President Obama, flanked by Vice President Biden and Speaker of the House John Boehner, delivers his State of the Union speech Tuesday in Washington.
WASHINGTON (CNN) -- In his State of the Union address, President Barack Obama on Tuesday night called keeping alive the American dream "the defining issue of our time" and pledged to fight obstruction by congressional Republicans.
The speech to a joint sitting of Congress is an annual evening of political pageantry, but the stakes are higher this year with Obama's re-election on the line in November.
Amid a festive atmosphere, with Rep. Gabrielle Giffords in attendence the night before she will resign due to her brain injury from last year's shooting attack in her native Arizona, Obama began by praising U.S. troops for unity and teamwork that can serve as a model for facing the country's problems.
With unemployment still above 8% amid a sluggish economic recovery, Obama framed the challenges facing the country as a choice between opportunity for some or giving everyone a chance to prosper.
"The defining issue of our time is how to keep that promise alive," the president said. "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, everyone does their fair share, and everyone plays by the same set of rules."
He continued by saying, "What's at stake aren't Democratic values or Republican values, but American values, and we have to reclaim them."
"The state of our union is getting stronger, and we've come too far to turn back now," Obama said.
The president offered a set of policy proposals for the final year of his first term intended to seek common ground with Republicans on some issues while pushing longstanding Democratic priorities that previously stalled in Congress.
At the same time, the address also was a political opportunity for Obama to present his re-election message as a choice between two different visions for the future of the country and the role of government.
He called for lowering corporate taxes and providing incentives for U.S. manufacturers to bring overseas jobs back to America, while ending tax breaks for businesses that continue to outsource. At the same time, Obama said, every multinational company should pay a basic minimum tax, while giving American manufacturers a tax cut.
"It's time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America," Obama said, adding a line that he repeated throughout the speech in a challenge to Congress. "Send me these tax reforms, and I'll sign them right away."
He also challenged Congress to act on comprehensive immigration reform, a major election-year issue for the important Hispanic-American vote. Short of a major overhaul, he called for legislation like the DREAM Act that provides children of illegal immigrants who go to college or serve in the military a path to possible citizenship.
In response to Republican criticism of his energy policy, Obama said to applause he was ordering his administration to open up 75% of potential offshore oil and gas resources. At the same time, he also said U.S. oil production was at the highest level in eight years, countering GOP claims he was stifling oil development.
Obama's presidency so far has been mostly defined by the ideological battle between Democrats and Republicans over the role of government in American society.
Bolstered by the conservative tea party movement that helped deliver the House majority in 2010, Republicans have pushed for shrinking government to ease mounting federal deficits and debt.
Obama and Democrats argue that deficit reduction must include both spending cuts and revenue increases in a balanced approach that maintains the essential role of government in American prosperity and opportunity.
The partisan divide has led to repeated congressional showdowns over budget and tax issues, with public dissatisfaction with Congress at historically low levels and the U.S. credit rating downgrade.
In his speech, Obama described the possibilities offered by what he called a "blueprint for an American economy that's built to last."
"Think about the America within our reach: A country that leads the world in educating its people," Obama said. "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."
At the same time, Obama repeated his readiness to work with Republicans to build on economic recovery that has started but still struggles to take off.
"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," Obama said.
He also rejected any efforts to "go back to an economy weakened by outsourcing, bad debt, and phony financial profits," according to the excerpts.
"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that does the same," Obama said. "It's time to apply the same rules from top to bottom: No bailouts, no handouts, and no cop-outs. An America built to last insists on responsibility from everybody."
Republicans, including candidates to take on Obama in November, already were panning the speech before its delivery, saying they expected few new ideas or sincere efforts by the president to end the partisan gridlock in Washington.
In the official GOP response, conservative Indiana Gov. Mitch Daniels will say that "it's not fair and it's not true for the president to attack Republicans in Congress as obstacles," according to excerpts released beforehand.
"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," Daniels will say, according to the excerpts. "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 will never be enough public revenue to pay for our safety net, national security, or whatever size government we decide to have."
In particular, Daniels will call for "a dramatically simpler tax system of fewer loopholes and lower rates" and "a pause in the mindless piling on of expensive new regulations that devour dollars that otherwise could be used to hire somebody."
Republican presidential candidate Mitt Romney earlier said Obama's speech will avoid talking about economic problems under his leadership.
"The president will do what he does best. He'll give a nice speech, a lot of memorable phrases in it, but he won't give you the hard numbers like 9.9% unemployment here in Florida," Romney said at a campaign event in Tampa. "... Instead, tonight President Obama will make the opening argument for his campaign against a do-nothing Congress."
Former House Speaker Newt Gingrich, who is surging in polls after his primary victory Saturday in South Carolina, said at a campaign event in Sarasota, Florida, that if elected president, his first acts would be to sign executive orders undoing policies of the Obama administration.
"Our goal is, in the executive orders that we sign on the first day, that by the time President Obama lands in Chicago, we will have dismantled about 40% of his administration," Gingrich said to cheers.
A preview of Obama's speech to supporters made the economy a principal theme.
Manufacturing, energy, education and values would be the foundation for building an "economy that works for everyone, not just a wealthy few," Obama said in a video released by his campaign.
A Democratic source briefed on the State of the Union speech gave CNN a view of what will be proposed:
• A tax code in which the Bush tax cuts expire and the wealthy pay more;
• More refinancing for homeowners in trouble;
• Additional tax breaks for companies that create jobs in the United States;
• More clean energy incentives;
• Enhanced education and job training initiatives;
• A renewed call for the Buffett Rule, a minimum tax rate for the wealthiest Americans;
• The creation of a China task force to monitor trade violations.
Obama and Democrats want to avoid the November election being a referendum on the president and his stewardship of the economy.
Instead, they want a contrast campaign between a GOP they can define as allied with wealthy interests that they contend brought the economy to its knees in 2008, vs. a president who will fight for regular working Americans.
Obama's speech drew on themes from the Kansas speech he delivered in early December that focused on restoring equal opportunity for all, rather than an economy where the wealthy and reckless such as irresponsible Wall Street investors get ahead.
Democratic sources acknowledge that to succeed in November, Obama has to make the case that his policies have begun to make a difference, with the economy showing signs of improvement.
According to the administration, the economy has added nearly 3.2 million private-sector jobs over the last 22 months, and American manufacturing is creating jobs for the first time since the late 1990s. The American auto industry is coming back, adding 100,000 jobs in the last year, and U.S. oil production is at the highest level in eight years.
Republicans argue that Obama's policies have stymied growth by increasing regulations and delaying opportunities such as the Keystone XL oil pipeline from Canada in order to appease some of his liberal support base.
"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," Daniels will say, according to the released excerpts of the GOP response. "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."
Among the president's unmet promises from last year's address are pledges to increase investment in clean energy, take action on the status of illegal immigrants, fund new infrastructure projects, overhaul Social Security, and let the Bush tax cuts on the highest income bracket expire.
The president submitted proposals to Congress addressing some of his 2011 pledges, including on infrastructure spending and the tax cuts, but Republicans promptly rejected those measures. On other issues, including entitlement reform, a simplification to the tax code, and addressing illegal immigration, no concrete plan from the White House ever reached Congress.
But the White House can point to some concrete achievements outlined in last year's address. These include the passage of trade deals with South Korea, Panama, and Colombia; an end to the war in Iraq, and a repeal of the "1099 provision" that was said to burden small businesses' bookkeeping efforts relating to health care coverage.