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POLITICS AND POLICY

State of the Union: Obama Seeks to Narrow Income

Gap

President Vows Executive Action on Wages, Savings;; GOP Warns He's Overreaching

Updated Jan. 28, 2014 11:45 p.m. ET

WASHINGTON—President Barack Obama, seeking to restore confidence in his leadership, declared in hisState of the Union address Tuesday that he would use executive power to try to narrow the gap betweenrich and poor and speed the nation's economic recovery.

Mr. Obama's speech was essentially a manifesto designed to inject new vigor into his languishing agendaand guide his presidency through the partisan divide in the capital. The goal was to position the president asthe champion of struggling Americans fed up with the bickering in Washington, marshaling an array of policyproposals aimed at helping them save more, earn more and find work in a tough economy.

"Corporate profits and stock prices have rarely been higher, and those at the top have never done better.But average wages have barely budged," Mr. Obama said. "Inequality has deepened. Upward mobility hasstalled…Our job is to reverse these trends."

The president told the joint session of Congress that "I'm eager to work with all of you," but his message was

President Barack Obama has made income inequality a central tenet of his economic plan;; here are a few highlights from theState of the Union address. Photo: AP.

By CAROL E. LEE and PETER NICHOLAS

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clear: "Wherever and whenever I can take steps withoutlegislation to expand opportunity for more American families,that's what I'm going to do."

In vowing to act unilaterally, Mr. Obama was implicitly pointingto the limits of his ability to enact policy: Executive orders tendto have less reach and less permanence than legislation. Mr.Obama laid out a long list of proposals that would requirecongressional approval, including raising the minimum wageand changing the immigration system. But getting lawmakersto go along likely would be difficult.

Republican lawmakers warned of presidential overreach andcast Mr. Obama as having given up on trying to compromisewith Congress. Sen. John Thune (R., S.D.) said Mr. Obama"ought to work with us on bipartisan measures," such asmaking changes to the 2010 health-­care law and approvingthe long-­stalled Keystone XL pipeline. "Instead, he's talkingabout taking unilateral action on a whole range of things."

Mr. Obama said Tuesday that he would sign an executiveorder in the coming weeks to raise the federal minimum wagefor employees on new federal contracts, a move that wouldaffect a fraction of low-­wage workers—janitors and laundryworkers on military bases, among others, the White Housesaid. In a second action independent of Congress, he said hewould create a new retirement-­savings program coordinatedby the government, a further bid to appeal to Americans'persistent sense of economic insecurity.

At the same time, he acknowledged he can't achieve certaingoals alone and called on lawmakers to push through variousproposals that have stalled in Congress. He urged the Houseand Senate to send him an overhaul of the immigrationsystem, raise and expand the earned income tax credit forlow-­wage workers without children, and raise the federalminimum wage for all eligible workers to $10.10 an hour, upfrom $7.25.

"Opportunity is who we are," Mr. Obama said. "And thedefining project of our generation must be to restore thatpromise."

President Barack Obama gives his State of the Unionaddress on Capitol Hill Tuesday. Associated Press

A look at the best moments from Barack Obama'sState of the Union address.

The majority of the speech focused on domestic affairs, but Mr. Obama touched briefly on foreign policy. Heindicated the U.S. ultimately would like to leave troops in Afghanistan after 2014, assuming an impasse innegotiations with the Afghan government can be resolved.

He also highlighted his administration's diplomatic efforts with Iran, saying that an agreement to curtailTehran's nuclear program "may not succeed" but threatening to veto any of the legislation in Congress thatwould enact additional sanctions.

Mr. Obama renewed his call for closing the prison at Guantanamo Bay, Cuba, and asked Congress to doaway with barriers on moving detainees out of Guantanamo so that the U.S. can shutter the prison this year.

The president asked lawmakers to tackle a number of his priorities. He called on lawmakers to overhaul thetax code and use the savings to fund infrastructure projects—a proposal he has made before that hasgained little traction—and he pressed the House and Senate to pass trade pacts that some members of hisown Democratic Party oppose.

Mr. Obama's speech touched on issues that have divided the two parties. He declared "climate change is afact" after saying he would act alone to increase fuel-­efficiency standards for heavy-­duty trucks this year.

He also tried to show how his health-­care overhaul has been successful, after a botched rollout that hasheightened the country's doubts about the law. At the same time, he challenged Republicans to do more thancomplain. "If you have specific plans to cut costs, cover more people, increase choice, tell America whatyou'd do differently," he said. "But let's not have another 40-­something votes to repeal a law that's alreadyhelping millions of Americans."

The new retirement accounts would provide a guaranteed return, White House officials said. Eventually,people could convert them into traditional retirement-­savings vehicles such as a 401(k) or an individualretirement account.

Mr. Obama's executive order on the minimum wage for employees of federal contractors is an attempt tolead the way as he presses employers to act voluntarily to lift minimum pay for their workers. It also is anopening salvo on an issue that Democrats plan to highlight in midterm elections.

Many Republicans oppose a minimum-­wage increase, saying it would prompt employers to cut back onhiring, hurting low-­wage workers. Senate Minority Leader Mitch McConnell (R., Ky.) said that whenminimum-­wage legislation comes to the Senate floor in the coming weeks, Republicans would offeralternatives that they believe would do more to create jobs.

Absent congressional action, Mr. Obama's executive order raising the wage for employees of federalcontractors is an attempt to lead the way as he presses employers to act voluntarily to lift the minimumwage. It also is an opening salvo in an election-­year push by Democrats to raise the federal minimum wagefor all eligible workers. The White House has planned for months to make the minimum wage an issue inNovember's midterm elections.

'Average wages have barely budged. Inequality has deepened. Upward mobility has stalled…Our jobis to reverse these trends,' President Barack Obama said in his sixth State of the Union Address. JewelSamad/Agence France-­Presse/Getty Images

An objective of the speech was to show that Mr. Obama isn't simply a player on the Washington scene but

rather a president with a broad vision and independence from a Congress that polls show to be unpopular. It

also was part of an effort by Mr. Obama to regain traction amid low job-­approval ratings and pessimism

about his abilities.

Many Democrats praised Mr. Obama's speech—"a practical agenda with specific ideas," said Sen. Tim

Kaine of Virginia—but Sen. Joe Manchin of West Virginia said he was concerned by the president's plans to

bypass Congress, if necessary. Rep. Tulsi Gabbard (D., Hawaii) said she was disappointed that Mr. Obamadidn't call for major changes to limit the surveillance of Americans' phone records, while Sen. Heidi Heitkamp(D., N.D.) said she would have welcomed support for Keystone XL or "finding a viable path forward for coal."

John Engler, president of the Business Roundtable trade group, said there were plenty of proposals in thespeech that corporations could rally behind, such as changes to immigration law, trade authority, and tax-­code changes. But he said it remains to be seen whether policy makers can bridge differences.

Nearly six in 10 people said they were uncertain, worried or pessimistic about his doing a good job in theremainder of his presidency. Some four in 10 surveyed said they were optimistic or hopeful.

"There's much in the message that we could work with. The question is almost 100% on the execution," hesaid.

—Jared A. Favole, Michael R. Crittenden and Janet Hook contributed to this article.

Write to Carol E. Lee at carol.lee@wsj.com and Peter Nicholas at peter.nicholas@wsj.com

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