UPDATE 8-Obama urges Congress to make government work for 'the many'
* A new focus on the economy in State of the Union speech
* Seeks a rise in minimum wage, spending on infrastructure
* Obama says 34,000 troops to return from Afghanistan
* Let free enterprise work, Republican Rubio urges
By Steve Holland and Roberta Rampton
WASHINGTON, Feb 12 (Reuters) - U.S. President Barack Obama challenged a divided Congress on Tuesday to raise the minimum wage and make government work for "the many" in a State of the Union speech focused on economic fairness for the middle class as the Democrat takes a more assertive tack in his second term.
Looking to use momentum from his re-election victory last November, Obama vowed to turn much of his attention toward economic troubles like the 7.9 percent unemployment rate, an issue that dogged his first four years as president.
While he offered few concessions to Republican demands for spending cuts, Obama backed higher taxes for the wealthy and a $50 billion spending plan to create jobs by rebuilding degraded roads and bridges.
It was the second time in a few weeks that Obama has used a major occasion to show a new, bolder side, coming after his inaugural speech in January when he offered a strong defense of gay rights and put climate change back on the agenda.
Obama on Tuesday outlined plans to withdraw 34,000 of the 66,000 U.S. troops in Afghanistan over the next year and called anew for action on immigration reform at home.
In the most emotional moment of the hour-long speech, Obama urged Congress to ban assault weapons and take other gun control measures. Victims of recent shootings like the school massacre in Newtown, Connecticut, looked on, some choking back tears.
But the central emphasis of his speech was to "build new ladders of opportunity" for the middle class.
"It is our unfinished task to make sure that this government works on behalf of the many, and not just the few," Obama told hundreds of lawmakers, Cabinet officials and dignitaries gathered before him in the well of the House of Representatives.
His address to a joint session of Congress came in the midst of yet another bitter battle with Republicans over taxes and spending, and this tussle cast a heavy shadow over his appearance.
Even as Obama spoke, House Speaker John Boehner, the top Republican in Congress, accused him of offering "little more than the same stimulus policies that have failed to fix our economy and put Americans back to work."
Boehner's comments came in a statement that was issued while Obama was still delivering his address and the speaker was sitting behind him, at times scowling. "The president had an opportunity to offer a solution tonight and he let it slip by," Boehner said in his statement.
NARROW WINDOW OF OPPORTUNITY
The clock is now ticking on Obama. He has about a year to get his legislative priorities enacted before Americans shift attention to the 2014 congressional elections.
Obama reserved his toughest words to urge a resolution to a festering budget battle that will result in automatic, deep spending cuts known as "sequestration" at the end of the month unless a deal can be reached.
Americans, he said, do not expect government to solve every problem, "but they do expect us to put the nation's interests before party. They do expect us to forge reasonable compromises where we can."
Many of his proposals may face a difficult path getting through Congress. He proposed raising the U.S. minimum wage for workers from $7.25 to $9 an hour. Republicans typically oppose increases in the minimum wage out of worry it will prompt businesses to fire workers.
Some anecdotal evidence supports their concern.
Monica Smith, 36, of Tupelo, Mississippi, said: "With us being in Mississippi, what is a $9 minimum wage going to do to small companies in Mississippi? I don't know how some of these small companies could afford it."
Obama backed a $50 billion program to fund infrastructure rebuilding projects like fixing aging bridges, but many Republicans are adamantly against such stimulative government spending after Obama's first-term $787 billion stimulus did not lead to a dramatic reversal in the unemployment rate.
"Our economy is adding jobs, but too many people still can't find full-time employment," he said. "Corporate profits have rocketed to all-time highs, but for more than a decade, wages and incomes have barely budged."
Obama said that to offset the cuts he would like to raise $800 billion in revenue by eliminating tax loopholes enjoyed mostly by the wealthiest Americans.
It is a proposal Boehner backed before he reluctantly agreed instead to higher income tax rates on the richest to avert a fiscal crisis at the end of 2012. Republicans are in no mood for more tax increases and want spending cuts instead.
Florida Senator Marco Rubio, a rising Republican star who could run for president in 2016, accused Obama of being too fond of big government.
"I hope the president will abandon his obsession with raising taxes and instead work with us to achieve real growth in our economy," Rubio said in the formal Republican response to Obama's speech.
Bringing his speech to an emotional end, Obama called on Congress to vote on measures to expand background checks, prevent gun trafficking, ban assault weapons and limit the size of ammunition magazines, saying victims deserved to have their elected officials take up the proposals.
"They deserve a vote," Obama said, calling out the names of communities scarred by massacres, Newtown, Aurora, Oak Creek, Tucson, Blacksburg. "They deserve a vote."
Obama and Vice President Joe Biden have been trying to build public support for gun control after 20 children were shot in their school in Newtown, a day Obama has described as the worst of his presidency.
But they face an uphill battle against a powerful pro-gun lobby and a strong U.S. tradition of hunting and gun ownership. The right to bear arms is guaranteed to Americans in the U.S. Constitution.
Obama urged lawmakers to approve over the next few months an overhaul of immigration laws to permit a pathway to citizenship for some 11 million illegal immigrants. Republicans who saw Hispanics overwhelmingly vote for Obama over Republican challenger Mitt Romney last November are more open to new immigration rules but want stronger border security first.
In a nod to Republican worries over what they see as out-of-control government spending on entitlement programs for the elderly and poor, Obama said he would back efforts to reduce healthcare spending by the same amount over a decade as proposed by a bipartisan commission whose recommendations he had rejected.
Saying the 12 hottest years on record have taken place in the last 15, Obama issued an ultimatum to Congress on climate change. He vowed to take action to confront climate change through presidential executive orders unless Congress enacts legislation.
While heavily focused on domestic policies, Obama's speech had some crucial foreign policy elements.
He outlined steps to unwind U.S. involvement in the unpopular 11-year-old Afghanistan war but gave no details on what sort of American presence might remain after 2014 when the U.S. withdrawal is supposed to be complete.
Obama's speech came a day after North Korea conducted its third underground test of a nuclear device in response to what it called U.S. hostility.
"Provocations of the sort we saw last night will only isolate them further, as we stand by our allies, strengthen our own missile defense and lead the world in taking firm action in response to these threats," he said.
Obama said the United States would enter into negotiations with the European Union aimed at reaching a transatlantic free trade agreement.
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