Team Biden is convinced that its State of the Union challenge tomorrow is as much about perception as reality, Hans Nichols reports.

• Why it matters: Economic indicators are heading in the exact direction the White House predicted, but voters are deeply skeptical that the economy is working for them.

What they're saying: “On average, American households are in a better position than before the pandemic hit,” Brian Deese, the director of the National Economic Council, told reporters today.

• But "the economic anxiety is real," he acknowledged.

Deese responded to a question about why 41% of Americans feel they are worse off, according to a Washington Post-ABC News poll, by implying that “two-thirds of Americans say their circumstances are better.”

• A reporter later corrected him that the poll indicated that 16% of Americans feel better off, with 42% saying they felt the same.

Driving the news: The White House has given lawmakers "palm cards," a list of economic data points that can fit in their hands, showing that manufacturing jobs are up and inflation is down.

• President Biden will focus on the progress the economy has made, including a 3.4% unemployment rate, the lowest level in some 70 years, and a surge in manufacturing jobs.
• He'll go through the motions of asking Congress, including a new House Republican majority, to pass the parts of his Build Back Better agenda left on the cutting room floor last year by a Democrat-controlled Senate.

Among Biden’s demands: a special surtax on billionaires and a call to quadruple taxes on corporations for stock buybacks.

• He will also make another pass at expanding the Child Tax Credit.

What's next: Before Biden speaks tomorrow evening, Fed Chair Jay Powell will give his views at the Economic Club of Washington at 11am ET.

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The Pentagon is adding to the intrigue on the Chinese balloons, saying it failed to contemporaneously detect four balloons during past flyovers.

Driving the news: The Pentagon over the weekend pointed out that balloons flew over the U.S. during the Trump administration.

• After public denials from Trump officials, the Defense Department is saying it didn't know at the time either.

"That's a domain awareness gap that we have to figure out," Air Force Gen. Glen D. VanHerck said in a briefing today, Axios' Emma Loop reports.

• U.S. intelligence agencies relied on "additional means of collection" to retroactively identify the other balloons, VanHerck told reporters.
• The most recent balloon was "up to 200 feet tall" with a payload comparable to that of a "regional jet," he said.

What's next: House Speaker Kevin McCarthy (R-Calif.) told reporters today that this week the Pentagon will brief the "Gang of Eight" — congressional leaders McCarthy, Sen. Charles Schumer (D-N.Y.), Sen. Mitch McConnell (R-Ky.) and Rep. Hakeem Jeffries (D-N.Y.); and Intelligence Committee leaders Sen. Mark Warner (D-Va.), Sen. Marco Rubio (R-Fla.), Rep. Michael Turner (R-Ohio) and Rep. Jim Himes (D-Conn.).

• “I’m asking for a full briefing for all the House members," McCarthy said.
• The Senate is getting an all-member classified briefing Thursday, a spokesperson for Schumer told Axios' Andrew Solender.

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In a prebuttal to Biden's State of the Union, McCarthy today promised that Social Security and Medicare cuts will be off the table during negotiations over a debt limit increase.

• Why it matters: He is trying to deliver on a promise to reduce spending, which gets much harder when certain programs are exempted from cuts.

Between the lines: McCarthy alluded to former Speaker Nancy Pelosi ripping up papers at Trump's 2020 State of the Union.

• “I won’t tear up a speech, I won’t play games, I’m very respectful," he said.