Obama Bids for Rebound

After Setbacks, President Tries to Restart 'Change' Agenda, Focuses on Economy

LAURA MECKLER JONATHAN WEISMAN

WASHINGTON—President Barack Obama, seeking to recapture the promise of change that propelled him to the White House, returned to his pledge to remake Washington after a bruising first year that saw his approval ratings drop and his ambitious agenda falter.

Mr. Obama spent the heart of his address Wednesday pledging to spur job growth and the economy, pivoting to issues that have hurt the president and his party. He reiterated his desire to see Congress pass the ambitious legislation begun last year, starting with a revamp of financial rules. He also urged lawmakers to press on with a health-care overhaul that has divided Washington and the nation.

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The president reserved some of the harshest criticism for the Washington he was expected to lead, but which often has confounded him.

"I campaigned on the promise of change—change we can believe in, the slogan went. And right now, I know there are many Americans who aren't sure if they still believe we can change—or at least, that I can deliver it," Mr. Obama said, striking a tone he all but left behind after his presidential campaign.

Mr. Obama's first State of the Union address mixed a defiant defense of his priorities and a plea for members of both parties to help. He took time to explain such complex issues as financial regulation. And he used humor, comparing the government's 2008 bank bailout to a root canal. Terrorism and war received less attention, a contrast to State of the Union speeches of George W. Bush's presidency.

The circumstances surrounding Wednesday's speech contrasted sharply with Mr. Obama's first address to Congress. A year ago, he was welcomed by Democrats as a conquering hero. Since then, he's struggled to get key priorities enacted.

To many Americans, a president who was supposed to sweep aside conventions in Washington has come to embody its gridlock, a dynamic Republicans are seeking to exploit. "The American people were looking for President Obama to change course tonight, and they got more of the same job-killing policies instead," said House Minority Leader John Boehner (R., Ohio).

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The president also faces resistance from his own side. Rep. Ike Skelton (D., Mo.), a moderate and the chairman of the House Armed Services Committee, voiced skepticism on health care and other items: "Somewhere along the line, the White House lost its way."

Republicans were courteous, a contrast to the rowdy greeting for the president in September when he addressed Congress on health care. On Wednesday, they joined Democrats during several standing ovations. At a meeting of House Republicans Wednesday morning, top GOP leaders urged their members to behave.

A significant portion of the address focused on the economy. Mr. Obama offered a strong defense of the $787 billion stimulus measure passed last year in the face of Republican opposition. He said the stimulus kept two million Americans working, and an additional 1.5 million jobs would be saved or created by the end of this year.

At the same time, he made clear not enough had been done to put people to work. Mr. Obama pressed tax cuts to promote small-business hiring and business investment in plants and equipment, as well as a plan to devote $30 billion in Wall Street bailout funds for small-business lending through community banks.

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The president set a goal of doubling U.S. exports over the next five years, but he stopped short of pressing Congress to approve languishing free-trade agreements with South Korea, Colombia and Panama.

The call for job creation was delicately balanced against fiscal discipline. In addition to calling for short-term spending and business-tax breaks, Mr. Obama exhorted Congress to support a plan to tame record budget deficits. He touted proposals to freeze spending on a small slice of the federal budget. And Mr. Obama called on Congress to back a bipartisan commission to address short- and long-term budget deficits.

Senate Minority Leader Mitch McConnell said he was pleased to hear the emphasis on jobs. "This is a welcome change in focus after the president and his administration spent nearly an entire year pursuing a partisan health-care plan that would have spent trillions of dollars we don't have," he said.

Reaction from business leaders was mixed. "I love it," said Bill McComb, chief executive of Liz Claiborne Inc. He said Mr. Obama's proposal to use bailout money to help small businesses was "what I wanted to hear." Dan DiMicco, chief executive officer of steelmaker Nucor Corp., thought Mr. Obama showed a weak grasp of the U.S. unemployment crisis and said the stimulus plan was "not working on scale to stop overall job losses."

The White House had hoped Mr. Obama would be able to use his speech Wednesday to mark a victory for the health-care legislation he spent much of his first year trying to move through Congress. Instead, the president didn't raise the issue until the last half of his speech, when he took some of the blame for falling support.

News Hub: In Speech, Obama Says Jobs a Priority

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WSJ's Kate Kelly and Jerry Seib parse President Barack Obama's first State of the Union address on The News Hub. They tell Kelly Evans that while there were plenty of digs to go around, the president ultimately focused on job growth.

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The president said he would not back down, despite the damaging loss last week of a Senate seat from Massachusetts. "By now it should be fairly obvious that I didn't take on health care because it was good politics," he said to laughter.

There's been talk about scaling that initiative back, but Mr. Obama told Congress he was committed to moving ahead, citing the troubles people have obtaining and affording health coverage. "I will not walk away from these Americans," he said, "and neither should the people in this chamber."

To move forward, Democrats will have to decide that abandoning the health-care overhaul carries greater political risks. The House and Senate must agree on the substance of the bill, and on a parliamentary maneuver that would allow it to pass the Senate with a simple majority.

The president didn't address the tactics to achieve a health-care bill. Congressional aides have said they hoped to have a plan by week's end.

In reintroducing the expansive agenda of last year, he began with re-regulating the financial industry. He didn't specifically call for a new regulator to watch over financial-industry consumers, a proposal that has run into opposition in the Senate. He did warn of a veto "if the bill that ends up on my desk does not meet the test of real reform."

On energy, Mr. Obama reaffirmed that comprehensive legislation was needed, though he did not mention the market-based system to cap carbon emissions he has backed. He made the case in terms of economic growth, saying America must lead the global economy in clean-energy jobs. He also mentioned energy sources popular with Republicans—including oil and gas drilling and nuclear power.

Late in the speech, the president reiterated general support for repealing the "don't ask, don't tell" policy that prohibits gays and lesbians from serving openly in the military. Mr. Obama also reiterated support for another controversial measure, the overhaul of the immigration system.

On foreign policy, the president talked of the threat posed by al Qaeda, as well as administration efforts to engage the rest of the world and isolate North Korea and Iran. He addressed the end of the war in Iraq, the surge of troops to Afghanistan and U.S. policy toward Iran.