* Republicans push back on closing Guantanamo
* Americans' main concerns are economy, domestic issues
* Congress controls government's purse strings (Recasts with Republican reaction)
By Patricia Zengerle and Matt Spetalnick
WASHINGTON, May 24 (Reuters) - President Barack Obama wants to roll back some of the most controversial aspects of the U.S. "war on terror," but efforts to alter the global fight against Islamist militants will face the usual hurdle at home: staunch opposition from Republicans in Congress.
In a major policy speech on Thursday, Obama narrowed the scope of the targeted-killing drone campaign against al Qaeda and its allies and announced steps toward closing the Guantanamo Bay military prison in Cuba.
He acknowledged the past use of "torture" in U.S. interrogations, expressed remorse over civilian casualties from drone strikes, and said Guantanamo "has become a symbol around the world for an America that flouts the rule of law."
After launching costly wars in Iraq and Afghanistan, the United States is tiring of conflict. While combating terrorism is still a high priority, polls show Americans' main concerns are the economy and other domestic issues such as healthcare.
Conservative opponents said they would try to block the closure of Guantanamo and rejected Obama's call to repeal the Authorization for Use of Military Force, passed in September 2001 and the legal basis for much of the "war on terror."
"We have 166 prisoners remaining (at Guantanamo) ... the meanest, nastiest people in the world. They wake up every day seeking to do harm to America and Americans. And if they are released, that's exactly what they are going to do," Republican Senator Saxby Chambliss said in an address to constituents on Friday.
Obama called for an end to a "boundless global war on terror" but Republicans warned against being too quick to declare al Qaeda a spent force.
"To somehow argue that al Qaeda is quote 'on the run,' comes from a degree of unreality that to me is really incredible. Al Qaeda is expanding all over the Middle East from Mali to Yemen and all the places in between," scoffed Republican Senator John McCain after Obama's speech.
While Obama largely has a free hand as commander in chief to set U.S. drone policy, Congress has used its power of the purse to block him from closing Guantanamo.
PURSE STRINGS
Congress stopped earlier efforts to close Guantanamo by banning the use of federal funds to transfer inmates to U.S. territory.
Several Republican lawmakers said they would do it again. Even some of Obama's fellow Democrats are wary of being seen as supporting moving Guantanamo inmates to the U.S. homeland.
Obama has been frustrated by his inability to make good on a 2008 campaign pledge to shut the prison opened by President George W. Bush to hold men rounded up on suspicion of involvement with al Qaeda and the Taliban after Sept. 11, 2001.
But two Senate Republicans, McCain and Lindsey Graham of South Carolina, said they could support closing Guantanamo and moving some of its functions to the United States if Obama presented a workable plan.
Obama suggested a suitable site could be found on the U.S. mainland to hold military tribunals.
McCain and Graham have proposed that military trials could be held at Charleston Naval Yard in South Carolina. A high-security "supermax" prison in Illinois has also been proposed in the past for housing Guantanamo inmates.
Some Democrats who back closing the camp also say its steep cost - $900,000 per year per inmate compared with $65,000 at a U.S. supermax - might prompt some fiscal conservatives to rethink Guantanamo in a time of budget austerity.
Though aimed first at a domestic audience, Obama's speech at Washington's National Defense University was also the latest milestone in his campaign to reshape the global image of the United States - particularly in the Islamic world.
Pakistan said it appreciated Obama's acknowledgement that force alone did not work, adding that the root causes of terrorism had to be addressed.
"On the use of drone strikes, the government of Pakistan has consistently maintained that the drone strikes are counter-productive, entail loss of innocent civilian lives, have human rights and humanitarian implications and violate the principles of national sovereignty, territorial integrity and international law," the Foreign Ministry said in a statement. (Reporting by Patricia Zengerle and Matt Spetalnick; Additional reporting by Nick Macfie in Islamabad; Editing by Alistair Bell and Eric Beech)
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