly on -- for a lot of Republicans should be front and center.

BEGALA: You're right, David Gergen is right. Much more emphasis in this speech on jobs, on opportunity, on vacation, on health care, on tax policy, interestingly enough. But what also struck me is, if you just looked at it here parachuting in from a foreign country, you probably wouldn't know that this is a president who is stuck at 44 percent going into his re- election with a painfully, almost 9 percent unemployment rate. Nor if you watched governor Daniels you would know his party is the won that just won a landslide election a year ago. It's really remarkable.

Governor Daniels has his admirers. And he's a fine man. I'm sure he's a good governor. For me, his speech was so pessimistic, and this is hard to do. It was like a glass of warm milk with a fly in it. It was both boring and depressing at the same time. I didn't quite go for it, but I want an optimist. I think Americans want optimists. And Barack Obama doesn't have that much to be optimistic about, but by God, he made the most of it tonight.

COOPER: Gloria?

BORGER: Well, I don't think it was that bad, Paul. What I think Mitch Daniels was trying to do was kind of shift the agenda away from what Barack Obama was talking about and to talk about those deficit issues.

And in addition to talking about Obama's policy, pro-poverty, as Roland points out, he also said it is extremism, he calls it, that stifles the development of home-grown energy, or cancels a perfectly safe pipeline that would create jobs. And obviously, he's referring to Keystone there.

But let me just get back to the president for one second, because I think what he was trying to do -- and he succeeded -- was to thread the needle here. Because he didn't want independent voters watching him, to look at his speech and say, you know what? You just don't like the rich. And what you're trying to do is tax the rich, and you are anti-wealth creation.

What he went out of his way to say is, quote, "We don't begrudge financial success in this country. We admire it." And then he started to talk about having the wealthy pay their fair share. And if you look at the polls in this country, poem don't begrudge wealth. They just want taxes to be fair. And so he was speaking...

COOPER: The argument over what does the word "fair" mean in this case? Stick around, everyone. A lot more to talk about. We are live to the midnight hour, as I said.

Up next, a Tea Party Republican's take on tonight from Senator -- South Carolina Senator Jim DeMint. We'll talk to him in a moment.

We'll also show you the emotional high point of the night. Gabby Giffords' first State of the Union since a gunman nearly took her life and her last State of the Union as a congresswoman.






OBAMA: As long as I'm president, I will work with anyone in this chamber to build on this momentum, 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.


COOPER: President Obama tonight laying down a marker on Wall Street regulation and other issues outlining action the White House could take without congressional approval. We'll return to Dana Bash, who was inside the House chamber for the address tonight. And Gabby Giffords' remarkable appearance, without a doubt, emotional issue and the high point of the evening.

BASH: There's no question about it, Anderson. I have sat in many a speech from Republican candidates, Democrat presidents, Democratic Congresses, Republican Congresses, and you hear applause and sometimes -- and most of the time, frankly, you see that it's forced because it's political. There was nothing forced about this. It was Democrats and Republicans genuinely happy to see Gabby Giffords and genuinely emotional about the fact that she did decide that she was going to resign her seat. In fact, tomorrow will be her last day so that she can focus full time on her recovery from, obviously, what people know is a gunshot wound through her head.

I want to bring in her colleague from Arizona, Congressman Jeff Flake, who is a Republican. And Congressman, I wanted to tell you my observation watching you from up in the gallery. And that was you were sitting next to her. You're a Republican. She's a Democrat. When the -- when the Democrats stood for the president's applause lines, you helped her stand up. You were oftentimes, most times the only Republican standing there. Tell me about that.

REP. JEFF FLAKE (R), ARIZONA: It's the least I could do. I mean, it was just an incredible experience to be there with her. Particularly after last year, having an empty chair where she should have been. And so it was just an overwhelming emotional experience for I think all of us.

BASH: We could see her. We couldn't hear her. Tell us what she was saying to you.

FLAKE: She -- we talked about the resignation tomorrow and the fact that we'll be able to pass one of the pieces of legislation she's worked so hard on just before she retires.

And also, she mentioned that she tried. She tried and tried to come back, and we all know that she gives 100 percent. And whatever is in store for her, we know that she'll give 100 percent.

BASH: She specifically said she tried to come back but she couldn't.

FLAKE: She mentioned to a few people when they talked to her, "I tried, I tried." And it was just for all of us, we're very saddened to see her retire, but just grateful for the service that she's given and the bipartisan atmospheres that she brought to the chamber. I mean, the fact that we all sat together last year and the tradition continued this year. I hope it continues beyond.

BASH: I heard you saying before that you were getting some tweets from your fellow Republicans saying you supported that, or you supported this?

FLAKE: I think most people will understand, and I support my colleague and friend.

BASH: Thank you very much. And I just want to say, Anderson, the irony, and I think you'll probably agree with this, is that Gabby Giffords, we now know, was considering running for the United States Senate in Arizona, and Congressman, you're running for the Senate. You could have been opponents.

FLAKE: We could have been. I would love nothing more than for her to be able to run and participate fully in that way, and I'm just grateful that she's recovering and continues to.

BASH: Congressman, thank you very much. Appreciate it.

Anderson, you see there, that really was, I think, one of the most remarkable moments of the day, there's no question about it. He mentioned the fact that last year at this time, pretty much everybody, Republican and Democrat, came with everybody from the other side of the aisle and sat with them to show their solidarity, to show that there's bipartisan feeling here.

I have to say, unfortunately, some members decided not to do that this year because following that things, devolved into partisanship this past year. And I think in the coming year, it's an election year. We're going to see that again.

COOPER: Yes. Dana Bash, appreciate that.

We're going to take a quick break. Coming up, we're going to talk to one of the president's staunchest critics, Senator Jim DeMint. We'll be right back.