By Alister Bull and Caren Bohan
WASHINGTON (Reuters) - President Barack Obama, concerned by voter anxiety over high unemployment, said on Monday he would use his State of the Union speech on Wednesday to reassure Americans worried about jobs and the economy.
"We're going to talk about how we can first of all, focus on job creation and growth," Obama said in an interview with U.S. television network ABC.
"There are going to be a set of proposals that we put forward that help to stabilise the situation and deal with the growing insecurity and anxiety of people who, even if they haven't lost their job, are still feeling squeezed by their incomes shrinking and their costs going up."
Obama's first State of the Union speech at 9 p.m. EST on Wednesday (2 a.m. British time on Thursday) will give him a chance to set the tone and priorities for his second year in office.
He is trying to balance the need to further boost the economy with the necessity of reining in the U.S. budget deficit, which soared to $1.4 trillion (860 billion pounds) in 2009.
Faced with voter anxiety over high unemployment and growing budget deficits, Obama's fellow Democrats are at risk of big losses in congressional elections in November. They suffered an embarrassing defeat in a special Senate election in Massachusetts last week.
Aides said Obama plans to propose freezing domestic spending over the next three years when he unveils his budget for fiscal 2011 on February 1.
But Obama told ABC News there were no "magic solutions" to the deficit. The problem would require "slow chipping away" and Democratic and Republican cooperation," he said.
Obama's rhetoric has taken a populist turn in recent weeks and he is expected to tap into voter frustration over the economy in his State of the Union speech.
EROSION OF SUPPORT
"Creating good sustainable jobs is the single most important thing that we can do to rebuild the middle class," Obama said earlier on Monday in unveiling proposals to expand a child-care tax credit and encourage savings to demonstrate his concern for middle-class families.
A year into his presidency, Obama and his Democratic Party have witnessed an erosion of support among middle-class Americans who swept him into office. He has responded with a tougher line against Wall Street and excessive executive bonuses.
The Middle Class initiatives he announced on Monday were developed by the White House Task Force on Middle Class Families, led by Vice President Joe Biden. The proposals would:
* Require companies that do not offer retirement plans to enrol their employees in direct-deposit retirement accounts unless the workers opt out.
* Increase the "Savers Credit," a tax credit for retirement savings, for families making up to $85,000.
* Change some of the rules for 401(k) employer-sponsored retirement savings accounts to make them more transparent.
* Increase the child tax credit rate to 35 percent of qualifying expenses from the current 20 percent for families making under $85,000 a year. Families making up to $115,000 would be eligible for some increase in the tax credit.
* Increase child care funding by $1.6 billion in 2011 to serve an additional 235,000 children.
* Boost government spending by $102.5 million for programs aimed at helping families who provide home care for an ageing relative.
* Ease the burden for student loans by limiting a borrower's payments to 10 percent of his or her income above a basic living allowance.
Knowing Obama will discuss the deficit on Wednesday night, conservative-leaning Democrats in the House of Representatives, know as the Blue Dogs, outlined a plan to Reuters on Monday of deficit-cutting measures that aims to balance the budget within 10 years and stabilise the national debt.
The 54 centrist members of the coalition could play a large role this year as nervous Democrats try to position themselves ahead of the November elections as responsible stewards of taxpayer money.
(Editing by Philip Barbara)
