captioning sponsored by cbs this is a cbs5 news special report. >> president obama's state of the union address. here is katie couric. c. >> couric: good evening, everyone. the constitution requires the president to report to congress from time to time on the state of the union and president obama has decided now is the time to lay out the challenges facing the country, including unemployment at 9.4% and a national debt of $14 trillion and proposed solutions. this will be mr. obama's second state of the union address as he begins the third year of his presidency and looks ahead to a campaign for reelection. his job approval rating has inched up in recent weeks. our latest cbs news poll found 49% of the public approves of

the job he's doing. now, you'll notice some changes this year. the president will be introduced by the new republican speaker of the house, john boehner. and in the audience where republicans traditionally sit on one side and democrats on the other, many of them have decided to mix it up this year. a show of unity after the attempted assassination of one of their own, arizona congresswoman gabrielle giffords. there will also be an empty chair in the house chamber for giffords who remains in intensive care in a medical center in houston, texas, tonight. members are also wearing black-and-white ribbons to honor her and all the victims of the tucson shootings, the six killed and 13 wounded. we have a team of correspondents with us tonight. let's start with chip reid at the white house where i understand, chip, the president has been working on this speech since right after thanksgiving. >> reporter: he has been working on it for a very long time, katie,. right up until recent hours. it's going to be a very optimistic speech, the white house says. in fact, we have an early draft

of it. the president is going to say in reference to the tucson shootings that it was a reminder that we are all part of the american family and we all need to work together. we need to work together to win the future. he then goes on to describe how americans can win the future and one key to that is american innovation. he refers back to the sputnik moment about 50 years ago when the russians beat... excuse me, the soviets beat the americans into space. the americans came roaring back with a wave of innovation that lasted until this day and the president will say this is our generation's sputnik moment and he will conclude by saying we as americans do big things. katie? >> couric: all right, thanks, chip. as we mentioned, tonight politics is making for some pretty strange seat mates. some have even called this congressional sp dating. our congressional correspondent nancy cordes is on capitol hill. nancy, people are having a lot of fun with this idea today, but the reason behind it is very serious. >> reporter: that's right, katie. this is something that was

proposed right after the tucson tragedy by senator mark udall of colorado. he said why not in a show of civility, a show of respect we take a break from this tradition of one party sitting on one side and standing up and cheering and clapping while the other side kind of sits glumly on its hands and let's mix it up. let's sit with each other. there's no reason that we can't be friends and show respect to one another even though we disagree fundamentally on so many things. >> couric: and so there are some interesting couplings tonight. i understand some are coming in trios, if you will, nancy. >> reporter: that's right, katie. you've got, for example, congressman joe wilson of south carolina. you might recall he was the one who shouted "you lie" at the president back in 2009. he's going to be sitting with two democrats tonight, one from california, one from guam. you just saw new york senator chuck schumer there, he's a noted liberal. he's going to be sitting with tom coburn of oklahoma who's one of the most conservative members of the senate. then there's minority leader

nancy pelosi. last year she was on the dais as speaker, this year she's sitting with veteran republican rtlett of maryland and, katie, how's this for awkward? majority leader eric cantor let it be known he'd like to sit with ms. pelosi but she already had a date and let him know via tweet she was taken. >> couric: also, nancy, i hear there's a joke going around that kirstin gillibrand and john thune were actually voted prom king and queen tonight. >> reporter: (laughs) that's right. they're kind of known for being two of the... maybe you could say better looking members of the senate and they paired up relatively early. things really gained steam over the past week or so. you had a lot of members who really were kind of getting into the spirit of the thing and i think that lot of members who just didn't want to be left out. >> couric: all right. nancy, we'll be checking in with you later. meanwhile, bob schieffer is here with us, of course, tonight. and, bob, we're hearing so much about a new tone. will we hear and see a new tone both in the audience and at the

podium? and i guess if we do will it actually last? >> schieffer: i know i'm going to be nominated for the mr. pollyanna of the year award, but i really do think there will be. only those of us who live in washington and deal with washington politics everyday know how really bad the partisan ship has been and how bitter all of this has been. and i mean i think everybody wants to just kind of step back. and i think you are going to see a toning down. i can't say how long it's going to last but when things are as bad as they are right now, katie, it certainly not going to hurt. and i think you're going to see, as jim said sunday on "face the nation" less jumping up and down than you normally see at one of these speeches and more time for people to think about what the president is saying. >> couric: let's listen to the sergeant at arms. >> mr. speaker, the president of the united states. (cheers and applause) >> couric: announcing the president's arrival as he glad hands with various members of

congress. you know, jeff, a lot of people are saying the real battle is how the recent midterm elections should be interpreted. republicans say voters wanted less government, they didn't want government-run health care. and the white house claims they just didn't like partisan politics and they wanted both sides to work together. what do you think the message of the midterms was? >> greenfield: because different people can interpret those differently, one of the most important things we're going to see is how the republicans interpret it when they start to govern. you've got 87 new members of the house, many of whom are fired up with a kind of militancy we very rarely see, even among new members. they really believe they were elected to put a firm immediate halt on spending and one of the things obama politically is going to try to do-- not just tonight but over the next year-- is to separate out the middle from what he will try to paint as a much too ideological republican majority. it's also going to be a lot of pressure on the new house speaker john boehner. i mean, there's a tension

between john boehner and the more militant tea party folks. that may be the best political story this season. >> couric: and, in fact, john dickerson, how is that shaking out? we all talked about after the midterm results how these two basically sides of the republican party were going to be integrated once this new congress was convened. what have you seen happen? how has it all sort of turned out so far? >> dickerson: well, it's a shaky business so far and the shakiness comes, we see it tonight. congressman paul ryan who will give the official republican response and then congresswoman michele bachmann will give another sort of tea party response. and the difference there, essentially, is between governing-- which is what ryan has to do, put together a budget, listen to all of tin put and voices-- and michele bachmann who's doing something closer to campaigning. and the mix and how they find that mix, how they keep those promises they made but still get enough votes to actually pass something that could even make it to the president's desk. that's the tension and they're still working that out and

they're working it out in public. >> couric: and how serious, bob schieffer, do you see this chasm developing? how big a problem will this pose for the g.o.p.? >> schieffer: it is a problem. and, i mean, the fact that the republican leadership is letting michele bachmann make a second response here just underlines that. i mean, my heavens, can you imagine what sam rayburn when he was speaker of the house would have done if one of his members said "by the way, i'm going to make a response, too"? or lyndon johnson when he was the leader of the senate? they're letting her make this speech because they're afraid to tell her not to, because they know how powerful these tea party people were and the power they had in the last election. >> greenfield: but to look at obama and the president's problem, he has an unemployment rate much higher than we're used to and if he can not see that unemployment rate shrink, all of these efforts to say "feel better, i'm an optimist, i know where the future is going" is going to be a hard sell if the

unemployment figure stays as high as it is. >> couric: and as he greets members of the supreme court, we should mention interior secretary kent salazar is the appointed cabinet member not present at tonight's state of the union address in the event of an emergency a cabinet member always stays home or goes out somewhere, maybe he's shopping, who knows. he's not there. >> schieffer: i wonder if he takes in the speech or watches a movie. >> couric: meanwhile, we're going to talk about creating jobs and reducing the deficit. john dickerson, can the white house do both of those things? >> dickerson: well, it's a tricky balance and what the president is trying to balance tonight is how to talk about the austerity that both he and the republicans believe have to happen but then also have an uplifting message and so tonight he'll try to strike that balance with this competitive message and how how america has always fought back. but the real test here is how much does he meet the minimum threshold for deficit reduction? that's something people care about. he has to show he's serious

enough about that so that people can hear his other message about the investments that need to be made to get jobs growing again. >> couric: you mentioned the word "investment." mitch mcconnell said today invest system latin for government spending, or he said that recently. and that was echoed by john boehner when he had a breakfast for reporters this morning, bob. you and i were both there. this is going to be the real source of contention for these two sides. >> schieffer: that's what the fight is about. he makes a very well-crafted speech tonight but he doesn't tell us how he's going to pay for it in detail. that's what the fight will be all about. >> couric: and, of course, the g.o.p. hasn't done that, either. >> schieffer: no. >> couric: so both sides it's kind of a game of a political chicken when it comes to spending cuts. >> >> greenfield: everybody's for cutting spending except for 90% of the budget, social security, medicare, medicaid, defense. so everybody's looking to cut spending where it matter the least. >> i have the high privilege and distinct honor of presenting the president of the united states.

(cheers and applause) >> schieffer: it's the night of great standing ovations, katie. the president got three or four before he even speaks. he's already gotten two now. >> thank you. thank you so much. thank you so much. thank you very much. thank you. everybody please have a seat. thank you. mr. speaker, mr. vice president, members of congress, distinguished guests and fellow americans. tonight i want to begin by con gaj lating the men and women of the 112th congress as well as your new speaker john boehner. (applause)

>> thank you, mr. president. thank you. (applause). >> and as we mark this occasion, we're also mindful of the empty chair in this chamber and we pray for the health of our colleague and our friend gabby giffords. (applause) it's no secret that those of us here tonight have had our differences over the last two

years. the debates have been contentious. we have fought fiercely for our beliefs. and that's a good thing. that's what a robust democracy demands. that's what helps set us apart as a nation. but there's a reason the tragedy in tucson gave us pause. amid all the noise and passion and rancor of our public debate, tucson reminded us that no matter who we are or where we come from, each of us is a part of something greater. something more consequential than party or political preference. we are part of the american family. we believe that in a country where every race and faith and point of view can be found we are still bound together as one people. and we share common hopes in a

common creed. that the dreams of a little girl in tucson are not so different than those of our own children and that they all deserve the chance to be fulfilled. that, too, is what sets us apart as a nation. (applause) now, by itself, this simple recognition won't usher in a new era of cooperation. what comes of this moment is up to us. what comes of this moment will be determined not by whether we can sit together tonight but whether we can work together tomorrow. (applause)

i believe we can and i believe we must. that's what the people who sent us here expect of us. with their votes, they've determined that governing will now be a shared responsibility between parties. new laws will only pass with support from democrats and republicans. we will move forward together or not at all. for the challenges we face are bigger than party and bigger than politics. at stake right now is not who wins the next election-- after all, we just had an election-- at stake is whether new jobs and industries take root in this country or somewhere else. whether the hard work and industry of our people is rewarded. it's whether we sustain the leadership that has made america

not just a place on a map but the light to the world. now, we are poised for progress. two years after the worst recession most of us have ever known, the stock market has come roaring back. corporate profits are up. the economy is growing again. but we have never measured progress by these yardsticks alone. we measure progress by the success of our people, by the jobs they can find and the quality of life those jobs offer by the prospects of a small business owner who dreams of turning a good idea into a thriving enterprise. by the opportunities for a better life that we pass on to our children. that's the project the american people want us to work on. together. (applause)

now, we did that in december thanks to the tax cuts we passed americans' paychecks are a little bigger today. every business can write off the full cost of new investments that they make this year. and these steps taken by democrats and republicans will grow the economy and add to the more than one million private sector jobs created last year. but we have to do more. these steps we've taken over the last two years may have broken the back of this recession, but to win the future we'll need to take on challenges that have been decades in the making. many people watching tonight can probably remember a time when finding a good job meant showing up at a nearby factory or a business downtown. you didn't always need a degree and your competition was pretty

much limited to your neighbors. if you worked hard chances are you'd have a job for life with a decent paycheck and good benefits and the occasional promotion. maybe you'd even have the pride of seeing your kids work at the same company. that world has changed. and for many, the change has been painful. i've seen in the the shuttered windows of once-booming factories, in the vacant store fronts on once-busy main street streets. i've heard in the the frustrations of americans who've seen their paychecks dwindle or their jobs disappear. proud men and women who feel like the rules have been changed in the middle of the game. they're right. the rules have changed. in a single generation, revolutions in technology have transformed the way we live, work, and do business.

steel mills that once needed a thousand workers can now do the same work with a hundred. today just about any company can set up shop, hire workers, and sell their products wherever there's an internet connection. meanwhile, nations like china and india realized that with some changes of their own, they could compete in this new world. so they started educating their children earlier and longer with greater emphasis on math and science. they're investing in research and new technologies. just recently, china became the home to the world's largest private solar research facility and the world's fastest computer so, yes, the world has changed. the competition for jobs is real but this shouldn't discourage us, it should challenge us.

remember, for all the hits we've taken these last few years, for all the naysayers predicting our decline, america still has the largest most prosperous economy in the world. (applause) no workers are more productive than ours. no country has more successful companies or grants more patents to investors and entrepreneurs. we're the hope to the world's best colleges and universities where more students come to study than any place on earth. what's more, we are the first nation to be founded for the sake of an idea, the idea that each of us deserves the chance to shape our own destiny. that's why centuries of pioneers and immigrants have risked everything to come here. that's why our students don't just memorize equations but answer questions like "what do

you think of that idea? what would you change about the world? what do you want to be when you grow up?" the future is ours to win. but to get there, we can't just stand still. as robert kennedy told us, the future is not a gift, it is an achievement. sustaining the american dream has never been about standing pat, it has required each generation to sacrifice and struggle and meet the demands of a new age. and now it's our turn. we know what it takes to compete for the jobs and industries of our time. we need to outinnovate, outeducate, and outbuild the rest of the world. (applause)

we have to make america the best place on earth to do business. we need to take responsibility for our deficit and reform our government. that's how our people will prosper. that's how we'll win the future. (applause) and tonight i'd like to talk about how we get there. the first step in winning the future is encouraging american innovation. none of us can predict with certainty what the next big industry will be or where the new jobs will come from. 30 years ago, we couldn't know that something called the internet would lead to an economic revolution. what we can do, what america does better than anyone else, is spark the creativity and imagination of our people.

we're the nation that put cars in driveways and computers in offices. the nation of edison and the wright brothers, of google and facebook. in america, innovation doesn't just change our lives, it is how we make our living. (applause) our free enterprise system is what drives innovation. but because it's not always profitable for companies to invest in basic research, throughout our history, our government has provided by cutting-edged scientists and inventors with the support that they need. that's what planted the seed for the internet. that's what helped make possible things like computer chips and g.p.s. just think of all the good jobs from manufacturing to retail that have come from these break throughs. now, half a century ago when the soviets beat us into space with the launch of a satellite called

sputnik, we had no idea how we would beat them to the moon. the science wasn't even there yet. nasa didn't exist. but after investing in better research and education we didn't just surpass the soviets, we unleashed a wave of innovation that created new industries and millions of new jobs. this is our generation's sputnik moment. two years ago i said that we needed to reach a level of research and development we haven't seen since the height of the space race and in a few weeks i will be sending a budget to congress that helps us meet that goal. we'll invest in biomedical research, information technology, and especially clean energy technology. (applause) an investment that will

strengthen our security, protect our planet, and create countless new jobs for our people. already we're seeing the promise of renewable energy. robert and gary allen are brothers who run a small michigan roofing company. after september 11, they volunteered their best roofers to help prepare the pentagon. but half of their factory went unused and the recession hit them hard. today with the help of a government loan, that empty space is being used to manufacture solar shingles that are being sold all across the country. in robert's words "we reinvented ourselves." that's what americans have done for over 200 years: reinvented ourselves. and to spur on more success stories like the allen brothers we've begun to reinvent our energy policy. we're not just handing out money, we're issuing a challenge. we're telling america's

scientists and engineers that if they assemble teams of the best minds in their fields and focus on the hardest problems in clean energy we'll fund the apollo projects of our time. at the california institute of technology, they're developing a way to turn sunlight and water into fuel for our cars. at oak ridge national laboratory they're using supercomputers to get a lot more power out of our nuclear facilities. with more research and incentives, we can break our dependence on oil with biofuels and become the first country to have a million electric vehicles on the road by 2015. (applause) we need to get behind this innovation, and to help pay for it, i'm asking congress to eliminate the billions in taxpayer dlases... dollars we currently give to oil companies.

(applause) i don't know if you've noticed, but they're doing just fine on their own. (laughter) so instead of subsidizing yesterday's energy, let's invest in tomorrow's. now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they're selling. so tonight i challenge you to join me in setting a new goal. by 2035, 80% of america's electricity will come from clean energy sources. (applause) some folks want wind and solar. others want nuclear, clean coal and natural gas. to meet this goal we will need them all and i urge democrats

and republicans to make it happen. (applause) maintaining our leadership in research and technology is crucial to america's success. but if we want to win the future, if we want innovation to produce jobs in america and not overseas then we also have to win the race to educate our kids think about it. over the next ten years, nearly half of all new jobs will require education that goes beyond a high school education. and yet as many as a quarter of our students aren't even finishing high school. the quality of our math and science education lags behind many other nations. america's fallen to ninth in the proportion of young people with a college degree. and so the question is whether all of us as citizens and as parents are willing to do what's necessary to give every child a

chance to succeed. that responsibility begins not in our classrooms but in our homes and communities. it's family that first instill it is love of learning in a child. only parents can make sure the t.v. is turned off and home work gets done. we need to teach our kids that it's not just the winner of the super bowl who deserves to be celebrated but the winner of the science fair. (applause) we need to teach them that success is not a function of fame or p.r. but of hard work and discipline.

our schools share this responsibility. when a child walks into a classroom, it should be a place of high expectations and high performance. but too many schools don't meet this test. that's why instead of just poring money into a system that's not working, we launched a competition called race to the top. to all 50 state wes said "if you show us the most innovative plans to improve teacher quality and student achievement we'll show you the money." race to the top is the most meaningful reform of our public schools in a generation. for less than 1% of what we spend on education each year, it has led over 40 states to raise their standards for teaching and learning. and these standards were developed, by the way, not by washington but by republican and democratic governors throughout the country. and race to the top should be

the approach we follow this year as we replace no child left behind with a law that's more flexible and focused on what's best for our kids. (applause) you see, we know what's possible from our children. when reform isn't just a top-down mandate but the work of local teachers and principals, school boards and communities. take a school like bruce randolph in denver. three years ago, it was rated one of the worst schools in colorado. located on turf between two rival gangs. but last may, 97% of the seniors received their diploma. most will be the first in their families to go to college. and after the first year of the school's transformation, the principal who made it possible wiped away tears when a student

said "thank you, miswaters, for showing that we are smart and we can make it." (applause) that's what good schools can do. and we want good schools all across the country. let's also remember that after parents, the biggest impact on a child's success comes from the man or woman at the front of the classroom. in south korea, teachers are known as nation builders. here in america, it's time we treated the people who educate our children with the same level of respect. (cheers and applause) we want to reward good teachers and stop making excuses for bad

ones. (applause) and over the next ten years, with so many baby boomers retiring from our classrooms, we want to prepare 100,000 new teachers in the fields of science and technology and engineering and math. (applause) in fact, every young person listening tonight who's contemplating their career choice, if you want to make a difference in the life of our nation, if you want to make a difference in the life of a child, become a teacher. your country more is you. (applause) your country needs you. of course, the education race

doesn't wednesday a high school diploma. to compete, higher education must be within the reach of every american. (applause) that's why we've ended the unwarranted taxpayer subsidies that went to banks and used the savings to make college affordable for millions of students. and this year, i asked dong go further and make permanent our tuition tax credit worth $(mark) 10,000 for four years of college. it's the right thing to do. because people need to be able to train for new jobs and careers in today's fast-changing economy. we're also revitalizing america's community colleges. last month, i saw the promise of these schools at forsyth tech in north carolina. many of the students there used to work in the surrounding factories that have since left

town. one mother of two, a woman named kathy proctor had worked in the furniture industry since she was 18 years old. and she told me she's earning her degree in biotechnology now-- at 55 years old. not just because the furniture jobs are gone, but because she e wants to inspire her children to pursue their dreams, too. as kathy said "i hope it tells them to never give up." if we take these steps, if we raise expectations for every child and give them the best possible chance at an education from the day they are born until the last job they take we will reach the goal that i set two years ago. by the end of the decade, america will once again have the highest proportion of college graduates in the world. (applause)

one last point about education. today there are hundreds of thousands of students excelling in our schools who are not american citizens. some are the children of undocumented workers who had nothing to do with the actions of their parents. they grew up as americans and pledge allegiance to our flag and yet they live everyday with the threat of deportation. others come here from abroad to study in our colleges and universities but as soon as they obtain obtained a vanceed degrees we send them home to compete against us. it makes no sense. now, i strongly believe that we should take on once and for all the issue of illegal immigration. and i am prepared to work with republicans and democrats to

protect our borders, enforce our laws, and address the millions of undocumented workers who are now living in the shadows. (applause) i know that debate will be difficult, i know it will take time. but tonight let's agree make that effort. and let's stop expelling talented, responsible young people who could be staffing our research labs or starting a new business. who could be further enriching this nation. (applause) the third step in winning the future is rebuilding america. to attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information.

from high-speed rail to high-speed internet. (applause) our infrastructure used to be the best. but our lead has flipped. south korean homes now have greater internet access than we do. countries in europe and russia invest more in their roads and railways than we do. china's building faster trains and newer airplanes. meanwhile, while our own engineers graded our nation's infrastructure they gave us a "d ." we have to do better. america's the nation that built the transcontinental railroad, brought electricity to rural communities, constructed the interstate highway system. the jobs created by these projects didn't just come from laying down track or pavement, they came from businesses that opened near a town's new train station or the new off ramp.

so over the last two years, we've begun rebuilding for 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. and tonight i'm proposing that we redouble those efforts. (applause) we'll put more americans to work repairing crumbling roads and bridges. we'll make sure this is fully paid for, attract private investment, and pick projects based what's best for the economy, not politicians. within 25 years, our goal is to give 80% of americans access to high-speed rail. (applause) this could allow you to go places in half the time it takes to travel by car. for some trips it will be faster than flying-- without the patdown.

(laughter). (cheers and applause) as we speak, routes in california and the midwest are already under way. within the next five years, we'll make it possible for businesses to deploy the next generation of high-speed wireless coverage to 98% of all americans. this isn't just about faster internet or fewer dropped calls, it's about connecting every part of america to the digital age. it's about a rural community in iowa or alabama where farmers and small business owners will be able to sell their products all over the world. it's about a firefighter who can download the design of a burning building on to a hand held device. a student who can take classes with a digital textbook. or a patient who can have face-to-face video chats with her doctor. all these investments in innovation, education, and infrastructure will make america

a better place to do business and create jobs. but to help our companies compete, we also have to knock down barriers that stand in the way of their success. for example, over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. those with accountants or lawyers to work the system can end up paying no taxes at all. but all the rest are hit with one of the highest corporate tax rates in the world. it makes no sense. and it has to change. (applause) so tonight i'm asking democrats and republicans to simplify the system. get rid of the loopholes. level the playing field. and use the savings to lower the corporate tax rate for the first time in 25 years without adding

to our deficit. (applause) it can be done. to help businesses sell more products abroad we set a goal of doubling our exports by 2014. because the more we export, the more jobs we create here at home. already our exports are up. recently we signed agreements with india and china that will support more than 250,000 jobs here in the united states. and last month we finalized a trade agreement with south korea that will support at least 70,000 american jobs. this agreement has unprecedented support from business and labor, democrats and republicans. and i ask this congress to pass it as soon as possible.

(applause) now, before i took office, i made it clear that we would enforce our trade agreements and that i would only sign deals that keep faith with american workers and promote american jobs. that's what we did with korea. and that's what i intend to do as we pursue agreements with panama and colombia and continue our asia-pacific and global trade talks. (applause) to reduce barriers to growth and investment i've ordered a review of government regulations. when we find rules that put an unnecessary burden on businesses we will fix them. (applause) but i will not hesitate to create or enforce common-sense

safeguards to protect the american people. (applause) that's what we've done in this country for more than a century. that's why our food is safe to eat, our water is safe to drink, and our air is safe to breathe. it's why we have speed limits and child labor laws. it's why last year we put in place consumer protections against hidden fees and penalties by credit card companies and new rules to prevent another financial crisis and it's why we passed reform that finally prevents the health insurance industry from exploiting patients. (applause)

now, i have heard rumors that a few of you still have concerns about our new health care law. (laughter) so let me be the first to say that anything can be improved. if you have ideas about how to improve this law by making care better or more affordable i am eager to work with you. we can start right now by correct ago flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. (applause) what i'm not willing to do-- what i'm not willing to do-- is go back to the days when insurance companies could deny someone coverage because of a preexisting condition.

(applause) i'm not willing to tell james howard, a brain cancer patient from texas, that his treatment might not be covered. i'm not willing to tell jim hauser, a small businessman from oregon that he has to go back to paying $5,000 more to cover his employees. as we speak, this law is making prescription drugs cheaper for seniors and giving uninsured students a chance to stay on their parents' coverage. (applause) so i say to this chamber tonight, instead of refighting the battles of the last two years, let's fix what needs fixing and let's move forward. (cheers and applause)

now, the final critical step in winning the future is to make sure we aren't buried under a mountain of debt. we are living with a legacy of deficit spending that began almost a decade ago. and in the wake of the financial crisis, some of that was necessary to keep credit flowing, save jobs, and put money in people's pockets. but now that the worst of the recession is over we have to confront the fact that our government spends more than it takes in. that is not sustainable. everyday families sacrifice to live within their means. they deserve a government that does the same. (applause)

so tonight i am proposing that starting this year we freeze annual domestic spending for the next five years. (applause) now, this would reduce the deficit by more than $400 billion over the next decade and will bring discretionary spending to the lowest share of our economy since dwight eisenhower was president. this freeze will require painful cuts. already we've frozen the salaries of hard-working federal employees for the next two years. i've proposed cuts to things i care deeply about, like community action programs. the secretary of defense has also agreed to cut tens of billions of dollars that he and his generals believe our military can do without. (applause)

now i recognize that some in this chamber have already proposed deeper cuts, and i'm willing to eliminate whatever we can honestly afford to do without. but let's make sure that we're not doing it on the backs of our most vulnerable citizens. (applause) and let's make sure that what we're cutting is really excess weight. cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. it may make you feel like you're flying high at first but it won't take long before you feel the impact. now, most of the cuts in savings i proposed only address annual domestic spending which represents a little more than 12% of our budget. to make further progress we have to stop pretending that cutting

this kind of spending alone will be enough. it won't. (applause) the bipartisan fiscal commission i created last year made this crystal clear. i don't agree with all their proposals, but they made important progress. and their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it: in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. (applause) this means further reducing health care costs, including programs like medicare and medicaid which are the single biggest contributor to our long-term deficit. the health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law

would add a quarter of a trillion dollars to our deficit. still, i'm willing to look at other ideas to bring down costs, including one that republicans suggested last year: medical malpractice reform to rein in frivolous lawsuits. (applause) to put us on solid ground, we should also find a bipartisan solution to strengthen social security for future generations. (applause) we must do it without putting at risk current retirees. the most vulnerable, or people with disabilities, without slashing benefits for future generations. and without subjecting americans s' guaranteed retirement income to the whims of the stock market.

(applause) and if we truly care about our deficit, we simply can't afford a permanent extension of the tax cuts for the wealthiest 2% of americans. (applause) before we take money away our our schools or scholarships away from our students we should ask millionaires to give up their tax break. it's not a matter of punishing their success, it's about promoting america's success. (applause) in fact, the best thing we could do on taxes for all americans is to simplify the individual tax code. (applause)

this will be a tough job, but members of both parties have expressed an interest in doing this and i am prepared to join them. (applause) so now is the time to act. now's the time for both sides and both houses of congress-- democrats and republicans-- to forge a principled compromise that gets the job done. if we make the hard choices now to rein in our deficits, we can make the investments we need to win the future. let me take this one step further. we shouldn't just give our people a government that's more affordable, we should give name government that's more competent and more efficient. we can't win the future into we are a government of the past. we live and do business in the information age. but the last major reorganization of the government

happened in the age of black-and-white t.v. there are 12 different agencies that deal with exports. there are at least five different agencies that deal with housing policy. then there's my favorite example: the interior department is in charge of salmon while they're in fresh water, but the commerce department handles them when they're in salt water. (laughter) i hear it gets even more complicated once they're smoked. (laughter) (applause) now... we've made great strides over the last two years in using technology and getting rid of waste. veterans can now download their electronic medical records with a click of the mouse. we're selling acres of federal

office space that hasn't been used in years. and we'll cut through red tape to get rid of more. but we need to think bigger. in the coming months, my administration will develop a proposal to merge, consolidate, and reorganize the federal government in a way that best serves the goal of a more competitive america. i will submit that proposal to congress for a vote and we will push to get it passed. (applause) in the coming year, we'll also work to rebuild people's faith in the institution of government because you deserve to know exactly how and where your tax dollars are being spent, you'll be able to go to a web site and get that information for the very first time in history. because you deserve to know when your elected officials are meeting with lobbyists, i ask congress to do what the white house has already done: put that

information online. and because the american people deserve to know that special interests aren't larding up legislation with pet projects, both parties in congress should know this: if a bill comes to my desk with earmarks inside i will veto it. (applause) i will veto it. the 21st century government that's open and competent, a government that lives within its means, an economy that's driven by new skills and new ideas. our success in this new and changing world will require reform, responsibility, and innovation.

it will also require us to approach that world with a new level of engagement in our foreign affairs. just as jobs and businesses can now race across borders, so can new threats and new challenges. no single wall separates east and west. no one rival superpower is aligned against us. and so we must defeat determined enemies wherever they are. and build coalitions that cut across lines of region and race and religion. and america's moral example must always shine for all who yearn for freedom and justice and dignity. and because we've begun this work, tonight we can say that american leadership has been renewed and america's standing has been restored. look to iraq where nearly 100,000 of our brave men and women have left with their heads held high.

(applause) american combat patrols have ended. violence is down, and a new government has been formed. this year, our civilians will forge a lasting partnership with the iraqi people while we finish the job of bringing our troops out of iraq. america's commitment has been kept. the iraq war is coming to an end. (applause) of course, as we speak, al qaeda and their affiliates continue to plan attacks against us.

thanks to our intelligence and law enforcement professionals, we're disrupting plots and securing our cities and skies. and as extremists try to inspire acts of violence within our borders, we are responding with the strength of our communities with respect for the rule of law and with the conviction that american muslims are a part of our american family. (applause) we've also taken the fight to al qaeda and their allies abroad. in afghanistan, our troop have taken taliban strongholds and trained afghan securities toes. our purpose is clear: by preventing the taliban from

reestablishing a stranglehold over the people, we will deny al qaeda the safe haven that served as a launching pad. fewer afghans are control of the insurgency thanks to our troops. there will be tough fighting ahead and the afghan government will need to deliver better governance. but we are strengthening the capacity of the afghan people and building an enduring partnership with them. this year we will work with nearly 50 countries to begin a transition to an afghan lead and this july we will begin to bring our troops home. (applause) in pakistan, al qaeda's leadership is under more pressure than at any point since 2001. their leaders and operatives are being removed from the

battlefield. their safe havens are shrinking and we've sent a message from the afghan boarder to the arabian peninsula to all parts of the globe. we will not relent, we will not waiver, and we will defeat you. (applause) american leadership can also be seen in the effort to secure the worst weapons of war because republicans and democrats approved the new start treaty, far few fewer nuclear weapons and launchers will be deployed. because we rallied the world, nuclear materials are being locked down on every continent so they never fall into the hands of terrorists. because of a diplomatic effort to insist that iran meet its

obligations, the iranian government now faces tougher sanctions, tighter sanctions than ever before. and on the korean peninsula we stand with our ally south korea and insist that north korea keeps its commitment to abandon nuclear weapons. (applause) this is just a part of how we're shaping a world that favors peace and prosperity. with our european allies we revitalized nato and increased our cooperation on everything from counterterrorism to missile defense. we've reset our relationship with russia, strengthened asian alliances, built new partnerships with nations like india. this marchly travel to brazil, chile, and el salvador to forge new alliances across the americas. around the globe we're standing with those who take

responsibility, helping farmers grow more food, supporting doctors who care for the sick and combating the corruption that can rot a society and rob people of opportunity. now, recent events have shown us that what sets us apart must not just be our power, it must also be the purpose behind it. in south sudan, with our assistance, the people were finally able to vote for independence after years of war. thousands lined up before dawn, people danced in the streets. one man who lost four of his brothers at war summed up the scene around him. "this was a battlefield for most of my life" he said. "now we want to be free." (applause) we saw that same desire to be

free in tunisia where the will of the people proved more powerful than the writ of a dictator. and tonight let us be clear: the united states of america stands with the people of tunisia and supports the democratic aspirations of all people. (applause) we must never forget that the things we've struggled for and fought for live in the hearts of people everywhere. and we must always remember that the americans who have borne the greatest burden in this struggle are the men and women who serve our country. (applause) .

(applause) tonight let us speak with one voice in reaffirming that our nation is united in support of our troops and their families. let us serve them as well as they've served us, by giving them the equipment they need, by providing them with the care and benefits that they have earned and by enlisting our veterans in the great task of building our own nation. our troops come from every corner of this country.

they're black, white, latino, asian, native american. they are christian and hindu, jewish and muslim. and, yes, we know that some of them are gay. starting this year, no american will be forbidden from serving the country they love because of who they love. (applause) and with that that change i call on our college campuses to open their doors to our military recruiters and r.o.t.c. it is time to leave behind the divisive battles of the past. it is time to move forward as one nation. (applause)

we should have no illusions about the work ahead of us. reforming our schools, changing the way we use energy, reducing our deficit. none of this will be easy. all of it will take time. and it will be harder because we will argue about everything. the costs, the details, the letter of every law. of course, some countries don't have this problem. if the central government wants a railroad, they build a railroad. no matter how many homes get bulldozed. if they don't want a bad story in the newspaper, it doesn't get written. and yet as contentious and

frustrating and messy as our democracy can sometimes be, i know there isn't a person here who would trade places with any other nation on earth. (applause). (cheers and applause) we may have differences in policy, but we all believe in the rights enshrined in our constitution. we may have different opinions, but we believe in the same promise that says this is a place where you can make it if you try. we may have rent backgrounds, but we believe in the same dream that says this is a country where anything is

possible no matter who you are, no matter where you come from. that dream is why i can stand here before you tonight. that dream is why a working class kid from scranton can sit behind me. (laughter) that dream is why someone who began by sweeping the floors of his father's cincinnati bar can preside as speaker of the house in the greatest nation on earth. (cheers and applause) that dream, that american dream is what drove the allen brothers to reinvent their roofing

company for a new era. it's what drove those students at forsyth tech to learn a new skill and work towards the future. and that dream is the story of a small business owner named brandon fisher. brandon started a company in berlin, pennsylvania, that specializes in a new kind of drilling technology. and one day last summer he saw the news that half way across the world 33 men were trapped in a chilean mine. and no one knew how to save them but brandon thought his company could help. and so he designed a rescue that would come to be known as plan "b." his employees worked around the clock to manufacture the necessary drilling equipment. and brandon left for chile. along with others, he began

drilling a 2,000 foot hole into the ground, working three or four days at a time without any sleep. 37 days later, plan "b" succeed ed and the miners were rescued. (applause) but because he didn't want all the attention, brandon wasn't there when the miners emerged. he'd already gone back home, back to work on his next project and later, one of his employees said of the rescue "we proved that center rock is a little company but we do big things." (applause) we do big things. from the earliest days of our

founding america has been the story of ordinary people who dare to dream. that's how we win the future. we're a nation that says "i might not have a lot of money, but i have this great idea for a few company. i might not come from a family of college graduates, but i will be the first to get my degree. i might not know those people in trouble, but i think i can help them and i need to try. i'm not sure how we'll reach that better place beyond the horizon but i know we'll get there, i know we will." we do big things. (applause) the idea of america endures. our destiny remains our choice. and tonight more than two centuries later it's because of our people that our future is hopeful, our journey goes forward and the state of our union is strong.

thank you. god bless you and may god bless the united states of america. (cheers and applause). >> couric: so, in a state of the union address taking about an hour and one minute president obama says the state of the union is strong but he acknowledges this country faces enormous challenges. in a call to action he said this is our generation's sputnik moment to reinvent ourselves so we can better compete with the rest of the world and create jobs here at home. and about his signature piece of legislation, health care reform, the president acknowledged it's not perfect. he said "let's fix what needs fixing and move on." the response to the speech among members of congress was somewhat muted, perhaps because so many republicans and democrats this time sat side by side. bob schieffer, the atmospherics were very different for this state of the union address. very few boisterous moments and quite a subdued crowd. >> schieffer: i thought the

atmosphere was very different and much better, if i might say so. i mean, i thought the president had a very well-written speech, especially the beginning and the end. and i think congress responded in a serious way. they gave him his say. i think it was a response that reflected well on the congress and sometimes, katie, after these things you wouldn't be able to say that, or at least i wouldn't. >> couric: right. and the divisions between the two parties only surfaced in a couple of moments, during a discussion about health care reform, for example. but other than that, it seemed to be a fairly unified response, although you couldn't necessarily tell because they were integrated this year. >> couric: >> schieffer: i think the fact they all sat together did make a difference. i said at the beginning how john mccain said we need less jumping up and down and acting silly and you saw a very different response by the congress at this time. >> couric: there was a lot of story tonight, jeff, and white house officials told me today the president felt he's been

sort of insulated and hasn't communicated enough stories with the american people. and in many ways, you felt this speech tonight was almost down right reaganesque. there have been some comparisons made in recent days about how this could be his reagan moment. do you think it was in any way? >> greenfield: i think there was an effort on several grounds. one, the story telling was woven throughout the speech. every political point or policy point he wanted to make was illustrated with that. second, it was the future. he kept talking about winning the future and that was always a big theme about reagan. it's not left/right, it's the past versus the future. most of all, the constant reiteration of optimism. we do big things, there isn't a person here who would trade places with anyone else on earth. i know we'll get there. that's almost like martin luther king, i've been to the mountain top. so in that sense he was clearly strike regulartor cal notes that reminded me of mr. reagan. >> couric: john dickerson, we can't have a big policy discussion but he was pretty short on specifics other than that five-year domestic spending freeze that will save $400 billion over ten years.

he didn't talk that much specifically about short-term job creation or spending cuts did he, john? >> dickerson: no. the spending cuts were played down. they here in there but he needed just enough to be able to say he'd done something. but too much spending cuts gets in the way of this uplifting message he was trying to convey, this notion of telling america its story back to itself and so too much spending talk would have just obscured that larger message. and he's trying to associate himself with that feeling of uplift. >> couric: and people might notice john that obviously people in the chamber are wearing these black-and-white ribbons in honor of gabrielle giffords and we should point out that there is a photo, quite moving, of mark kelly, her husband, watching the state of the union address from that hospital in houston where she is currently staying, waiting for rehab because she had some fluid buildup in her brain this week. but he's watching the state of the union address. and, again, that might be one reason why the crowd was rather subdued. it's hard not to forget about

what happened to their colleague and, of course, they're wearing those ribbons and she's very much in the forefront of their minds. >> schieffer: i think that did have an impact here. i mean, how could it not? i mean, this was one of their own who was wounded in this thing. i don't think there's any question that that did have an impact. you were talking about a reagan moment. i really think, jeff, that his reagan moment was when he made that speech in tucson. but i think he kind of built on that tonight. i thought this speech was something of an extension of that speech. >> greenfield: i think you're totally right. in fact, one of the reasons why the applause was muted is when you're a speech writer you know how to write a speech that gets people on their feet and you also know how to write a speech that people have to listen to. this was an explainer speech. how did we get here. why are we in this fix? how do we get out of it? there were long moments where i don't think the speech writers or the president... they weren't looking for applause. certainly not the kind of cheerleading we've seen. >> schieffer: the one thing i

wonder about, i thought it was a wonderful line when he said it's our sputnik moment but i wonder jeff and katie, are there enough americans alive who will remember? i do, of course, because i was alive when that happened. >> greenfield: 75% of americans were not alive when sputnik was launched. they might think it was a kind of jewish soul food. >> couric: it was launched the year i was born, 1957 and i'm proud to say that on national television. i don't mean to rain on your praird in terms of how eloquent this speech was but realistically, john dickerson, let me ask you, how long will this last? obviously we've got health care reform looming on the horizon, the republicans are doing everything they can to dismantle it and there's certainly a lot of areas of disagreement. so do you see this lasting at all? >> dickerson: well, we still have that big philosophical disagreement at the center of our politics. it was interesting to see john boehner clap when the president talked about a hundred thousand new teachers. well, that's part of his investment that republicans

before the speech had said that investment is just spending, it's wasteful old-style democratic spending. so perhaps the president may have made a little inn road here in terms of some of the spending he wants, might get republicans to sign on. but the philosophical disagreement is still there and republicans believe spending has to be cut drastically to get government out of the way so private enterprise can do its thing and create jobs and growth. the president is saying we need some sparks, we need some incentives and nudges here to get private enterprise to create shows jobs. >> couric: nancy cordes, are there areas of common ground where the two sides can indeed come together in your view? >> reporter: well, there are, katie. speaker boehner said just today we might be able to work with the president on targeted increasing of funding for infrastructure. we want to see the same kinds of free trade agreements getting signed. but we're only going to agree to targeting... targeted spending if the president is going to agree to bring down spending in other areas. and we like to hear him talk about balancing the budget, but

we want to see action. we want to see specifics before we sign on for more spending. >> couric: and, nancy, since you were up there tonight, did you notice the atmosphere? how was it? how did it seem to you, the fact that depths were sitting next to republicans. did it seem to make a difference? >> reporter: well, katie, it seemed like both parties were a little bit more light hearted. republicans didn't seem like they had to come in there loaded for bear and looking very grim because they had to disagree with the entire speech and i think part of that was because of the speech itself. >> couric: all right, nancy, thanks. the president has had his say tonight. coming up next, the republican response. cbs news coverage of the state of the union address will continue right after this. california should be proud.

we were the first to ban smoking on airplanes. the first to have smoke-free bars and restaurants. all while saving over $86 billion in health care costs... and over a million lives. we've done a good job. but even if you were born today, you'd still grow up in a world where tobacco kills more people... than aids, drugs, alcohol, murder and car crashes... combined.

>> couric: now to respond to the president's state of the

union address, the republicans have chosen one of their rising stars, congressman paul ryan of wisconsin. one of the so-called "young guns" of the g.o.p. a deficit hawk, he chairs the house budget committee and will be a key player in the battle to cut federal spending. he's speaking tonight from the committee hearing room on capitol hill. >> good evening. i'm congressman paul ryan from wisconsin and chairman here at the house budget committee. president obama just addressed a congressional chamber filled with many new faces. one face we did not see tonight was that of our friend and colleague congresswoman gabrielle giffords of arizona. we all miss gabby and her cheerful spirit and we're praying for her to return to the house chamber. earlier this month, president obama spoke movingly at a memorial event for the six people who died on that violent morning in tucson. still, there are no words that can lift the sorrow that now engulfs the families and the friends of the fallen. what we can do is assure them that the nation is praying for

them. that in the words of the psalmist, the lord heal it is broken hearted and binds up their wounds and that over time grace will replace grief. as gabby continues to make encouraging progress, we must keep her and the others in our thoughts as we attend to the work now before us. tonight the president focused a lot of attention on our economy in general and on our deficit and debt in particular. he was right to do so. and some of his words were reassuring. as chairman of the house budget committee, i assure you that we want to work with the president to restrain federal spending. in one of our first acts in the new majority house republicans voted to cut congress' own budget and just today the house voted to restore the spending discipline that washington sorely needs. the reason is simple: a few years ago reducing spending was important. today it's imperative. here's why. we face a crushing burden of

debt. the debt will soon eclipse our entire economy and grow to catastrophic levels in the years ahead. on this current path, when my three children who are now six, seven, and eight years old are raising their own children, the federal government will double in size and so will the taxes they pay. no economy can sustain such high levels of debt and taxation. the next generation will inherit a stagnant economy and a diminished country. frankly, it's one of my greatest concerns as a parent and i know many of you feel the same way. our debt is the product of acts by many presidents and many congresses over many years. no one person or party is responsible for it. there's no doubt the president came into office facing a severe fiscal and economic situation. unfortunately, instead of restoring the fundamentals of economic growth, he engaged in a stimulus spending spree that not only failed to deliver on his promise to create jobs but also

plunged us even deeper into debt. the facts are clear. since taking office, president obama has signed into law spending increases of nearly 25% for domestic government agencies and 84% increase when you include the failed stimulus. all of this new government spending was sold as investment. yet, after two years, the unemployment rate remains above 9% and government has added over $3 trillion to our debt. then the president and his party made matters even worse by creating a new open-ended health care entitlement. what we already know about the president's health care law is this: costs are going up, premiums are rising, and millions of people will lose the coverage they currently have. job creation is being stifled by all of its taxes, penalties, mandates, and fees. businesses and unions from around the country are asking the obama administration for waivers from the mandates.

washington should not be in the business of picking winners and losers. the president mentioned the need for regulatory reform to ease the burden on american businesses. we agree and we think its health care law would be a great place to start. last week, house republicans voted for a full repeal of this law as we pledged to do. and we will work to replace it with fiscally responsible patient-centered reforms that actually reduce costs and expand coverage. health care spending is driving the explosive growth of our debt and the president's law is accelerating our country toward bankruptcy. our debt is out of control. what was a fiscal challenge is now a fiscal crisis. we can not deny it. instead we must, as americans, confront it responsibly. and that is exactly what republicans pledge to do. americans are skeptical of both political parties, and that skepticism is justified, especially when it comes