State of the Union 2011: Obama urges co-operation
President Barack Obama has used his State of the Union address to make an impassioned plea for parties to work together in the divided US Congress.
He called for action to cut the deficit and meet the challenges from new competitors, such as India and China.
Mr Obama said the US was now "poised for progress" after "the worst recession most of us have ever known".
Republicans warn they will reject calls for increased spending, in order to tackle the "crushing burden of debt".
In a change from tradition, many rival Democrats and Republicans were sitting together in the chamber to hear the president's speech, instead of separately.
The gesture was intended to show unity, amid the heated debate since a mass shooting in Arizona earlier this month in which Congresswoman Gabrielle Giffords was seriously injured.
Mr Obama began his speech by paying tribute to Ms Giffords, saying the shooting had reminded the US public that they "share common hopes and a common creed".
Following elections in November, both parties now shared the responsibility of governing and the people wanted them to work together, the president said - to win the future, the US had to take on "challenges that have been decades in the making".
Mr Obama said technical advances, the rise of nations like India and China and the export of jobs overseas, meant that for many Americans, "the rules have changed" and it was now essential to encourage "American innovation" to secure jobs.
"This is our generation's Sputnik moment," he said, referring to the Soviets' achievement in putting the first satellite into orbit ahead of the US in 1957.
"Two years ago, I said that we needed to reach a level of research and development we haven't seen since the height of the Space Race," he said, pledging to invest in education and create a budget which would meet that goal.
"We'll invest in biomedical research, information technology, and especially clean energy technology - an investment that will strengthen our security, protect our planet, and create countless new jobs for our people."
Mr Obama said the issue of illegal immigration had to be tackled once and for all, but that the country must learn to value the children of undocumented workers, who could play a vital role in the US economy but face the constant threat of deportations.
The president said the government would invest in large-scale improvements in infrastructure, including high-speed rail links and ensuring 98% of Americans had high-speed wireless internet connections within the next five years.
He also addressed the divisive issues of healthcare reform, joking that he had "heard rumours a few of you have some concerns about the new healthcare law" and saying he was eager to work with anyone who had ideas for improving it.
"Instead of fighting the battles of the last two years, let's fix what needs fixing and move forwards," he said.
Mr Obama said the government would tackle the domestic deficit by freezing domestic spending for the next five years.
This would "require painful cuts", he said, but must not take place "on the backs of our most vulnerable citizens".
One of the longest bursts of applause came when Mr Obama paid tribute to US troops, saying the country must "serve them as well as they served us" by providing the right equipment and post-service care.
Foreign policy was only briefly touched on in the speech, but Mr Obama said US combat troops had ended their mission in Iraq "with their heads held high", while al-Qaeda's leadership in Pakistan was "under more pressure than at any point since 2001".
In Afghanistan, he said, "there will be tough fighting ahead", but that the US was committed to building an enduring partnership with the Afghan government.
"Our purpose is clear - by preventing the Taliban from re-establishing a stranglehold over the Afghan people, we will deny al-Qaeda the safe haven that served as a launching pad for 9/11," he said.
Mr Obama also hailed improved relationships with Russia and India and urged Congress to approve a recently negotiated free trade agreement with South Korea.
The State of the Union speech is nationally televised and is historically one of the most watched political events in the US.
The speech comes less than three weeks after a mass shooting in Tucson, Arizona, that injured Ms Giffords and 12 other people and left six people dead.
A seat in Congress remained empty in honour of Ms Giffords, and family members of some of the victims were sitting with First Lady Michelle Obama.
The president's job approval numbers have been on the rise in recent weeks, seen in part as the result of his success in pushing a series of new laws through the so-called lame duck Congress at the end of last year.
But Republican lawmakers have criticised the president on his plans for new public spending and investments in education, research and infrastructure.
"A few years ago, reducing spending was important," said Wisconsin Republican Representative Paul Ryan in the Republican response to Mr Obama. "Today, it's imperative. Here's why - we face a crushing burden of debt."
"We are at a moment, where if government's growth is left unchecked and unchallenged, America's best century will be considered our past century."
The Republican Party has already pledged to oppose the president's plans, and a large, prominent group of the most conservative House Republicans has proposed slashing $2.5 trillion (£1.57 trillion) from the federal non-defence budget over the next 10 years.
The Republicans hold the majority in the House of Representatives and enough strength in the US Senate to block unilateral Democratic action on economic policy, but are unable to dictate their own agenda.