President Barack Obama said it is time for the US to "turn the page" on years of hardship, as he urged Republicans to back tax increases on the rich to help struggling American families.
During his annual State of the Union speech in the House of Representatives, a bullish Mr Obama declared that "the shadow of crisis has passed" after two wars and a "vicious recession".
The President, whose approval ratings are on the up, appeared undaunted by Republicans who have just assumed control of both houses of Congress for the first time since he came to office.
He said: "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?"
He added: "So the verdict is clear. Middle-class economics works. Expanding opportunity works."
The Democratic President wants to increase the capital gains tax rate on couples making more than $500,000 (£330,000) per year, from 23.8% to 28%.
Republicans will not pass the increases, but he will place them in the tricky spot of blocking measures that could offer a lift to working families.
In his nationally televised, hour-long speech, he also called on lawmakers to pass a new authorisation of military force against Islamic State militants.
He said the US-led effort to stop the extremists from advancing in Iraq and Syria is working without sucking the US into another Middle East ground war.
Mr Obama elicited applause from both sides of the aisle as he said: "I have no more campaigns to run."
There was more laughter among lawmakers as he added off the cuff: "I know 'cause I won both of 'em."
Newly elected Iowa Senator Joni Ernst issued the Republicans' rebuttal.
She said: "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."
Mr Obama's pet issue of income inequality is likely to be a defining one as Republicans and Democrats vie to replace him in the 2016 White House election.
During Tuesday night's speech, the President also defended his move to end the US embargo against Cuba.
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