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Obama to address voter fears in State of Union

2010-01-26 10:09:17

By Alister Bull and Caren Bohan Alister Bull And Caren Bohan . Mon Jan 25,

10:32 pm ET

WASHINGTON (Reuters) . President Barack Obama, concerned by voter anxiety over

high unemployment, said on Monday he would use his State of the Union speech on

Wednesday to reassure Americans worried about jobs and the economy.

"We're going to talk about how we can first of all, focus on job creation and

growth," Obama said in an interview with U.S. television network ABC.

"There are going to be a set of proposals that we put forward that help to

stabilize the situation and deal with the growing insecurity and anxiety of

people who, even if they haven't lost their job, are still feeling squeezed by

their incomes shrinking and their costs going up."

Obama's first State of the Union speech at 9 p.m. EST on Wednesday (0200 GMT on

Thursday) will give him a chance to set the tone and priorities for his second

year in office.

He is trying to balance the need to further boost the economy with the

necessity of reining in the U.S. budget deficit, which soared to $1.4 trillion

in 2009.

Faced with voter anxiety over high unemployment and growing budget deficits,

Obama's fellow Democrats are at risk of big losses in congressional elections

in November. They suffered an embarrassing defeat in a special Senate election

last week in Massachusetts.

Under pressure from deficit hawks, Obama will seek a three-year freeze on

domestic spending excluding U.S. security in his 2011 budget that would save

$250 billion by 2020, aides said on Monday.

Obama will outline the spending hold-down in his State of the Union address and

will spell it out in detail on February 1, when he unveils his second budget.

The 2010 budget allocated $447 billion to non-security discretionary spending,

or about one-eighth of the overall budget. Agencies that could feel the pinch

include the Commerce, Interior, Justice and Labor departments, as well as the

Environmental Protection Agency.

But Obama told ABC News there were no "magic solutions" to the deficit. The

problem would require "slow chipping away" and Democratic and Republican

cooperation," he said.

Obama's rhetoric has taken a populist turn in recent weeks and he is expected

to tap into voter frustration over the economy in his State of the Union

speech.

EROSION OF SUPPORT

"Creating good sustainable jobs is the single most important thing that we can

do to rebuild the middle class," Obama said earlier on Monday in unveiling

proposals to expand a child-care tax credit and encourage savings to

demonstrate his concern for middle-class families.

A year into his presidency, Obama and his Democratic Party have witnessed an

erosion of support among middle-class Americans who swept him into office. He

has responded with a tougher line against Wall Street and excessive executive

bonuses.

The Middle Class initiatives he announced on Monday were developed by the White

House Task Force on Middle Class Families, led by Vice President Joe Biden. The

proposals would:

Require companies that do not offer retirement plans to enroll their

employees in direct-deposit retirement accounts unless the workers opt out.

Increase the "Savers Credit," a tax credit for retirement savings, for

families making up to $85,000.

Change some of the rules for 401(k) employer-sponsored retirement savings

accounts to make them more transparent.

Increase the child tax credit rate to 35 percent of qualifying expenses from

the current 20 percent for families making under $85,000 a year. Families

making up to $115,000 would be eligible for some increase in the tax credit.

Increase child care funding by $1.6 billion in 2011 to serve an additional

235,000 children.

Boost government spending by $102.5 million for programs aimed at helping

families who provide home care for an aging relative.

Ease the burden for student loans by limiting a borrower's payments to 10

percent of his or her income above a basic living allowance.

Knowing Obama will discuss the deficit on Wednesday night, conservative-leaning

Democrats in the House of Representatives, known as the Blue Dogs, outlined a

plan to Reuters on Monday of deficit-cutting measures that aims to balance the

budget within 10 years and stabilize the national debt.

The 54 centrist members of the coalition could play a large role this year as

nervous Democrats try to position themselves ahead of the November elections as

responsible stewards of taxpayer money.