Mr Obama's speech included plans to build a competitive economy by improving America's infrastructure and providing free access to community college. Photo: Reuters

In a speech devised to appeal to working families, Mr Obama outlined his strategy for "middle-class economics".

"It's now up to us to choose who we want to be over the next 15 years," he said.

But the plans are unlikely to make it past a Republican-controlled Congress.

Analysis: BBC's North America editor, Jon Sopel

Most of this speech must be seen as essentially aspirational, given the Republican control of both houses of Congress - and their antipathy towards the president

So if this speech stands little chance of becoming legislative reality, what was it all about?

First of all legacy. This is a president who seems to be following Winston Churchill's maxim that history is written by the winners.

In a speech which he described as more focused on values than policies, Mr Obama declared America had turned a page after the worst recession since the Depression.

The president said he planned to build on this growth by providing working families with help in the form of sick and maternity leave and affordable childcare.

"Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?"

"This plan is your chance to graduate ready for a new economy, without a load of debt," he said.

At the weekend, the White House pledged to close tax loopholes on large inheritances, raise capital gains tax on the richest earners from 23.8% to 28% and introduce new fees on US financial firms with assets about $50bn.

Some senior members of the Republican party dismissed this as "class warfare".

Other plans outlined by the president include:

• improve statutory sick leave and minimum wage
• help nine million students to pay for community college
• stronger cybersecurity and consumer protection
• continue with plans to shut the prison in Guantanamo
• equal pay for men and women

The president reiterated his belief that the US could negotiate an agreement to prevent Iran gaining nuclear weapons and said he would veto any new sanctions bill which threatens this.

He said his decision to end America's long-standing policy on Cuba and try something new had the potential to "end a legacy of mistrust in our hemisphere".

Alan Gross, who was recently released after spending five years in a Cuban prison, was among Michelle Obama's guests to hear the president.

On Wednesday, Russian Foreign Minister Sergei Lavrov denounced the speech as an indication of what he said was the determination of the US to dominate international affairs.

"Americans have set a course for confrontation," Mr Lavrov said. "Obama's address yesterday shows that there's just one thing at the heart of [their] philosophy: 'We are number one'... It shows that the United States wants to dominate the world."

'Best for America'

In ending his address, Mr Obama said he was optimistic he could work with Congress, despite months of political gridlock.

"I have no more campaigns to run. My only agenda for the next two years is the same as the one I've had since the day I swore an oath on the steps of this Capitol - to do what I believe is best for America," he said.

But consensus with the Republican party on many of the issues he outlined is unlikely.

In their official rebuttal, Republican senator and rising star, Joni Ernst, said Americans have not seen solutions from Mr Obama and criticised his health and immigration policies.

"Americans have been hurting, but when we demanded solutions, too often Washington responded with the same stale mindset that led to failed policies like Obamacare," she said

The senator called on Mr Obama to work with Republicans on issues where they might have common ground - including a trade deal and tax code reform.