* Obama poised to bypass Congress on some policy initiatives
* "America does not stand still and neither will I," he says
* President aims to strengthen America's middle class
* In response, Republicans criticize Obama's approach
By Steve Holland
WASHINGTON, Jan 28 (Reuters) - President Barack Obama will lay out his strategy for getting around a divided Congress starting with a wage hike for federal contract workers in a State of the Union speech on Tuesday that reflects scaled-back legislative ambitions after a tough year.
Obama will say in his 9 p.m. EST (0200 GMT Wednesday) address that he will bypass fractious U.S. lawmakers and go it alone in some areas with a series of executive actions aimed at boosting the middle class, many that do not require congressional approval.
Trying to breathe new life into his presidency and boost congressional Democrats facing re-election battles in November, Obama will tell Congress he is eager to work with lawmakers, "but America does not stand still - and neither will I."
"So wherever and whenever I can take steps without legislation to expand opportunity for more American families, that's what I'm going to do," Obama will say, according to speech excerpts released by the White House.
The White House said Obama would announce that he is issuing an executive order to raise the minimum wage to $10.10 an hour for federal contract workers with new contracts.
In his address, Obama will also call on Congress to pass a bill to increase the federal minimum wage for all workers to $10.10 an hour from $7.25 and index that to inflation.
The executive order raising the level for federal contract workers, which applies to new contracts or existing contracts in which terms are being changed, will take effect at the beginning of next year, with janitors and construction workers among the beneficiaries.
Issuing the order allows the Democratic president to bypass Congress, where Republicans oppose a broad increase in the minimum wage. But liberals felt Obama's move did not go far enough, arguing that he should have extended the wage hike to existing federal contracts.
"This action, while a step forward, suggests he may still be unwilling to take the fighting stance necessary to deliver the big wins over growing inequality that our country desperately needs," said Jim Dean, chairman of the liberal advocacy group Democracy for America.
White House officials said Obama would also announce new executive actions on retirement security and job training to help middle-class workers expand economic opportunity.
Obama will say he is offering a set of "concrete, practical proposals" to speed up economic growth and strengthen the middle class, which he says has lost jobs because of shifts in technology and global competition.
"Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled," Obama will say, according to the excerpts.
"The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by - let alone get ahead. And too many still aren't working at all," Obama also said in the excerpts.
REDUCED AMBITIONS
With three years left in office, Obama has effectively reduced for now his ambitions for grand legislative actions, having already seen many proposals blocked in a Congress in which Democrats control the Senate and Republicans run the House of Representatives.
Obama is expected to renew his appeal for a long-stalled overhaul of U.S. immigration policy that has been stymied by congressional Republicans. He also will promote his signature healthcare law, four months after its disastrous initial rollout.
Republicans clambered for some of the same rhetorical ground as Obama in pledging to narrow the gap between rich and poor but staked out a different vision for doing so.
"It's one that champions free markets and trusts people to make their own decisions, not a government that decides for you," Representative Cathy McMorris Rodgers, chairwoman of the House Republican Caucus, said in her party's response to Obama's speech. "It helps working families rise above the limits of poverty and protects our most vulnerable."
White House officials said the president would try to work with Congress to accomplish his agenda, but would also try to advance it through executive actions if necessary.
Congressional Republicans expressed skepticism.
House Speaker John Boehner, the top Republican in Congress, said that while Obama may have the authority to raise the minimum wage on federal contracts, the impact will be "close to zero" because it will only affect future contracts.
He also said an across-the-board increase in the minimum wage could harm the economy. "When you raise the cost of something, you get less of it," Boehner told a news conference after a party meeting near the U.S. Capitol. "And we know from increases in the minimum wage in the past, that hundreds of thousands of low-income Americans have lost their jobs."
'COMES DOWN TO ECONOMIC ISSUES'
Obama is trying to recover from a difficult fifth year in office, when immigration and gun control legislation failed to advance in Congress, his healthcare law struggled out of the starting gate, and he appeared uncertain about how to respond to Syria's civil war.
Polls reflect a dissatisfied and gloomy country. An NBC News/Wall Street Journal poll released on Tuesday showed 68 percent of Americans saying the country is either stagnant or worse off since Obama took office. People used words like "divided," "troubled" and "deteriorating" to describe the state of the country, the poll showed.
A central theme of the address, Obama's sixth such annual speech in the House chamber, is addressing income inequality, as middle-class Americans struggle to get ahead even while wealthier people prosper in the uneven economic recovery.
"It comes down to economic issues," said Andy Smith, director of the University of New Hampshire Survey Center. "The economy is going to be the thing that determines whether people have confidence in the president. If the economy is doing well, people will forgive a lot of the things the president has done or not done."
Attending the speech will be a variety of Americans who will sit in the gallery with the president's wife, Michelle Obama, symbolizing issues important to the White House. They will include heroes from last year's Boston Marathon bombings, a firefighter who led the rescue response to an Oklahoma tornado, and an openly gay basketball player.
One of Obama's goals is to lay out ideas that Democratic congressional candidates can adopt in the run-up to November elections as they try to hold on to their Senate majority and challenge Republicans for control of the House.
Obama will talk up themes from the speech in a two-day road trip starting on Wednesday that will include stops in Maryland, Pennsylvania, Wisconsin and Tennessee.
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