In order to fix that, Obama said action has to be taken on both ends of Pennsylvania Avenue -- at the White House and on Capitol Hill.
Obama called for "strict limits" on the amount of money that lobbyists can give to political candidates. He will issue an order to Congress to come up with legislation that would reverse last week's Supreme Court decision that said corporations should not be restricted from spending unlimited amounts on political commercials.
"I don't think American elections should be bankrolled by America's most powerful interests, and worse, by foreign entities," he said. "They should be decided by the American people, and that's why I'm urging Democrats and Republicans to pass a bill that helps to right this wrong."
Obama reiterated his commitment to energy reform and earned bipartisan applause for advocating for the building of new nuclear power plants as a way to create clean energy jobs.
With such a heavy emphasis on domestic policy and the economy, the president seemed to gloss over the foreign policy items on his agenda this year. He noted the troop increase in Afghanistan and withdrawal of troops from Iraq and the continued work with Russia on nuclear disarmament.
Obama stressed his administration's commitment to working with allies.
"That is the leadership that we are providing -- engagement that advances the common security and prosperity of all people," he said.
There was no mention of Middle East peace talks or his administration's plans to close the detention center at Guantanamo Bay.
First lady Michelle Obama continued the tradition of inviting notable guests to sit with her in the House Gallery for the State of the Union.
Her guests included two service members, military spouses and Americans whom the White House wanted to highlight for their work as an entrepreneurs or community activists.
Sgts. Kimberly Munley and Mark Todd, civilian members of the Ft. Hood police force who stopped the deadly rampage on the Texas military base on Nov. 5, attended tonight's speech and sitting with the first lady.
Also in attendance were Ambassador Raymond Joseph, Haiti's ambassador to the United States; Rebecca Knerr, wife of Captain II Joseph Knerr, leader of Fairfax County's Va.'s Task Force 1 serving in Haiti; and two college students who participated in the White House's D.C. Scholars program as high school students.
One of those students, Clayton Armstrong, said he almost missed the White House call.
"English class was just ending," the college freshman told ABC News. The caller "asked me if I would be able to come back to D.C." from the University of Arizona. "The first lady is inviting you to sit with her in the box" for the State of the Union address.
Armstrong was stunned silent.
"He wanted to make sure I was still on the phone," Armstrong said. "My heart was pounding the rest of the day."
Armstrong and the second student, Janelle Holloway, a freshman at Harvard, are both products of troubled Washington, D.C., public high schools. Both beat the odds and made it to college, and both held White House internships last summer.
Holloway's work on the correlation between abused children and teen violence caught the eye of the West Wing's Domestic Policy Council.
ABC News' Devin Dwyer, Ann Compton and Sunlen Miller contributed to this report.