President Barack Obama vowed to reverse a tide of economic inequality threatening the American dream Tuesday, seeking to outflank rival Republicans and revive his stumbling second term.

In his annual State of the Union address, Obama vowed to use his executive powers to lift up workers, improve education and clean the environment if his foes in Congress balk at more sweeping action.

"America does not stand still -- and neither will I," Obama said, talking, past the lawmakers gathered to listen in the House of Representatives directly to millions of television viewers.

"Inequality has deepened. Upward mobility has stalled and too many still aren't working at all," Obama said in an address to lawmakers, cabinet members, Supreme Court justices and top military brass, punctuated by ritual standing ovations.

While focusing squarely on a domestic audience, Obama strayed into foreign policy only briefly.

He vowed to support free expression in Ukraine, warned Al-Qaeda's threat had evolved and yet again urged Congress not to thwart his efforts to close the war on terror camp at Guantanamo Bay, Cuba.

But mostly Obama mined a political seam that has proven rich in the past, billing himself as the champion of middle class families fighting to overcome the worst recession since the Great Depression.

He opened on a note of optimism, saying that thanks to "five years of grit" by the American people, the US economy was finally poised for a "breakthrough."

"The United States is better positioned for the 21st century than any other nation on earth," Obama declared, touting the lowest unemployment rate in five years and a rebounding housing market.

Yet he argued the "defining project of our generation is to restore" the promise of equality of opportunity for all Americans.

Obama speaks at his annual State of the Union address

He promised to wield his power to raise the minimum wage for federal workers on new contracts from $7.25 to $10.10 per hour, and to create a new retirement savings "starter" scheme to help millions of Americans.

Obama called on corporate CEOs to pledge not to discriminate against long-term unemployed job seekers, and to introduce new energy efficient fuel standards for trucks while working with cities and states to promote cleaner power.

But Obama's vows of action are likely to reach far fewer Americans than could be accomplished through legislation.

For example, while he has the power to wage the minimum wage for federal workers, a reluctant Congress would be required to extend the measure across the entire economy.

He called on lawmakers to do just that but they appear unlikely to heed his call.

Such is the stranglehold clamped by Republicans on Congress, much of Obama's second term agenda is stillborn.

While Obama's headline was easing the burden of the middle class, the subtext was reviving a presidency that seems to be racing towards early lame duck status after a disastrous 2013.

He also needs to shield allied lawmakers from his political undertow which has Democrats in peril of losing the Senate in mid-term elections.

A new Wall Street Journal/NBC News poll pegged Obama's approval rating at 43 percent, the worst level for any president apart from George W. Bush, heading into his sixth year State of the Union address since World War II.

And 68 percent said the country was either stagnant or worse off since Obama took power in 2009.

The president's reputation has been sullied by the disastrous rollout of his signature health care law, a government shutdown drama and perceived missteps abroad last year.

The grand designs and sweeping reforms of the once energetic president's first year in office are but a memory.

There are signs though that Obama's rhetoric on economic disparity is paying off as Republicans also tackled the issue in their response to Obama's address.

Republican congresswoman Cathy McMorris Rodgers promised Americans an agenda that "empowers you, not the government."

"It's one that champions free markets - and trusts people to make their own decisions, not a government that decides for you," she said in excerpts of her remarks.

"It helps working families rise above the limits of poverty and protects our most vulnerable."

With power ebbing at home, second term presidents often look for opportunity abroad.

But with America facing challenges from Syria to the South China Sea, there are few easy victories on offer for Obama.

He defended an interim nuclear deal with Iran, which has many skeptics in Congress, as the best way to resolve a top security challenge "without the risks of war."

Obama also reiterated his vow to veto a new sanctions bill that he fears could cause Iran to walk away from the negotiating table.

He said that,while Al-Qaeda's core leadership was "on a path to defeat," the extremist threat was evolving through Yemen, Somalia, Iraq and Mali.

The president argued that US diplomacy backed by force had resulted in the handover of Syria's chemical weapons, and was supporting difficult talks on an Israeli-Palestinian peace.

And he vowed to back the right of the people of crisis-hit Ukraine to "express themselves freely and peacefully."