captioning sponsored by macneil/lehrer productions >> ifill: good evening and welcome to the pbs newshour special coverage of the president's state of the union address. it's the third time president obama has gone before congress and the country with the annual assessment of america's progress and problems. just a few moments ago we had an emotional moment on the house floor when representative gabrielle giffords who will leave congress tomorrow handed her resignation appeared to sit in the front row. her husband is in the first lady's box tonight. her colleagues stood up and gave her an ovation. ( applause )

that was of course, mark kelly her husband in the box with the first lady. here with me as they will be all night our "new york times" columnist david brooks and "washington post" columnist ruth marcus. that's an emotional way to start the evening, ruth. what does the president have to do here. >> marcus: well, what he has to do is show up and tell us... find the right adjective to say about the state of the union, the adjective i think will be "stronger." getting stronger. improving. i really think of this. we talked about this earlier tonight. i think of this as the sort of "it's not a campaign speech" but it's really setting the stage for his job application for next term. there's not a lot he's going to be able to accomplish legislatively in the next year, but this is laying out his vision for a second term. >> ifill: what do you think, david. >> brooks: how partisan does he want to be? what does he focus on the key issue. they've signaled it will be the middle class. he feels this is the tipping

point for the middle class, whether it survives with the traditional america we've known. we'll see how many policies you can unfurl to really address middle class wage stagnation, inequality, economic, anxiety, the feeling of national decline. >> ifill: the stage has been taken over by the republicans because they're running a primary campaign. the president has an opportunity to get up there for the final speech of his first term. and take that stage back at least for the night. how can it not be a campaign speech really? >> marcus: not only can it not not be a campaign speech-- i'm not sure how many negatives we have in there-- but also in a sense the republican candidates have teed this up perfectly for the president. they have had this magnificent debate about tax policy and specifically the question of whether mitt romney is paying enough in federal income taxes. he disclosed, maybe he thought he was going to sort of hide it in the excitementetween last night's debate and tonight's state of the union. but instead in a sense his disclosure and the actual

documents that he's paying his federal tax rate of about 15% sets up perfectly the argument that i expect we'll hear from the president that the rich and the wealthy are not paying enough of their fair share, that the warren buffet rule, in other words that it's unfair that the billionaire investor pays less in effect in taxes than his secretary does and his secretary will be here tonight. it's perfectly setting up the buffet rule argument that the president's going to make. >> ifill: david, is this inequality argument or this fairness argument, i think we're going to hear that word a fair amount tonight, is that resonating in a congress where or a divided congress which essentially said.... >> i think inequality has or at least fairness has a role but he has to talk about opportunity. the two are in tension. the buffet rule gets you so far, the rich should pay more. but what exactly is he doing for the middle class. we have two categories of state of the union addresses.

the first is where there's some big policy when the president is just arguing for whether it's the iraq war, health care. there's a series of longer laundry list of a lot of longer little programs. >> ifill: we're going to see a laundry list tonight? >> i think we'll see a lot of different subjects mentioned all along the line of helping the middle class. a lot of different things. >> ifill: many americans say that this economy is headed in the wrong direction. we're still at 8.5% unemployment even though that's not as high as it was when he gave his speech last year. how does he change the subject to optimism which he seems to signal he wants to do at a time when everyone is feeling so pessimistic? >> marcus: you can look backwards and talk about not where we were last year but in 2009. if you look at that speech it was at a very dire time. i think it can be also a very forward-looking speech in terms of casting not maybe legislative calendar because, as you say, that's not going to happen. but in terms of the road ahead. i would actually argue that

there's not the tension really between fairness and opportunity that you said. i think the way at least the president sees it, those two are intertwined, and that ensuring that opportunity is the road to fairness. >> ifill: we're awaiting for the president to arrive. we are looking at the new sergeant of arms. his name is paul irvin. >> mr. speaker, the president of the united states. ( applause ) >> ifill: the president enters. he replaces bill livinggood who made that announcement for 17 years. he just retired. the president enters and greets many of these members of congress have been there at 8:00 in the morning staking out seats in order to greet him as he walks in. what we're seeing, david, is it real or just put-on affection that happens every year at this time. >> brooks: it's real put-on. they are professional politicians. they love to be in each other's presence.

i find when you get a group of politicians like this, they are genuinely ecstatic. >> ifill: you know, last year i remember there was... everybody crossed partisan aisles and sat with someone of the opposite. the buddy system. do we see any of this happening this year? >> marcus: i don't think we're having the buddy system this year. but politicians love nothing more than face time. this is ultimate face time moment. >> ifill: at least there was supposed to be one bipartisan seating in the chamber tonight. that was senator mark kirk, republican from illinois and senator joe manchin, the democrat from west virginia. they're supposed to sit together. senator mark kirk suffered a serious stroke over the weekend. senator manchin said he will keep his seat open for him. other than that, other than this kind of genuine friendship and symbolism we don't see much of, we're going to see the top up, top down. >> brooks: the buddy system didn't really work. it's not as if partisanship went away. i thought it was a good thing.

i thought i saw scott brown and john kerry sitting together. i could be wrong about that. but.... >> ifill: scott brown, the republican from massachusetts and john kerry the democrat. >> brooks: there's a big of a jovial show business aspect. there's sort of a pep rally after that. so when you're in the room, the atmosphere is actually pretty good no matter how partisan they are in real life. >> ifill: let's get back to what we expect the president to say. what does he say? we've already heard prebuttals not only from romney but john boehner the speaker of the house who will be sitting right behind the president tonight. not happy. >> marcus: of course they're not happy. it's their job not to be happy. as the senate minority leader famously said, his goal is to make sure that the president doesn't get elected. i don't think other than cheering the troops and

cheering some mom and apple pie things you're going to see a lot of eagerness to embrace the president's views tonight. >> brooks: there's an argument about capitalism though. if you go on the campaign trail the republicans say that we're in real trouble and the problem is we don't have enough capitalism. we have to liberate the market. the president's position says that's not the problem. the problem is people need more support. >> ifill: the chief justice of the supreme court. now greeting the secretary of state. of course the supreme court sometimes are there and sometimes they're not. but at least we see many members of the cabinet. there is always one member of the cabinet who doesn't make it every year for national security purposes someone has to stay away. this year it is the secretary of agriculture tom vilsack. do we expect this to be... you talked about the issue. but the president must have some reality check about what he can actually do. he's not a lame duck exactly but he's going to spend the rest of the year campaigning. >> marcus: right. i think that we're not going to necessarily see remember

when famously president clinton said, you know, send me this and if you send me this this way, i'll take out my veto pen. there's not going to be a lot of threats about veto pens because there won't be a lot passed for him to veto. there won't be a lot of ex-or tagss: pass this bill, pass this plan, because we saw that argument and it didn't exacty happen so it is going to be more athlete receipt cal really than actual... it's not i'm going setting up the legislative language. >> ifill: the president greets gabby giffords. a big hug. a big smile. of course her last night as a member of the house. she announced last week she was not going to be able to continue to serve. she's going to concentrate on her recovery. exactly one year since she was shot in that parking lot in arizona, her own district. the president is now making his way up to the podium

greeting everybody on his way. greeting vice president biden. greeting john boehner. his golfing buddy. the two of them have an interesting relationship. they say they get along but they just can't find way to agree. that's congress. now he hands him the official letter saying, "here i am. i bring you the state of the union." he's going to make his address. mark kelly, gabrielle giffords' husband sitting in the box with the first lady tonight along with many other guests which the president i'm sure will identify in his speech. all designed to make a point. looking at them, you would think it was a very happy, unified group. that's first lady michelle obama. president obama. >> members of congress, i have the high privilege and the distinct honor of presenting to you the president of the united states.

( cheers and applause ) >> thank you. thank you. thank you so much. thank you very much. 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. ( applause ) for the first time in nine years there are no americans fighting in iraq. (applause) for the first time in two decades osama bin laden is not a threat to this country. (cheers and applause)

most of al qaeda'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 team work 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. (applause)

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. (applause)

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 the work force 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. 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 you are gent. 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. (cheers and applause) what's at stake aren't democratic values or republican values but american values. 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 of out 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 four million jobs. and we lost another four million before our policies were in full effect. those rethe facts. but so are these. in the last 22 months, businesses have created more than three million jobs. (applause) 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 have 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. (applause) the state of our union is getting stronger and we've come too far to turn back now. as long as i'm presidentially 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 the return to the very same policies that brought on this economic crisis in the first place. (cheers and applause)

no, we will not go back to an economy weakened by outsourcing, bad dead and phony financial problems. 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. (cheers and applause) 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. (applause) 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 many places like china. meanwhile, america is more productive. a few weeks ago the c.e.o. of master lock told me that it now makes business sense for him to bring jobs back home. (applause) today for the first time in 15 years, master lock's unionized plant in milwaukee is running at full capacity. (applause) 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 yourself what is 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. (applause) that money should be used to cover moving expenses for companies like master lock that

decide to bring jobs home. (applause) second, no american company should be able to avoid paying its fair share in taxes by moving its jobs and profits overseas. (applause) 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. (applause) 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. 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... (applause). ... 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! (applause) 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 agreement wes signed into law, we're on track to meet that goal ahead of schedule. (applause)

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. (applause) i will go anywhere in the world to open new markets for american products. and i are 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. (applause) over a thousand americans are working together because we stopped a surge in chinese tires. but we need to do more. it's not right when another country lets our music, movies

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... (applause). there will be more inspections to prevent unsafe or counterfeit goods from crossing our borders and this congress should make sure 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. (applause)

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 do 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 form add 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 two million americans with skills that will lead directly to a job. (applause) 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 other lando and louisville are up and running. now you need to give more community colleges the resources they need to be community career centers. places that teach people skill it is a 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 web site, 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. (applause) 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% 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 tray trajectory or their li. 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. (applause) and in return grant schools flexibility to teach with

creativity and passion and stop teaching to the test and to replace teachers who just aren't helping kids learn. that's... (applause). that's a bargain worth making. (applause) we also know that when students don't walk away from their education, more of them walk the stock exchange to get their diploma. when students are not allowed to drop out... (applause). ... 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. (applause)

when did 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. (applause) 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. recently i spoke with a group of college presidents who've done just that. some schools redesigned 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. let's also remember that hundreds of thousands offal

lnted hardworking 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 everyday 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. (cheers and applause)

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 lance, 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. (cheers and applause) 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 to equal work.

(applause) 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 start-ups 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. (applause) 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.

(applause) 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 untached. new lightweight vests for cops and soldiers that can stop any bullet. don't gut these investment 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% of our potential offshore oil and gas resources. (applause) right now, right n 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. (applause) but with only 2% of the world's oil reserves, oil isn't enough. this country needs an owl out all of the above strategy that develops every available source of american energy. (cheers and applause)

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. the 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 power trucks and factories that are cleaner and cheaper proving 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 positioned america to be the world's leader 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 brian ritterby was laid off from his job making furniture.

he said he worried at 55 no one would give him a chance but he found work at a wind turbine manufacturer in michigan called energetics. before the recession, the factory only made luxury yachts. today it's hiring workers like brian 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 brian. (applause) i will not creed 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. (cheers and applause) pass clean energy tax credits. create these jobs. wethe differences in this chambr may be too deep 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 three 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. (applause) of course, these t easiest way to save money is to waste less energy. so here's a proposal, help manufacturers eliminate waste in their factories and give businesses incentives to upgrade their buildings. their energy bills will be a

hundred billion dollars lower over the next decade and america will have less pollution, more manufacturing, more jobs for construction workers who need it. send me a bill that creates these jobs. (applause) 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 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. (cheers and applause) a there's never been a better time to build. especially sense 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 have seen their home values decline. and while government can't fix the problem on its own, responsible homeownerses shouldn't have to sit and wait for the housing market to hit bottom to get some relief. 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 insure 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. (cheers and applause)

let's never forget, millions of americans who work hard and play by the rules everyday deserve a got 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. (applause) 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 out dated, 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. (applause) 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 run 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. claf claf.

(laughter) now, i'm confident a farmer can contain a milk spill without a federal agency looking over his shoulder. (applause) 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. ( applause ) i will not back down from protecting our kids from mercury poisoning, from 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 than men. ( applause ) 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 pass 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 a 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. ( applause ) 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. ( applause ) 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 anti-fraud 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 generals to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abuse of 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. ( applause ) 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. ( applause ) 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% of americans. right now because of loopholes and shelters in the tax codes, a quarter of all millionaires pay lower tax rates than millions of middle class households. right now warren buffet 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 awful lot of members like congress pay our fair share of taxes. ( applause ) tax reform should follow the buffet rule. if you make more than a million dollars a year, you should not pay less than 30% 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% of american families, your taxes shouldn't go up. you are the ones struggling. with rising costs and stagnate wages. you are 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. ( applause )

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'll 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 talk 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. some of this has to do with the corrosive influence of money and politics. together let's take some steps to fix that. send me a bill that bands insider trading by members of congress, and i will sign it tomorrow. ( applause ) 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. (scattered applause) 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 nominations receive a simple up or down vote within 90 days. ( applause ) 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, that our government is leaner, quicker, and more responsive to the needs of the american people. ( applause ) 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 common-sense ideas. i'm a democrat. but i believe what republican abraham lincoln believed: the government should do for people only what they cannot do better by themselves and no

more. ( applause ) (cheering) 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. 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. ( applause ) 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 qaeda operatives who remain are scrambling, knowing that they can't escape the reach of

the united states of america. ( applause ) from this position of strength, we've begun to wind down the war in afghanistan. 10,000 of our troops have come home. 23,000 more will leave by the end of this summer. this transition to afghan will continue and we will build an enduring partnership with afghanistan so that it is never again a source of attacks against america. ( applause ) as the tide of war recedes, a wave of change has washed across the middle east and north africa, from tunis to cairo, from tripoli. a year ago, qaddafi 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. ( applause ) how this incredible transformation will end remains uncertain. but we have a huge stake in the outside. 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. 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. ( applause )

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 ironclad commitment-- and i mean ironclad to israel's security has meant the closest military cooperation between our two countries in history. ( applause ) 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. ( applause ) 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 capetown 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 mercury mains the one indispensable nation in world affairs. as long as i'm president, i intend to keep it that way. ( applause ) that's why working with our military leaders, i 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 to congress legislation that will secure our country from the growing dangers of cyber threats. ( applause ) above all, our freedom endures because the men and women in uniform who defend it. ( applause )

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. ( applause ) 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 joe biden have worked with american businesses to secure a pledge of 135,000 jobs for veterans and their families. tonight i'm proposing a veterans jobs corps that will help our communities hire veterans as cops and firefighters so that america is strong as those who defend her. ( applause ) which brings me back to where i began. those of us who have 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 to the american 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. 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 50 stars and those 13 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 are 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 your union will always be strong. thank you. god bless you and god bless the united states of america. ( cheers and applause ) >> ifill: and that is president obama's third state of the union speech. he spoke for one hour, four minutes and 45 seconds, longer than his 60-minute speech last year. i believe it's safe to call it a laundry list of ideas, of big ideas, of overarching and

a fair amount of congressional scolding in that. some of it greeted with enthusiastic applause, some of it not so much. with me now are david brooks and ruth marcus. david, give me your first reaction to this. >> brooks: over an hour. republicans don't go. it was his best state of the union speech. look at what he tried to achieve. 38% approval among independents. is he going to wage a campaign that really goes to their issues, that gives them a whole series of policies? i'm not a liberal but i'm sort of for that. if you look at the policies that were in the speech, i didn't think they were the biggest things in the world. i don't personally think they're sufficient. they're pretty reasonable. they're pretty moderate i think on balance. on the whole i think it was a successful speech. >> ifill: the president always goes for the small things. i remember when bill clinton talked about school uniforms. he was derided for that. he was talking about vests for

police that could stop a bullet. >> marcus: i'm not sure they're completely comparable. i think i was struck by three things. first of all, in a year like this, in an election year always unmistakable undertone of campaign rhetoric that you hear. when he talked about the importance of passing the dream act, there are certain candidates out there who want to be president who don't agree with that. when he talked about the... how it's not envy to want a fair tax code, there are certain candidates out there whom he was speaking to. mitt romney. there is an inevitable acknowledgment of the new reality. he basically said we can't get comprehensive immigration reform passed. we can't get climate change legislation passed. so let's go for the smaller works. then finally i thought as david did that he did a very good job laying out his vision of government and the fundamentally different vision of government than his

republican opponents, all of them, where he sees the sort of vigorous role for government and he ticked them off broadly: in manufacturing, in education, and in energy policy. then he pivoted to talk about what i think is really the defining difference between him and the republicans which has to do with the tax code and the fairness of the tax code and the divide between the top and mitt romney's rate and the rate paid by others. >> ifill: i was struck by the president's kind of a forceful pushback against the notion that america is in decline which is another theme we hear a lot on the campaign trail. >> brooks: right. the argument for the republicans is where... we're slipping, losing vitality, turning more into europe. therefore you need a total rebooting. that is their view. his view is we need smaller programs. if you look at the things he actually proposed today, the multinational minimum tax, the general electric tax, trade enforcement on china, more off

shore oil and gas drilling, a navy program for energy, a 90- day filibuster. these are all pretty small stuff. most of them are quite reasonable. i think most of the republicans in the quiet room would say, yeah, that's pretty reasonable. >> ifill: he also was talking about the things he considers good news. nobody else is talking about. killing of osama bin laden, the rescue of the auto industry, the clean-up of the gulf. but he didn't talk that much about his signature legislative achievement, health care. >> marcus: there were two or three sentences about health care. one about how he wasn't going to let some pieces of it be dismantled. but this was not trumpeting what they had certainly hoped would have been the signature achievement of his presidency. something that was thought by democratic presidents in harry truman. >> ifill: as we watch the president walk out of the hall

tonight it's really interesting. you wouldn't know that just a few minutes ago he was accusing this congress of carrying out a perpetual campaign of mutual destruction. that was pretty tough language coming from a president to a joint session of congress. >> brooks: he does believe in institutions quite a lot. i thought the institutional reform part was one of the better parts of the speech when he opposed the filibustering and talked about getting the nominees. he sort of had passion. i think that is genuine to him. it was not particularly well received. it's in the perpetual executive branch grab for power. it will be a campaign theme. they're the do-nothing congress. i'm trying to do something. i'm running against a republican congress. >> marcus: one does have to point out in his call for filibusters that we saw sitting there the chief justice of the united states whom he chose to filibuster. it depends on how you feel about that may depend on where you sit. >> ifill: we also see richard cordray sitting in the first lady's box, the new consumer

watchdog who was on the hill today being grilled by his recess appointment because he would be filibustered if he tried to get him appointed. you know, we're told there were 190 members of congress involved in date night, sitting across party lines. there wasn't the jack in the box quality of people standing up to applaud but it was hard to gauge what more of what he said was welcome. >> brooks: it's hard to gauge. i guess i saw it more as an attack on congress. i mean there was some liberal versus conservative but i thought there was relatively little of that picking a big ideological fight. the republicans want a clear ideological fight saying we have an economy that is winding down. we have to do very big things if we're going to cut the job losses and cut the slow growth of small employment. he didn't want to pick that kind of fight. i politically think he's wise not to want to pick that kind of fight. it actually could have been a

lot hotter than what we saw. >> ifill: is it possible he doesn't pick the fights right now, ruth, because he doesn't have the.... >> i think there's an interest on the other side and not necessarily picking fights in that venue. so we had the very interesting image of eric cantor, the house majority leader, clapping as the president called for an extension of the payroll tax. reduction. now that's easy to clap. it's hard to do. but that was quite interesting. >> ifill: actually where there seemed to be the most agreement across the party lines was when they were talking about tax. the president spent a lot of time talking about making the tax code more-- i think the word fair or fairness he used eight times. >> brooks: that polls pretty well. some of the taxes he talks about little tax cuts here and there, cutting taxes on the payroll for the bottom 98%. cutting taxes on businesses. he mentioned cutting taxes quite a lot. in many ways this was his most

clintonian speech ever. >> ifill: what do you mean? >> a lot of small bore stuff. that was clintonian. a lot of stuff that seems kind of moderate, seems kind of triangulating, cutting taxes on businesses. it's not entirely an accident. there are a lot of clintonians in the white house in senior positions. nonetheless for a guy who campaigned not only really against bush, he campaigned against clinton, against some of the childish things that were going on in washington i'd say he's become a lot more like clinton as time has gone by. >> ifill: maybe that's what happens when it takes a while. we're waiting by the way for a few moments until we get the republican response to the state of the union that is going to be delivered by mitch daniels the governor of indiana who a lot of republicans are hoping he would run for president. he chose not to. i wonder in this election year with all of this fractiousness that is happening on the campaign trail whether the president was clearly deciding tonight that he was going to give a more uplifting, optimistic, less kind of

engaged kind of assault? >> i think there will be time enough for that. he was more engaged a few months ago when he gave the speech about economic inequality in kansas. and i think we saw the outlines of the ways in which he'll engage in the future but he did the appropriate thing here. i do want to point out one thing i thought was very interesting which was we heard about the buffet rule before but for the first time he really put a number on it. he said that the wealthiest, the millionaires should not pay less than 30% of their income in taxes. that's significantly more than where their tax burden or tends to be now. >> ifill: mitt romney today released his tax returns. 15% or 14% is what he said he's paying. >> brooks: does he want to propose raising the capital gains tax to 30%? i personally think the capital gains tax is the tax that's most sensitive to incentives

and when you raise the rates at the top. i think that would be a pretty bold move. if he really raises the capital gains rate i would not want to be trading stocks tomorrow. that might not be. >> ifill: a bold move because of his base would applaud it but republicans would.... >> brooks: it would be extremely polarizing especially in the business community. >> ifill: what are his other options? in reality a president shows up and says i want to fix things. we should reach across the aisle and work together but here are the things i'm going to do without you. >> and you saw some examples of that. i'm going to sign an executive order that opens this for exploration or that tells the navy department to go for alternative energy and renewable energy sources, things like that. this is what... we've seen this before. we saw it with president clinton. in a second term, in a situation where you've lost control of congress, that's what you do. you get your executive order book out and you start to fill

it out. >> brooks: there was toughness towards china. clearly the administration hasate gotten much tougher on china in the last year or so than before. >> marcus: there's potentially a romney response because there's a lot of cage rattling there. i would argue a more responsible version of the cage rattling. >> brooks: there was also the mortgage refinance proposal. i'm not sure that's something they can do on our own. very intriguing policy. i'm not quite sure what it is. >> ifill: rp dropped out there without a lot of.... >> brooks: $3,000 a year mortgage deduction helping them refinance assuming they can actually get a refinance in this market. >> ifill: we've got about a minute until we hear from mitch dan yells the governor of indiana with the republican response. roou, if you are the... did you hear anything you like? >> i think you heard that 30%, you heard that vision of government. you probably are not energized but i think david made a point in the sense that is not his complete target audience

tonight because you have those independents who are less than thrilled. >> ifill: david? the other side. >> brooks: the republicans won't like it but the independents are looking at the republican race and they're going, this guy seems sort of reasonable. >> ifill: for the republican response to the president's address, we turn to indiana governor mitch daniels speaking to us from the indiana war memorial in the state capital. >> greetings from the home of super bowl 46. 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 entireco