President Barack Obama delivers the State of the Union address on Tuesday. (CNN video image)

By Nina Lincoff and Elena Schneider

WASHINGTON — President Barack Obama challenged the country to “win the future,” calling on Americans’ innovative spirit to become the international leader in business, education and infrastructure in Tuesday night’s State of the Union address.

Our capacity to dream big and lead the world, the president said, is the very reason that “we do big things.”

In his speech to a joint session of Congress, the president’s solution to U.S. problems—job growth, the federal deficit, clean energy—is American creativity.

Obama and Vice President Joe Biden will begin selling the points the president made in his speech, taking the show on the road Wednesday to two manufacturing plants in the Midwest and marking the unofficial start of the 2012 campaign season.

Throughout, innovation threaded Obama’s themes together.

“What we can do – what America does better than anyone – is spark the creativity and imagination of our people. We are the nation that put cars in driveways and computers in offices; the nation of Edison and the Wright brothers; of Google and Facebook. In America, innovation doesn’t just change our lives. It’s how we make a living,” Obama said.

Jobs and the deficit

Obama focused on the creation of jobs and the reduction of federal debt—two economic problems on which Obama has moved from the left to center, citing bipartisan compromise as the solution.

With more than six million jobs lost since the start of the recession—3.4 million of those jobs have since been recovered—the national unemployment rate still hovers above nine percent. To create more jobs, Obama proposed expanding the clean energy sector.

“Clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling,” Obama said.

“So tonight, I challenge you to join me in setting a new goal: by 2035, 80 percent of America’s electricity will come from clean energy sources…To meet this goal, we will need them all – and I urge Democrats and Republicans to work together to make it happen.”

To reduce the federal deficit, Obama proposed freezing annual domestic spending for the next five years, reducing the deficit by more than $400 billion over the next decade.

Annual domestic spending only represents a little more than 12 percent of the total federal budget.

The president and Republicans agree that alleviating the debt is a priority.

“He was right to do so, and some of his words were reassuring,” Rep. Ryan Paul, R-Wis., said in the official Republican response to the president’s address. “As chairman of the House Budget Committee, I assure you that we want to work with the president to restrain federal spending.”

To be effective, the budget cuts need to “cut the excess weight,” but not in vital sectors, like education and clean energy.

Obama admitted to excess bureaucracy, sharing that even he is lost when considering the amount of committees and the vague lines which divide them.

“The Interior Department is in charge of salmon while they’re in fresh water, but the Commerce Department handles them in when they’re in saltwater,” Obama said. “And I hear it gets even more complicated once they’re smoked.”

Obama paused for several seconds, allowing the entire chamber to chuckle.

Obama made clear that innovation can only happen if both the public and politicians break through divisive lines and rise to meet challenges together.

In a move that strongly ties Obama to the Democratic party, he refused to allow a permanent extension of the tax cuts for the wealthiest two percent of Americans, referencing December’s extension of Bush-era tax cuts.

“Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break,” Obama said.

Education in the future

Obama reminded the public that it requires a strong educational foundation to create jobs.

“If we want to win the future – if we want innovation to produce jobs in America and not overseas – then we also have to win the race to educate our kids,” Obama said.

Personal stories grounded Obama’s plug for education, detailing how his Race to the Top fund had brought meaningful reform to public schools by refocusing on “what’s best for our kids,” he said.

Education was one topic both Republican and Democratic lawmakers clearly agreed. Obama received a standing ovation.

“If we raise expectations for every child, and give them the best possible chance at an education, from the day they’re born until the last job they take – we will reach the goal I set two years ago: by the end of the decade, America will once again have the highest proportion of college graduates in the world,” Obama said.

On the floor

For the first time in recent memory, Democrats and Republicans sat together for the address.

Leading by example, former presidential candidates Sens. John Kerry, D-Mass., and John McCain, R-Ariz., sat together to hear the address.

The president entered the House chamber a little after 9 p.m.(EST) wearing a blue tie, slightly tinged with purple, to a standing ovation. “I have the high privilege and distinct honor of presenting the President of the United States,” the newly-elected Speaker John Boehner, R-Ohio, said.

After the crowd took their seats, Obama spoke to a sea of black and blue men’s suits and pink, red, lime green, burnt orange, and blue women’s suits.

If the bipartisan pairings on the House floor are any indication, those big things are things that Republicans and Democrats will have to do together.

“We will move forward together, or not at all – for the challenges we face are bigger than
party, and bigger than politics,” Obama said.

Presidential concessions

Rounding out his speech, Obama touched upon health care, acknowledging the divisive mood in Congress.

“Now, I’ve heard rumors that a few of you have some concerns about the new health care
law. So let me be the first to say that anything can be improved,” Obama said.

However, Obama made clear that he will not retreat on his less moderate stance on health care, though moving forward he is open towards improvement.

“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,” Obama said.

One of Obama’s concessions to the new House Republican majority was an invitation to improve the health care law.

In particular, Obama said he would revisit the Republican push for medical malpractice reform.

However, he spoke strongly against starting over.

“So instead of re-fighting the battles of the last two years, let’s fix what needs fixing and move forward,” said Obama.

Forward thinking

Obama referenced the past in looking to the future. The future Obama imagines is one in which Republicans and Democrats challenge each other, not for the sake of party lines, but for the good of the country.

Quoting Robert Kennedy, the president outlined his idea of a new age of American innovation —“The future is not a gift. It is an achievement.”

Over the next two years the American public can expect a move towards the future, although it will require “each generation to sacrifice, and struggle, and meet the demands of a new age.”

The president ended the speech after just more than an hour.

“Thank you. God bless you. And may God bless the United States of America.”

— Medill News Service reporters Elisa Santana and Lauren Schwartzberg contributed to this story.

More State of the Union coverage

Our live blog of the speech: