* Obama poised to bypass Congress on some policy initiatives
* 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 vowed on Tuesday to bypass a divided Congress and take action on his own to bolster America's middle class in a State of the Union speech that he used to try to breathe new life into his second term after a troubled year.
Standing in the House of Representatives chamber before lawmakers, Supreme Court justices and VIP guests, Obama declared his independence from Congress by issuing a raft of executive orders - a move likely to inflame already tense relations between the Democratic president and Republicans.
Obama's actions, while relatively modest, collectively amounted to an outpouring of frustration at the pace of legislative action with Republicans in control of the House of Representatives and able to slow the president's agenda.
"I'm eager to work with all of you," Obama told the lawmakers gathered for the annual speech. "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's orders included a wage hike for federal contract workers, creation of a "starter savings account" to help millions of people save for retirement, and plans to establish new fuel efficiency standards for trucks.
He said he was driven to act by the widening gap between rich and poor and the fact that while the stock market has soared, average wages have barely budged.
"Inequality has deepened," Obama said. "Upward mobility has stalled. 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's strategy means he has scaled back ambitions for large legislative actions and wants to focus more on small-bore initiatives that can reduce income inequality and create more opportunities for middle-class workers.
He did, however, renew appeals for actions that still await congressional approval. He called for Congress to give him the authority to speedily negotiate international trade agreements, a proposal held up by Democratic opposition.
On one of his biggest priorities, immigration reform, Obama urged Congress to work together on an overhaul, but he tempered his criticism of Republicans who have held up the law, with signs of possible progress emerging in recent days among House Republicans.
Obama also held back from taking a step that immigration reform advocates have called on him to take. He did not take executive action to freeze the deportations of parents of children brought to the United States illegally.
"Let's get immigration reform done this year," he said.
'REFIGHTING OLD BATTLES'
On healthcare, the issue that rocked his presidency and caused many Americans to lose confidence in him, Obama defended the overhaul law he signed in 2010 but did not dwell on it, urging Americans to sign up for medical insurance coverage by a March 31 deadline.
"I don't expect to convince my Republican friends on the merits of this law," Obama said. "But I know that the American people aren't interested in refighting old battles."
His political objective was to create a narrative for Democrats to use as they seek to head off Republicans eager to wrest control of the Senate from Democrats in November elections and build on their majority in the House.
The party in control of the White House typically loses seats in these so-called mid-term elections, but Democrats feel they stand a chance of limiting their losses or even making some gains.
With three years left in office, long-standing issues still seemed to hang over his presidency. He called anew for closing the U.S. military prison at Guantanamo Bay, Cuba.
"This needs to be the year Congress lifts the remaining restrictions on detainee transfers and we close the prison at Guantanamo Bay," Obama said. "Because we counter terrorism not just through intelligence and military action, but by remaining true to our constitutional ideals and setting an example for the rest of the world."
He also said nothing about whether he would approve the long-delayed Keystone XL Canada-to-Texas oil pipeline that environmentalists oppose.
Instead, Obama spoke passionately about the need to tackle climate change, a statement that could foreshadow more executive actions to reduce carbon emissions this year.
"Climate change is a fact," he said.
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."
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.
Obama dwelled mostly on domestic issues in his hour-long address, but warned Congress he would veto any effort to increase economic sanctions on Iran as he tries to reach a comprehensive deal with Tehran to ensure it does not obtain a nuclear weapons capability.
Obama will talk up the economic 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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