Since taking office in January, Obama has pushed through a $787bn stimulus plan designed to revive the US economy through job creation and tax cuts.

Economy focus

"The state of our economy is a concern that rises above all others," Obama said as he began his speech.

In depth



Full text of speech

Video: Judging the Obama presidency

Video: Homelessness on the rise as economy fails

Special report: The Obama presidency

"Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, healthcare, and education that will grow our economy, even as we make hard choices to bring our deficit down."

On Monday, Obama had pledged to halve the country's $1.3 trillion budget deficit over the next four years after hosting a bipartisan summit on "fiscal responsibility" at the White House.

He has also pledged a programme of government and private sector spending of $2.5 trillion to save the nation's banks and allocated $75bn to aid the battered US housing market.

In his speech on Tuesday, the US president also promised greater oversight of the spending of public funds after widespread criticism of the Wall Street executives who took bonuses while receiving government aid from last year's $700bn bailout of financial institutions.

"Wall Street may be more comforted by an approach that gives banks bailouts with no strings attached, and that holds nobody accountable for their reckless decisions," he said.

But he added to cheers from the chamber that "this time, CEOs won't be able to use taxpayer money to pad their paycheques or buy fancy drapes or disappear on a private jet. Those days are over".

Republican doubts

Rob Reynolds, Al Jazeera's correspondent in Washington, said Republicans - champions of smaller government and decreased public expenditure - were wary of Obama's spending plans.

"Who among us would ask our children for a loan, so we could spend money we do not have on things we do not need?"

Bobby Jindal, Republican governor of Louisiana

Bobby Jindal, Louisiana's Republican state governor, responded to Obama's speech by saying his party would be the Democrats' "strongest partner" on shared policy goals during a "time of challenge".

However, he stressed Republicans must also be "candid and offer better ideas" where the two disagree, before going on to cast doubt over the government's approach to the global economic crisis.

"What it [Obama's recovery plan] will do is grow the government, increase our taxes down the line and saddle future generations with debt," he said.

"Who among us would ask our children for a loan, so we could spend money we do not have on things we do not need?"

Fighting 'extremism'

Obama also vowed to focus on Afghanistan and Pakistan after recently approving a request to send 17,000 more troops to Afghanistan to combat Taliban fighters.

"We will forge a new and comprehensive strategy for Afghanistan and Pakistan to defeat al-Qaeda and combat extremism," he said.

"Because I will not allow terrorists to plot against the American people from safe havens half a world away."

Hamish McDonald, Al Jazeera's correspondent in the Afghan capital Kabul, said Afghans would have listened closely to Obama's comments on foreign policy.

"Those in Afghanistan who watched the speech probably would not have been particularly impressed," he said.

"Clearly, there is a question about whether or not, amid all of this financial turmoil, the US can continue to foot the cost of the war."

Obama spoke as American media reports suggested the US president was set to announce that most US combat forces in Iraq would be withdrawn within 19 months.