Obama urging 'investments' in State of the Union, despite national mood souring on spending

Ed Henry reports from the White House


President Obama, after delivering a barbed inaugural address that focused on controversial social agenda items, plans to return to the economy in his State of the Union Tuesday -- but his prescription for growth is still at odds with that of the Republican Party, and many voters. 

The president is expected to revive his calls Tuesday for government "investments" in infrastructure and education -- meaning spending. 

While the recurring push, for Republicans, brings back bad memories of the stimulus law they opposed, White House economic adviser Gene Sperling told Fox News on Tuesday that closing the deficit "doesn't mean you pull back on everything."

"I don't think that laying the foundation for future growth (with research and highway spending) is anything to discount in any way," Sperling said. "What you need to do is be smart."

Obama on Tuesday night is expected to focus on economic growth, while acknowledging the need to close the deficit through a combination of budget cuts and tax increases. 

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"The core emphasis that he has always placed in these big speeches remains the same, and it will remain the same -- the need to make the economy work for the middle class," White House Press Secretary Jay Carney said. 

He declined to get into specifics, but said the speech will focus on "proposals that are necessary to help the middle class grow and to help the economy grow." 

Carney pointedly countered House Democratic Leader Nancy Pelosi, who a day earlier dismissed the idea that Washington has a spending problem. 

"Of course the president believes that we have a spending problem," Carney said. Still, he said, "we need more investments that help the key industries of the 21st century ... take root here." 

Striking the balance between energizing a still-shaky economic recovery and taking sincere steps to reduce the deficit, though, is tricky. If not careful, the president could further antagonize Republicans who say cutting spending should be priority No. 1. 

If he calls for too much new spending, the president who claimed a decisive re-election victory in November could also find himself out of step with many Americans. 

A Fox News poll released last week showed that 73 percent of voters say cutting spending would be more likely to help strengthen the nation's economy -- as opposed to just 15 percent who believe increasing spending would do the trick. Opposition to another round of stimulus also ran 2-to-1, according to the poll 

The poll showed that out of 13 issues tested, more voters are "extremely" concerned about government spending than any other issue. Even a majority of Democrats -- 55 percent -- agreed that cutting spending is the way to help the economy. Ninety-one percent of Republicans held that view. 

A recent Pew poll also showed the budget deficit rocketing up the list of policy issues people care most about. The poll showed the budget deficit coming in third on that list, behind the economy and jobs. The deficit even outranked "defending against terrorism" in the survey. 

The president will have plenty of other hot-button items to weave into his speech. While an inaugural address, like the one delivered Jan. 21, is typically thematic and sweeping in scope, a State of the Union traditionally serves as a more practical, point-by-point policy agenda of the year to come. 

Obama is setting the tone for both 2013 and his second term with his address Tuesday. That agenda already includes a push for new gun control measures -- covering universal background checks, and bans on assault weapons and high-capacity magazines. The gun control measures face stiff resistance on the Hill, particularly in the House, but Obama's call for comprehensive immigration reform has gathered a more bipartisan following, with legislation being drafted by Democrats and Republicans in the Senate. 

Obama may also touch on climate change and other issues left over from his first term. 

But the deficit and the economy are unavoidable centerpieces for any Obama speech. Despite a seemingly slow-and-steady recovery in jobs, in the stock market and other indicators, the unemployment rate ticked back up again last month. And a Commerce Department report showed the economy shrank by .1 percent in the last quarter of 2012. 

Meanwhile, Obama and Congress are scrambling to find a way to avoid automatic spending cuts poised to hit March 1 unless a deal is reached to replace them. 

Obama, to the chagrin of Republicans, wants to replace those cuts with a blend of tax hikes and separate cuts. Republicans, citing the tax-hike concessions they gave during the fiscal crisis talks, are averse to more tax increases -- even if this time, those increases do not come in the form of rate hikes. 

Stephanie Cutter, former Obama deputy campaign manager, said on ABC's "This Week" that an all-cuts package will "strangle our economy" and in doing so, jack up the deficit. 

"This was an enforcement mechanism for Congress to come together, finally come together to pass balanced deficit reform, deficit reduction.  These across-the-board cuts (are) not going to get us there," she said. 

But Noelle Clemente, with the American Action Forum, told FoxNews.com LIVE that the claims of spending cuts so far are "full of budget gimmicks." Clemente said more spending is not the answer. 

"We've seen that stimulus spending doesn't work," she said. "That's not the solution. ... We know that this is a long-term spending problem and it's driven by long-term spending. Medicare, Medicaid, Social Security."