A State of the Union speech with re-election bid in mind
The speech saw a renewed call for higher taxes on the wealthy, something Republicans strongly oppose. The US economy is on the mend, but unemployment remains high at 8.5%.
The annual State of the Union address - one of the most keenly watched events in US politics - traditionally includes policy prescriptions from the White House for the upcoming year.
President Obama's speech on Tuesday in the Republican-dominated House of Representatives was delivered with an eye on November's presidential election, when he will seek another four years in office.
He said: “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by.
”Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.
“What's at stake are not Democratic values or Republican values, but American values. We have to reclaim them.”
Obama said the economy was bouncing back from the 2007-09 recession. However he sounded a warning to his conservative opponents, as he added: “I intend to fight obstruction with action, and I will oppose any effort to return to the very same policies that brought on this economic crisis in the first place.”
Mr Obama also made a renewed call for his Buffett Rule - a principle that millionaires should not pay a lower tax rate than typical workers. The idea is named after billionaire investor Warren Buffett, who famously complained that his secretary pays a higher rate of tax than he does.
Mr Buffett's secretary, Debbie Bosanek, watched the speech alongside First Lady Michelle Obama from the gallery.
Pledging no tax increases for those earning fewer than 250.000 dollars, Obama said: “If you make more than 1 million a year, you should not pay less than 30% in taxes”.
“Now, you can call this class warfare all you want,” he added. “But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”
Republicans have repeatedly rejected Mr Obama's call for higher taxes on the wealthy and accuse him of resorting to class warfare to get elected again.
Mr Obama also proposed: tax reforms to make it less attractive for US companies to transfer jobs overseas; allowing homeowners with privately held mortgages to refinance at lower interest rates and a new trade enforcement unit dedicated to deterring unfair practices.
Indiana Governor Mitch Daniels, delivering the Republican Party's response to Mr Obama's speech, called it “pro-poverty”.
He said: “No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favour with some Americans by castigating others.”
The address put the political spotlight firmly back on the Democratic president, after months of focus on the Republican candidates vying to challenge him for the White House.
Earlier, one of those contenders, Mitt Romney, was forced by political pressure to release his tax returns.
The forms revealed the private equity tycoon earned nearly 22 million dollars in 2010 and paid an effective tax rate of about 14%, a lower rate than most other Americans pay.
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