Obama to Focus on Economy in State of the Union As Critics Attack Economic Record

Jan. 19, 2012: President Obama speaks at a campaign event at the Apollo Theatre in Harlem. (AP)

WASHINGTON – President Obama is expected to focus on the economy and restoring the middle class in his State of the Union address Tuesday night -- an annual speech that Obama is using not only to review the condition of the nation, but to attempt to convince voters to let him keep his job next year.

As Republicans slam what they say is a dismal record on fixing the economy and creating work for Americans, the president will discuss his ideas to grow manufacturing and small businesses, expand exports, reduce dependence on foreign oil and make sure people are prepared for jobs in the 21st century.

He will also discuss ways to create a "strong and durable economy ... one that is fair to everybody," Obama senior advisor Valerie Jarrett told Fox News on Tuesday.

"A country where everybody plays by the same rules, where there's fairness and equity -- if you work hard you can start a business in a garage and it can grow to a global corporation, but where everybody has that opportunity. And he will talk about taxes and a fair way to have a tax system where people are paying their fair share," Jarrett said.

In what will be his third State of the Union address -- all of which have offered administration goals for fixing an economy that the president said he inherited -- Obama is expected to propose raising the tax rate on dividends and capital gains, which stands at 15 percent. That rate is the main reason billionaire Warren Buffett pays taxes at a lower rate than his secretary. Buffett's secretary will sit in first lady Michelle Obama's box for the speech.

The proposal is not new -- he suggested raising the rate to 20 percent for upper income taxpayers in his 2012 budget, released in February last year. The move would raise $123.6 billion over 10 years, according to administration estimates.

But as White House seeks to play up support for business, entrepreneurs and job creation, all could be hurt by higher taxes on capital gains and dividends. The small business community is waiting for the president to provide a plan to get customers through their doors, said Dan Danner, president and CEO of the National Federation of Independent Businesses.

Small business owners want "a plan that will create jobs by reducing the constraints that prevent small-business owners, and all Americans who work and shop on Main Street, from investing in the future," he said.

Republican presidential candidate Mitt Romney, whose tax returns released Tuesday show he pays about a 15 percent effective tax rate because much of his income is designated as carried interest, predicted that the president's proposals will not restore the economy, but are aimed at "partisan planks for his re-election campaign."

"Tonight, we'll … be treated to more divisive rhetoric from a desperate campaigner-in-chief,"Romney said Tuesday morning at a campaign stop in Florida. "It's shameful for a president to use the State of the Union to divide our nation. And someone ought to tell him: In order for the economy to truly 'work for everyone,' everyone needs to be working."

Senate Minority Leader Mitch McConnell said that although he doesn't know all the specifics of the president's address, "we do know the goal. Based on what the president's aides have been telling reporters, the goal isn't to conquer the nation's problems. It's to conquer Republicans. The goal isn't to prevent gridlock, but to guarantee it."

With joblessness at 8.5 percent, Obama may have a difficult time persuading voters he is the one who can restore the economy and put Americans back to work. The fact that the president's campaign office previewed the speech has only added to claims that it's a partisan effort.

But White House spokesman Jay Carney said Monday that Obama is not conceding the next 10 months to "campaigning alone," and David Plouffe said Tuesday morning the president is "happy to have a debate" about his performance.

McConnell said the president can try to run on his record, but he has no one but himself to blame for a shallow recovery.

"The fact is, any CEO in America with a record like this after three years on the job would be graciously shown the door. This president blames the managers instead. He blames the folks on the shop floor. He blames the weather," McConnell said.

For three days after the speech, the president will promote his ideas in states expected to be critical for his reelection -- Iowa, Arizona, Nevada, Colorado and Michigan. Polls show Americans are divided about Obama's overall job performance but unsatisfied with his handling of the economy.

The Associated Press contributed to this report