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Obama denounces economic inequality

President Barack Obama has 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 before a joint session of Congress, one of America's grandest political events, put Mr 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 Mr Obama's address was the improving but deeply wounded economy - the matter driving Americans' anxiety and the one likely to determine the next president.

With little hope of getting a divided Congress to approve much of his legislative agenda, Mr Obama spoke with voters in mind.

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. And 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.

Republicans applauded infrequently. In the party's formal response, Indiana Governor Mitch Daniels denounced the speech as "pro-poverty" and Mr Obama's tactics as divisive. "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," Mr Daniels said.

Even before Mr 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 Mr Obama would "show a willingness to put aside the extreme ideology of the far left". And Mitt Romney, a former Massachusetts governor, said Mr Obama was proposing "more taxes, more spending, and more regulation".

But Mr Obama's timing could not have been better for a message about income inequality. Earlier, Mr Romney released his federal tax returns under political pressure, revealing that he earned nearly 22 million US dollars in 2010 and paid an effective tax rate of about 14% - a lower rate than many Americans pay because of how investment income is taxed in the United States.

In his speech, Mr Obama proposed a minimum tax rate of at least 30% for those earning one million US dollars or more a year. Mr Obama calls this the Buffett rule, named after billionaire Warren Buffett, who has said it is unfair that his secretary pays a higher tax rate than he does.

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