Obama denounces inequality in key speech

WASHINGTON (AP) — President Barack Obama used his annual State of the Union policy address to denounce America's economic inequality, drawing a battle line with Republicans ahead of what is expected to be a tough fight for re-election.

The nationally televised speech Tuesday night before a joint session of Congress, one of America's grandest political events, put Obama back in the spotlight after months of being overshadowed by the fierce race among Republicans vying to be his opponent in the November election.

At the core of Obama's address was the improving but deeply wounded economy — the matter driving Americans' anxiety and the one likely to determine the next president.

Facing a deeply divided Congress, Obama appealed for lawmakers to send him legislation on immigration, tax credits for clean energy and elimination of red tape for Americans refinancing their home mortgages, knowing full well the election-year prospects are bleak but aware that polls show that the independent voters who lifted him to the presidency crave bipartisanship.

"I intend to fight obstruction with action," Obama told a packed chamber and tens of millions of Americans watching on television. Republican lawmakers greeted his words with stony silence.

He outlined a vastly different vision for fixing the country than the one pressed by the Republicans. He pleaded for an active government that ensures economic fairness for everyone, as his opponents demand that the government back off and let the free market rule.

He called for higher taxes on millionaires and a flurry of aid for the middle class. Restoring a fair shot for all is "the defining issue of our time," 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," he said.

In the Republicans' formal response, Indiana Gov. Mitch Daniels, who once considered a White House bid, denounced the speech as "pro-poverty" and Obama's tactics as divisive.

"No feature of the Obama presidency has been sadder than its constant efforts to divide us, to curry favor with some Americans by castigating others," Daniels said, speaking from Indianapolis.

Even before Obama spoke, the two top contenders for the Republican presidential nomination offered criticism. Newt Gingrich, a former speaker of the House of Representatives, questioned whether Obama would "show a willingness to put aside the extreme ideology of the far left." Mitt Romney, a former Massachusetts governor, said, "Tonight will mark another chapter in the misguided policies of the last three years — and the failed leadership of one man."

But Obama's timing could not have been better for a message about income inequality. Earlier Tuesday, Romney released his federal tax returns under political pressure, revealing that he earned nearly $22 million in 2010 and paid an effective tax rate of about 14 percent, largely because his wealth came from investments. That is a lower rate than many Americans pay on their wage earnings.

Obama called for a new minimum tax rate of at least 30 percent on anyone making more than $1 million a year. Many millionaires — including Romney — pay a rate less than that because they get most of their income from investments, which are taxed at a lower rate.

"Now you can call this class warfare all you want," Obama said. "But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense."

Obama calls this the "Buffett rule," named for billionaire Warren Buffett, who has said it's unfair that his secretary pays a higher tax rate than he does. Emphasizing the point, Buffett's secretary, Debbie Bosanek, attended the address in first lady Michelle Obama's box.

Though domestic issues dominated his speech, Obama talked about extending new ties and influence toward Asia, while claiming that old alliances in Europe and elsewhere are stronger than ever.

He said that while all options are on the table to prevent Iran from acquiring a nuclear weapon — an implied threat to use military force if necessary — "a peaceful resolution of this issue is still possible."

Regarding Syria, where more than 5,000 people have been killed in a crackdown on protesters, he said the government of President Bashar Assad "will soon discover that the forces of change can't be reversed, and that human dignity can't be denied."

Obama also called for the creation of a new trade enforcement unit that would go after unfair trade practices around the world. Obama said the U.S. would provide financing to put its companies on even footing when the Chinese or other competitors use unfair export financing to help their businesses.

Obama faces considerable challenges three years into his term. Polling shows Americans are divided about the president's overall job performance but unsatisfied with his handling of the economy.

Obama described an economy on the rebound from the worst economic crisis since the Great Depression of the 1930s, with more than 3 million jobs created in the last 22 months and U.S. manufacturers hiring. Although unemployment is high at 8.5 percent, home sales and corporate earnings have increased, among other positive economic signs.

Partisanship has become so intense in Washington that last year the government neared both a shutdown and, even worse, a first-ever default on its obligations.

A rare wave of unity splashed over the House chamber at the start. Congresswoman Gabrielle Giffords, who survived an assassination attempt one year ago, received sustained applause from her peers and cheers of "Gabby, Gabby, Gabby." She blew a kiss to the podium. Obama warmly embraced Giffords who planned to resign her House seat Wednesday to focus on her recovery from a gunshot wound to the head.

Lawmakers also leapt to their feet when Obama said near the start of his speech that terrorist leader Osama bin Laden, killed by a raid in Pakistan authorized by the president, will no longer threaten America. He also touted other national security successes — the diminished strength of al-Qaida and the demise of Libyan strongman Moammar Gadhafi.

Obama leaves Washington for a three-day tour of five states crucial to his re-election bid. On Wednesday he'll visit Iowa and Arizona to promote ideas to boost American manufacturing; on Thursday in Nevada and Colorado he'll discuss energy; and in Michigan on Friday he'll talk about college affordability, education and training.