WASHINGTON, Jan. 27, 2010— -- Expect high drama on Capitol Hill tonight when President Obama delivers his first State of the Union address and tries to reassure an increasingly skeptical U.S. public that his agenda is the right solution to fix the nation's economic woes.
A popular president, Obama has spent a year's worth of political capital on what has turned out to be an unpopular agenda. Tonight's address offers a chance for him to outline what he will do in his second year to get the economy back on track and reconnect with Americans.
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With Republican victories in recent elections in Virginia, New Jersey and Massachusetts -- three states Obama won in the 2008 presidential election -- the president's agenda has, to a degree, been rebuked by the voters.
"The president's going to explain why he thinks the American people are angry and frustrated," White House press secretary Robert Gibbs said on "Good Morning America" today.
"Many of the same factors that led Sen. [Scott] Brown to become a senator from Massachusetts led Barack Obama to become president. Now, we've got to deal with those angers and frustrations by putting people back to work, by demonstrating we have a plan to get our economy continued on the road to recovery and putting those folks back to work, and protecting our country from those who seek to do us harm."
According to a new Pew poll, 39 percent of Americans say that this year's State of the Union address will be more important than in past years, and the president will be delivering the address to an audience skeptical of a U.S. economic recovery.
"I have not detected a level of anger and cynicism about the federal government in my lifetime as high as it is today," said Sen. Evan Bayh, D-Ind.
Obama will try to appeal to voters tonight by discussing programs that will help them directly, including nearly doubling the child tax credit, helping with student loans and developing ways to help the job market improve.
Obama to Push Tax Cuts, Education Reform
Gibbs said the president will outline plans to get "more and more Americans back to work by providing tax cuts to small businesses, to open up lending from community banks to many of the small businesses and create that environment where the private sector is hiring again."
The tax measures for small businesses are expected to include a credit for small business new hires, the elimination of capital-gains taxes for small business investments, and an extension of tax cuts and credits for the purchase of new equipment or facilities.
That may be just what the American public is looking for.
"I think they want to know that their president has heard about their pain and heard they want answers on jobs and unemployment," Republican strategist Mark McKinnon said.
To do that, Obama will focus on jobs, with proposals aimed at improving small-business hiring, White House officials say.
The president will push for a tax credit for small-business new hires, the elimination of capital-gains taxes for small-business investments and an extension of tax cuts and credits for the purchase of new equipment or facilities. Treasury Secretary Tim Geithner and Small Business Administrator Karen Mills will be the point people for the new proposals.
Obama will also highlight his commitment to education overhaul, "including his plan to improve outcomes for students at every point along the educational pipeline," an official says.
Some education programs in the budget will be consolidated but overall there will be a 6.2 percent increase in funding for the Department of Education, including an additional $1.35 billion for the Race to the Top program, to be expanded with a separate competition for school districts.
Obama Plans to Get Fiscal House in Order
White House spokesman Robert Gibbs said Tuesday that the president will also reflect on the economic situation he faced coming into office and the "tough decisions" he had to make within his first year.
"He'll again talk about why those decisions were made despite the fact that they may or may not have been popular at the time," Gibbs said.
Gibbs said the president would focus on getting the fiscal house in order.
"We have to take and continue to take the steps necessary to do that," he said.
Some voters, especially the independents that Democrats have been hemorrhaging in recent polls and in recent elections, want to hear that the president has a plan to rein in federal spending.
For them he will offer some symbolism -- a salary freeze for high-level White House staffers and political appointees, and elimination of any bonuses.
Last January, the president announced a pay freeze for more than 100 White House aides making more than $100,000. This year the pay freeze will extend to all political appointees, including executive branch employees under the executive schedule; ambassadors; non-career members of the foreign service and politically appointed senior executive service employees. This move will affect approximately 1,200 people, the White House estimates.
In a move that is raising alarms among many liberals, Obama will propose a three-year freeze on domestic spending not related to national security or entitlement programs like Medicare.
The freeze saves $250 billion over 10 years -- less than 1 percent of what the government spends.
"It's only one of the things that we're going to be doing, but it's nonetheless important. It's important to draw a line somewhere," said Peter Orszag, the director of the Office of Management and Budget.
The decision drew heat from liberals who questioned the president's priorities.
"If people are hungry, you want to make sure that we're spending appropriately so that nobody goes hungry," said Sen. Bernie Sanders, D-Vt., who sits on the Senate Budget Committee. "If we're spending money on weapons systems that are no longer relevant in the fight against terrorism, you want to eliminate that."
Republicans, Voters Concerned About Deficit
Meanwhile, conservatives say that the president is not cutting nearly enough federal spending.
"We've been on quite a binge over the last 12 months, and it's going it take a lot more than just this kind of modest freeze to get us back on the right track," said Sen. Minority Leader Mitch McConnell, R-Ky.
The deficit has become a political liability for the White House. The latest ABC News-Washington Post poll found that 56 percent of Americans disapprove of Obama's handling of the federal budget deficit. Among independents, who have flocked to Republicans in recent elections, the president fares even worse, with 2-1 disapproval.
Obama will tonight push a bipartisan commission to make recommendations on how to reduce the national debt, despite the Senate's voting Tuesday against a measure that would have created an entity, modeled after the Base Closure Commission, to issue such recommendations.
The fiscal commission vote failed with 53 votes, seven shy of the required 60. Even seven of the bill's original cosponsors voted against it.
The White House said Tuesday it will continue to pursue other options to create the commission.
"There are alternatives to a statutory version," the OMB's Orszag said. "We have long said that we believe a bipartisan caucus is necessary and that is what we will be pursuing."
But one of the lead sponsors of the failed Senate bill, Sen. Kent Conrad, D-N.D., said a commission created by executive order and not by the Congress itself was of questionable worth.
"I don't see how that's effective because there's no assurance at all of a vote on the recommendations of the commission," Conrad told reporters Tuesday.
The Senate bill would have required Congress to vote on its recommendations.
The critical challenge for the president right now is to rally his liberal base while at the same time reach out to independents.
"Hit dogs bark and one of the things that popular presidents do is that they step on the toes of their own constituencies," McKinnon said.
First Lady, Guests Among Address Attendees
First lady Michelle Obama will continue the tradition of inviting notable guests to sit with her in the House Gallery for the State of the Union.
Her guests will include two servicemembers, military spouses and Americans whom the White House wants 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, will be attending tonight's speech and sitting with the first lady.
Also in attendance will be 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, says 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.
Clayton was stunned, silent. "He wanted to make sure I was still on the phone… 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, DC, public high schools. Both beat the odds and made it to college, and both held White House internships last summer.
Janelle's work on the correlation between abused children and teen violence caught the eye of the West Wing's Domestic Policy Council.
Both will be seated with the VIPs for the President's address and both say they will be listening for one issue: education.
ABC News' Ann Compton and Sunlen Miller contributed to this report.