Obama pushes jobs after tough year

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President Barack Obama pushed job creation to the top of his agenda and vowed not to abandon his struggling healthcare overhaul after a political setback that raised doubts about his leadership.

Still smarting from a drop in his popularity and the loss by his Democratic Party of a pivotal U.S. Senate seat in Massachusetts, Obama said it had been a difficult year and acknowledged some mistakes.

"I don't quit," he told the U.S. Congress in his annual State of the Union address today.

Facing the collapse of his ambitious agenda to overhaul healthcare and address climate change, Obama used the high-stakes speech to try to reconnect with ordinary Americans angry about the weak economy and punishing double-digit unemployment rate.

Obama tried to show his prime-time television audience he understood their pain and aimed to tap into public discontent, stemming mainly from a still-struggling economy, while buying time for his administration to regroup.

"Jobs must be our number one focus in 2010," he told Congress, where many of his Democratic colleagues fear losing their seats in November's elections.

Even as he signaled a recasting of his agenda by making the economy the most pressing priority, Obama did not concede the defeat of his efforts to revamp healthcare and forge a bipartisan consensus on climate change.

The loss in Massachusetts was seen by some political analysts as a referendum on his agenda, reflecting voter anxiety over the healthcare effort but also frustration with the 10 percent jobless rate.

"People are out of work. They are hurting. They need our help. And I want a jobs bill on my desk without delay," he said.

Obama appealed for a new bipartisan effort in Congress to address the problems of ordinary Americans - something he failed to get last year in the face of unified Republican opposition.

Huge deficits have also hurt Obama's political standing. Republicans have sought to paint him as a "big spender" and characterized the healthcare bill as a government intrusion into the economy.

To counter the criticism, Obama proposed a three-year freeze on some domestic programs to take aim at soaring budget deficits. He also called for the creation of a bipartisan commission to tackle long-term budget challenges.

"If we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery," Obama warned.

His healthcare reform legislation faces possible failure now that Democrats no longer hold a "supermajority" of 60 Senate votes to overcome Republican procedural hurdles.

The climate legislation has stalled and even some of its supporters believe it may be sidelined this year.

He insisted he was not giving up on healthcare reform.

"By the time I'm finished speaking tonight, more Americans will have lost their health insurance. Millions will lose it this year," Obama said. "I will not walk away from these Americans. And neither should the people in this chamber."

He criticized "bad behavior" and recklessness on Wall Street and demanded Congress pass robust legislation on financial regulation.

Obama promised to push back against financial industry lobbyists who are seeking to water down or kill the proposed legislation.

"We cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back," Obama said.

The unexpected Democratic setback in Massachusetts, one of the country's most liberal states, followed defeats for the party in governors races last year in Virginia and New Jersey.

Many Democratic lawmakers fear those races could be a harbinger of crushing losses in November's congressional elections.

That has prompted Obama to move toward the political center with a focus on themes such as deficit reduction.

But in a move that may play well with his Democratic supporters, Obama urged Congress to repeal the policy of "Don't Ask, Don't Tell" that prevents openly gay people from serving in the military.

Virginia Governor Bob McDonnell, delivering the Republican response to Obama's speech, said his call for a freeze on some domestic spending was "laudable" but urged further steps.

McDonnell also rejected Obama's push to revamp healthcare, saying it amounted to turning over "the best medical care system in the world to the federal government."

Obama highlighted economic improvements and tried to deflect criticism that the healthcare push had shifted his focus.

The economy was shedding hundreds of thousands of jobs each month when he took office. "After two years of recession, the economy is growing again," he said.