By Jeff Mason
WASHINGTON (Reuters) - President Barack Obama threw red meat to his political base on Tuesday with a promise to do the nearly impossible: solve the problem of widening U.S. income inequality.
Faced with the very real possibility of losing the White House in November, Obama used his State of the Union address to demand a tax increase for millionaires and launch an aggressive campaign arc built upon economic fairness.
"No debate is more important," Obama said early in his hour-long speech before a joint session of Congress.
"We can either settle for a country where a shrinking number of people do really well while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules."
In recent months, Obama had made clear he would mine the vein of resentment in America over the growing income gap, the source of inspiration for last year's Occupy Wall Street movement that highlighted the concentration of wealth among 1 percent of the population.
But by choosing to make it the cornerstone of his annual speech to the nation, he cemented the theme of working for the 99 percent as his campaign battlecry for the next 10 months.
He could not have chosen a better day to contrast his populist ideas with his possible Republican challenger.
Mitt Romney, one of the wealthiest presidential candidates in history, released tax returns on Tuesday that showed he and his wife paid an effective tax rate of 13.9 percent in 2010 and expect to pay a 15.4 percent effective tax rate for 2011.
Obama proposed a minimum tax rate of 30 percent for people who make $1 million or more a year, a clear shot at his would-be rival, even though he was unnamed in the speech.
"I think it's one of the best cards he can play, especially given that Mitt Romney released his tax returns today," said
Henry Brady, dean of the Goldman School of Public Policy at the University of California, Berkeley.
"People are worried about fairness in the tax code. So it seems to me that this is something where he has the rhetorical advantage."
Senior administration officials said the 30 percent figure was established long before Romney's tax rate was made public.
One noted, however, that not all wealthy people kept their money in accounts on the Cayman Islands, a dig at the former Massachusetts governor, whose advisers said his holdings included amounts in funds based in the Cayman Islands and other overseas entities.
Obama's tax reform proposal, made on one of the biggest campaign stages of the year, is the latest in a series of moves the president has made to appeal to the middle class and to present a populist message.
The president's fall deficit reduction proposals and recent appointment of a director to lead the consumer financial protection agency that is unpopular with Republicans have raised the temperature and highlighted the contrasts between him and the opposition party.
Nevertheless, the president knows he has almost no chance of getting his millionaire tax proposal through a divided Congress.
But the issue gives him a strong talking point to energize his political base, much of which has been disenchanted with his record.
"It's a great issue for President Obama. It's something that his base has been waiting for," said Democratic strategist Bud Jackson. "He has started to move to a more combative approach in terms of contrasting himself with Republicans ... and I also think that dovetails nicely with Mitt Romney or Newt Gingrich or whoever the nominee will be."
The president will take the message on a five-state, three-day trip beginning on Wednesday.
The state choices are not coincidental. He is going to Iowa, Arizona, Nevada, Colorado, and Michigan - all battlegrounds that could help decide the general election.
Officials said he would release more details about his business, energy, and college affordability proposals during the trip.
Supporters are eager to have more details - and more red meat.
"I did particularly like that he described income inequality and the support of the middle class as the defining issues of our time," said James Catalano, 51, of Tampa, Florida, who attended a party with other Democrats to watch the speech.
"I thought it was really moderate and reasonable, which was a little frustrating."
(Additional reporting by Patricia Zengerle; editing by Mary Milliken and Eric Beech)
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