President Obama hugs outgoing Rep. Gabrielle Giffords, D-Ariz., before Tuesday night's State of the Union address. (Photo credit: The White House)

WASHINGTON — President Barack Obama urged a divided Congress on Tuesday night to rescue an American dream tainted by economic inequality — a dire situation he called “the defining issue of our time.”

In his State of the Union address, Obama implored lawmakers to imagine “an economy built to last, where hard work pays off, and responsibility is rewarded.” His appeal not only established the speech’s overarching theme but also kicked off a reelection campaign that will undoubtedly be dominated by his handling of a still-fragile economy.

A largely populist speech, the prime-time address struck political tones central to Obama’s reelection strategy: namely, that he’s running against what he sees as a do-nothing Congress.

It was a joint session that, at times Tuesday night, was visibly split despite mixed seating among the parties. The Republicans and Democrats could not even agree on whether to laugh at Obama’s only spot of humor, in which he claimed streamlining federal regulations was “worth crying over spilled milk.”

Repeating a familiar refrain from advocacy for his yet-to-be-passed jobs bill from last year, Obama urged lawmakers to send legislation to his desk for him to sign “right away.”

Although the president signaled continued interest in bipartisan solutions, he vowed to no longer tolerate stubborn opposition that stunts economic growth.

“The state of our union is getting stronger,” Obama said. “And we’ve come too far to turn back now. As long as I’m president, I will work with anyone in this chamber to build on this momentum. But 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.”

Obama laid out an economic blueprint grounded in domestic manufacturing, workplace skills and energy innovation. He insisted he would not yield to the Wall Street institutions that he said float above the fray of reasonable oversight.

“Let’s never forget: millions of Americans who work hard and play by the rules every day deserve a government and financial system that do the same,” Obama said. “It’s time to apply the same rules top to bottom. No bailouts, no handouts and no copouts.”

The president promised to amp up regulations on big banks that continue to make risky bets with their customers’ money. He said such scandalous lenders will be required to pen a “living will” that outlines how they will pay their bills if they fail.

“Because the rest of us aren’t bailing you out ever again,” Obama said as applause mounted.

He also pledged to establish a financial crimes unit that would protect investments and fight fraud, especially when some firms face no real penalties for violating existing laws. The operation would be complemented by another special unit tasked with further investigating financial wrongdoing in the lead-up to the mortgage crisis, Obama said.

Yet Obama framed the financial reform as necessary on a broader scale: It would restore fairness to a country where a “shrinking number of people do really well, while a growing number of Americans barely get by.”

He pointed to loopholes that allow a quarter of all millionaires to pay lower taxes than millions of middle-class households, saying the wealthiest Americans need to carry a greater tax burden.

Evoking the “Buffett rule” first touted while promoting his jobs bill in September, Obama said the “American people know what the right choice is” when it comes equitable tax rates.

“Now, you can call this class warfare all you want,” the president said in an obvious reference to GOP barbs. “But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”

However, his push for a fairer society primarily hinged on stimulating job growth at the heart of the American economy.

Touting a first-term accomplishment expected to animate his reelection campaign, Obama declared the American auto industry is “back” after being bailed out by the federal government. He said the auto-making triumph could be translated to places outside of Detroit, the home of General Motors.

Obama touted tax incentives to keep American manufacturers in the country, vowing to stop rewarding businesses that ship jobs overseas.

He also announced the creation of a Trade Enforcement Unit that would investigate unfair trade practices and stifle the flow of counterfeit goods into the United States from uncooperative countries like China.

At home, Obama stressed America must value — not shun — its educators, even while state budgets slash away thousands of positions.

“Give them the resources to keep good teachers on the job, and reward the best ones,” Obama said. “In return, grant schools flexibility: To teach with creativity and passion; to stop teaching to the test; and to replace teachers who just aren’t helping kids learn.”

He emphasized job development in the field of alternative energy. Claiming “oil isn’t enough,” Obama said he will create 600,000 jobs by the end of the decade with a green strategy that both opens more offshore drilling locations and pursues cleaner energy solutions.

Shifting from his plea for a fairer society, Obama devoted serious time to a cornerstone attraction of his reelection campaign: foreign policy.

The longest bipartisan applause line of the night arrived when Obama zeroed in on Iran’s nuclear program.

“Let there be no doubt,” he said. “America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal.”

With U.S.-led campaigns finished in Iraq and winding down in Afghanistan, he brushed off critics’ claims the country’s international role has been diminished.

“Anyone who tells you otherwise, anyone who tells you that America is in decline or that our influence has waned, doesn’t know what they’re talking about,” he said.

Obama started and ended the night’s speech comparing the tormented inner workings of Washington to the unity behind the military mission that ended in the death of Osama bin Laden.

On the day of that mission, he said members of the Navy SEAL Team could care less about whether they were Democrats or Republicans, black or white, rich or poor, gay or straight.

“They’re not consumed with personal ambition,” he said. “They don’t obsess over their differences. They focus on the mission at hand. They work together.”

Additional reporting by Rebecca Nelson

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