focusing problem

hi everyone. maybe someone here can help me figure out what is wrong. i have
a vivitar vivicam 5385 digital camera and it has been wroking fine for the
last oh about 2 months. but for some reason my portrait mode wont work. what
i mean is,i know its suppossed to blure the background and keep the main
object in focus but it just focuses in everything, the same thing happens
in macro mode. no matter how close i get in, its either, everything is in
great focus or everything is blurred from being too close.

ive checed all of my settings and i have them set to auto. not infinity,now
i do have some water droplet stains on my lens , could that be my problem?
later on im gonna try to clean my lens but if thats not it does anyone have
any idea what could be wrong? thanks for your help