State of the Union 2011: Fact Checking President Obama's Speech

WASHINGTON, Jan. 25, 2011— -- Economy was the central focus of President Obama's State of the Union address tonight, a roughly 60-minute address that touched on an array of issues, from bipartisanship to the war in Afghanistan.

The president pledged to confront the nation's challenges hand in hand with Republicans and challenged members of Congress to reach across the political aisle and to tackle heavily partisan issues like clean energy and job growth.

ABC News takes a look at some of the claims in the president's address tonight and separates facts from fiction.

Tax Cuts:

"Thanks to the tax cuts we passed, Americans' paychecks are a little bigger today. Every business can write off the full cost of the new investments they make this year. 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."

The White House inked a deal with Republicans last month to extend for 13 months Bush-era tax cuts that were set to expire at the end of 2010. The tax cut extension bill passed in early December, much to the ire of many House Democrats.

By enacting a temporary break on the Social Security payroll tax, Americans, on average, will be getting $2,000 more in their paychecks this year than previous years. But not all income groups will benefit from the change. For those who make less than $20,000 per year, the new tax package actually means a smaller paycheck. That's because the extension cut the Making Work Pay tax credit that gave working individuals $400 and couples filing jointly $800 on their 2009 and 2010 tax returns.

The bill also included a provision for businesses that would allow both large and small businesses to write off the full cost of most of their investments in 2011. The Treasury Department estimated that this could generate more than $50 billion in additional investment this year.

Education Reform:

"Race to the Top is the most meaningful reform of our public schools in a generation. For less than one percent of what we spend on education each year, it has led over 40 states to raise their standards for teaching and learning."

The president established the Race to the Top program in February 2009, one of his first steps in the education sector as commander-in-chief. The $4.3 billion program was part of the Recovery Act and is designed to reward states that are "implementing significant education reforms." It constitutes less than 1 percent of total U.S. education spending, which is expected to reach or exceed $900 billion this year.

The program has led to much debate and strife over some schools being left behind in this competitive process, especially in states with strong union presence. Critics also doubt the long-term viability of the plan.

Over the course of the competition, 35 states and the District of Columbia adopted rigorous common academic standards in reading and math, and 34 states changed laws or policies to improve education.

Economic Recovery:

"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."

President Obama hailed the rebound of the securities markets and corporate profits as signs the economy is recovering from recession. The data show both claims are true.

The Dow Jones Industrial Average, one measure of the markets' pulse, stood above 13,000 in December 2007, on the eve of the recession. It dipped below 9,000 by late 2008. But at the end of 2010, the Average had bounced back to 11,500 and has been climbing.

U.S. businesses also reported record earnings last year, closing out the third quarter of 2010 at a rate of $1.659 trillion a year. That's a sea change from the start of the great recession in 2008, when the bottom fell out of corporate profits. Businesses reported earning only $1.258 trillion in 2009.

Immigration:

"I strongly believe that we should take on, once and for all, the issue of illegal immigration. 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. ... And let's stop expelling talented, responsible young people who can staff our research labs, start new businesses, and further enrich this nation."

Obama delivered a brief and familiar call for a bipartisan effort on immigration reform tonight. But he also singled out a desire to end the deportation of young, educated illegal immigrants, presumably those eligible for the DREAM Act, which was narrowly defeated in the last Congress.

Obama said those immigrants can "further enrich this nation."

Several nonpartisan studies have found that allowing more highly-skilled young workers to remain in or immigrate to the U.S. would benefit the economy.

In the technology and engineering fields alone, for example, nearly a quarter of all new businesses are founded by immigrants, and they account for a significant chunk of jobs. Many of these entrepreneurs came to the United States as students and stayed.

But immigration opponents say legalization of young immigrants -- regardless of their education level or military service -- could cost taxpayers billions of dollars.

The nonpartisan Congressional Budget Office estimated late last year that one version of the DREAM Act, which would provide a path to citizenship for an estimated 300,000 to 500,000 currently undocumented aliens, would reduce the deficit by $1.4 billion in the first decade because of increased tax revenue from immigrant residents.

But the same study also projects the bill could add between $5 billion and $20 billion to the deficit by 2060 through generation of additional benefit program costs.

Health Care:

"What I'm not willing to do is go back to the days when insurance companies could deny someone coverage because of a pre-existing condition. 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 Houser, a small business owner from Oregon, that he has to go back to paying $5,000 more to cover his employees."

While it's true that the Affordable Care Act bars insurance companies from denying coverage based on pre-existing conditions, the provision for adults does not take effect until 2014. In 2010, a temporary program was created that would provide health coverage to individuals with pre-existing conditions who had been uninsured for six months at the least. Also starting last year, insurance companies were prohibited from denying children with pre-existing conditions health insurance.

The new health care law provides some tax credits for small businesses, but they vary depending on the size of the company. Small businesses with 25 employees or less whose average annual salary is less than $50,000 are eligible for tax credits of up to 35 percent of employer cost between 2010 and 2013, and up to 50 percent after 2014, if the employer purchases insurance through the exchange. That still leaves out a majority of businesses that are defined as small by the Small Business Administration.

Medicare and Medicaid:

"This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit. Health insurance reform will slow these rising costs, which is part of why nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit."

According to the non-partisan Congressional Budget Office, implementing the changes in Medicare, Medicaid and the Children's Health Insurance Program mandated under the Affordable Care Act would actually cost the administration $5 billion to $10 billion over the next decade. CBO did, however, estimate that Medicare spending would increase significantly more slowly during the next two decades compared to the past two decades.

But a report by economic experts at the Department of Health and Human Services in April found that Medicare cuts in the law may be unrealistic and unsustainable and may not control costs that the president hoped would be the case. The report by Medicare's Office of the Actuary projected that Medicare cuts could drive about 15 percent of hospitals and other institutional providers into the red, "possibly jeopardizing access" to care for seniors.