UPDATE: President Obama: American Dream In Danger

WASHINGTON (AP) -- Declaring the American dream under siege, President Barack Obama called Tuesday night for a flurry of help for a hurting middle class and higher taxes on millionaires, delivering a State of the Union address packed with re-election themes. Restoring a fair shot for all, Obama said, is "the defining issue of our time."

Obama outlined a vastly different vision for fixing the country than the one pressed by the Republicans challenging him in Congress and fighting to take his job in the November election. He pleaded for an active government that ensures economic fairness for everyone, just as his opponents demand that the government back off and let the free market rule.

Obama offered steps to help students afford college, a plan for more struggling homeowners to refinance their homes and tax cuts for manufacturers. He threw in politically appealing references to accountability, including warning universities they will lose federal aid if they don't stop tuition from soaring.

Standing in front of a divided Congress, with bleak hope this election year for much of his legislative agenda, Obama spoke with voters in mind.

"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," Obama said. "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."

A rare wave of unity splashed over the House chamber at the start. Rep. Gabrielle Giffords, survivor of 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 embraced her.

Lawmakers leapt to their feet when Obama said near the start of his speech that terrorist leader Osama bin Laden, killed by a raid authorized by the president, will no longer threaten America.

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

"The state of our union is getting stronger," Obama said, calibrating his words as millions remain unemployed. Implicit in his declaration that the American dream is "within our reach" was the recognition that, after three years of an Obama presidency, the country is not there yet.

He spoke of restoring basic goals: owning a home, earning enough to raise a family, putting a little money away for retirement.

"We can do this," Obama said. "I know we can." He said Americans are convinced that "Washington is broken," but he also said it wasn't too late to cooperate on important matters.

Republicans were not impressed. They applauded infrequently, though they did cheer when the president quoted "Republican Abraham Lincoln" as saying: "That government should do for people only what they cannot do better by themselves - and no more."

Indiana Gov. Mitch Daniels, offering the formal GOP response, called Obama's policies "pro-poverty" and his tactics 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 in excerpts released before the address.

In a signature swipe at the nation's growing income gap, Obama called for a new minimum tax rate of at least 30 percent on anyone making over $1 million. Many millionaires - including one of his chief rivals, Republican Mitt 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, responding to a frequent criticism from the GOP presidential field. "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.

Obama underlined every proposal with the idea that hard work and responsibility still count. He was targeting independent voters who helped seal his election in 2008 and the frustrated masses in a nation pessimistic about its course.

In a flag-waving defense of American power and influence abroad, Obama said the U.S. will safeguard its own security "against those who threaten our citizens, our friends and our interests." On Iran, 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 - "a peaceful resolution of this issue is still possible."

With Congress almost universally held in low regard, Obama went after an easy target in calling for reforms to keep legislators from engaging in insider trading and holding them to the same conflict-of-interest standards as those that apply to the executive branch.

With the foreclosure crisis on ongoing sore spot despite a number of administration housing initiatives over the past three years, Obama proposed a new program to allow homeowners with privately held mortgages to refinance at lower interest rates. Administration officials offered few details but estimated savings at $3,000 a year for average borrowers.

Obama proposed steps to crack down on fraud in the financial sector and mortgage industry, with a Financial Crimes Unit to monitor bankers and financial service professionals, and a separate special unit of federal prosecutors and state attorneys general to expand investigations into abusive lending that led to the housing crisis.

At a time of tight federal budgets and heavy national debt, Obama found a ready source of money to finance his ideas: He proposed to devote half of the money no longer being spent on the U.S. military in Iraq and Afghanistan to "do some nation-building right here at home," to help create more jobs and increase competitiveness. The other half, he said, would go to help pay down the national debt.

Obama also offered a defense of regulations that protect the American consumer - regulations often criticized by Republicans as job-killing obstacles.

"Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same," Obama said. "It's time to apply the same rules from top to bottom: No bailouts, no handouts and no copouts. An America built to last insists on responsibility from everybody."

Obama will follow up Tuesday night's address with a three-day tour of five states key 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.

Polling shows Americans are divided about Obama's overall job performance but unsatisfied with his handling of the economy.

The speech Tuesday night comes just one week before the Florida Republican primary that could help set the trajectory for the rest of the race.

Romney, caught up in a tight contest with a resurgent Newt Gingrich, commented in advance to Obama's speech.

"Tonight will mark another chapter in the misguided policies of the last three years - and the failed leadership of one man," Romney said from Florida.

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WASHINGTON (AP) -- President Barack Obama is pledging an economic revival that will work for everyone and not just the rich, declaring that "the defining issue of our time" is the endangered promise of the American dream. He's using his State of the Union address Tuesday night to draw a battle line with Republicans over how to avoid a nation of haves and have-nots.

In excerpts of his speech released in advance, Obama attacked income inequality and offered an economic agenda built upon boosting manufacturing, energy and education. He will call for requiring the rich to pay more in taxes and try to appeal to the independent voters and frustrated masses whose support he needs to keep his job.

Obama was making his pitch to a bitterly divided Congress and to a country underwhelmed by his handling of the economy. Targeting anxiety about a slumping middle class, Obama was underlining every proposal with the idea that hard work and responsibility still count.

"No debate is more important," Obama said in the excerpts released by the White House ahead of the 9 p.m. EST speech.

"We can either settle for a country where a shrinking number of people do really well while a growing number 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," the president said.

He warned Republicans in Congress that he will fight them if they try to obstruct him or restore an economy gutted by "outsourcing, bad debt and phony financial profits."

Republicans weren't impressed.

Indiana Gov. Mitch Daniels, offering the formal GOP response, called Obama's policies "pro-poverty" and his tactics 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 in excerpts released before the address.

Senate Minority Leader Mitch McConnell, speaking ahead of the president's speech, said: "It's hard not to feel a sense of disappointment even before tonight's speech is delivered. The goal isn't to conquer the nation's problems. It's to conquer Republicans. The goal isn't to prevent gridlock, but to guarantee it."

Steeped in American tradition, the State of the Union has become a night of political theater watched by tens of millions of Americans. And this year, the one time when Obama is delivering the address while also campaigning for re-election, the speech amounts to his biggest, best case to spell out his vision for another four years.

The economy dominates.

For an incumbent on the attack about income inequality, the timing could not be better.

Ahead of Obama's speech, Republican presidential contender Mitt Romney released his tax returns under political pressure, revealing that he earned nearly $22 million in 2010 and paid an effective tax rate of about 14 percent. That's a lower rate than many Americans pay because of the way investment income is taxed.

Obama, though, has his own considerable messaging challenges three years into his term.

The economy is improving, but unemployment still stands at the high rate of 8.5 percent. More than 13 million people are out of work. Government debt stands at $15.2 trillion, a record, and up from $10.6 trillion when he took office. Most Americans think the country is on the wrong track.

Obama's relations with Republicans in Congress are poor, casting huge doubt on any of his major ideas for the rest of this year. Republicans control the House and have the votes to stall matters in the Senate, although Obama has tried to take the offensive since a big jobs speech in September and a slew of executive actions ever since.

Despite the political atmosphere in Washington, the scene is expected to have at least one unifying touch. Outgoing Rep. Gabrielle Giffords, who survived an assassination attempt a year ago, is expected to attend with her colleagues. Her husband, former astronaut Mark Kelly, was attending as a guest of first lady Michelle Obama.

Obama's tone was under as much scrutiny as his proposals.

He was aiming to find all the right balances: offering outreach to Republicans while sharpening his competing vision, outlining re-election themes without overtly campaigning and pledging to work with Congress even as he presses a campaign to act without it.

The context was set not just by the re-election year, but by the awful past year of partisan breakdowns in Washington. The government neared both a shutdown and, even worse, a default on its obligations for the first time in history.

Less than 10 months before Election Day, the presidential race is shaping up as a contest between unmistakably different views of the economy and the role of government.

Obama is campaigning on the idea of helping people at least get a fair shot at a job, a house, a career and a better life. Republicans say he and his philosophy have become a crushing burden on free enterprise and that the president is resorting to what amounts to class warfare to get elected again.

He was to unveil new proposals to address the housing crisis that has left many people trapped, and he planned to promote steps to make college education more affordable.

The president was planning a traditional rundown on the state of American security and foreign policy - and a reminder that he kept a promise to end the Iraq war.

But his driving focus was to secure faith in the economic recovery and in voters' confidence that he is getting the country on the right path.

Obama planned to renew his call for his "Buffett rule" - a principle that millionaires should not pay a lower tax rate than typical workers. While middle-income filers fall in the 15 or 25 percent bracket, and millionaires face a 35 percent tax bracket, those who get their income from investments - not a paycheck - pay 15 percent.

The president named his idea after billionaire Warren Buffett, who says it is unfair that his secretary pays a higher tax rate than he does. The White House invited Buffett's secretary, Debbie Bosanek, to attend the State of the Union as a special guest.

And then for three days following his speech, Obama will promote his ideas in five swing-voting states.. 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.

Polling shows Americans are divided about Obama's overall job performance but unsatisfied with his handling of the economy.


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