UPDATE 2-Obama hits Republicans, Wall St in populist speech
* Obama lays out themes of 2012 election campaign
* Vows new legislation to punish Wall Street fraud
* Republicans say speech is bid to distract
By Jeff Mason
OSAWATOMIE, Kansas, Dec 6 (Reuters) - U.S. President Barack Obama blasted his Republican foes and Wall Street on Tuesday as he portrayed himself as a champion of the middle class and laid out in the starkest terms yet the populist themes of his 2012 re-election bid.
In a speech meant to echo a historic address given by former President Theodore Roosevelt in the same Kansas town more than 100 years ago, Obama railed against "gaping" economic inequality and pressed the case for policies he insisted would help ordinary Americans get through hard times.
He seized the opportunity to step up pressure on congressional Republicans to extend payroll tax cuts that independent economists say are vital to economic recovery, and also vowed new legislation to punish Wall Street fraud.
But Obama's broader message was a sweeping call for the working class to get a "fair shot" and a "fair share" as he pushed for wealthier Americans to pay higher taxes and demanded that big corporate interests play by the rules.
"This is the defining issue of our time. This is a make or break moment for the middle class," Obama told a cheering crowd in a high school gymnasium in Osawatomie, Kansas.
"At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home and secure their retirement," he said.
With the election just 11 months away, Obama's speech was part of a strategy to cast the Republicans as the party beholden to the rich and blame them for obstructing his efforts to boost the fragile economy and slash high unemployment, considered crucial to his re-election chances.
"Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules. Well, I'm here to say they are wrong," he said.
But Republicans said it was another attempt to distract from what they see as Obama's failed economic record. Senate Republican Leader Mitch McConnell accused the president and his fellow Democrats of resorting to "cheap political theater."
SWEEPING CAMPAIGN THEMES
Obama's attempt to lay out the ideological foundations of his re-election campaign marked a shift from recent speeches that have concentrated on small-scale executive actions or campaign-style harangues against Republicans to stop stalling his $447 billion jobs plan.
This time, Obama sought to channel Roosevelt, a Republican who provoked deep anger within his party with his landmark "New Nationalism" speech in 1910 that hailed the government's role in promoting social justice and warned against the abuses of rich business interests. Roosevelt lost the 1912 presidential election running as a third-party candidate.
Obama sharpened his tone against Wall Street, reflecting what aides see as a message that increasingly resonates with working-class voters whose taxes have gone to business bailouts while their own incomes have flatlined.
He was also seeking to revitalize his liberal base amid fears that an "enthusiasm gap" could cut into the Democratic turnout and cost him a second term.
Obama sounded themes of economic inequality and corporate greed that have driven the Occupy Wall Street protest movement that was spawned in New York in recent months and has spread to other major cities and even other countries.
"President Obama is attempting to energize Democrats for the campaign, define himself as something more than a passive president and take populism back from the Tea Party," Princeton University political historian Julian Zelizer said.
The risk for Obama is that tougher rhetoric against Big Business could turn off some of the centrist voters he needs to win re-election. After his Democrats suffered major losses in the November 2010 congressional elections, he launched an outreach to the business community to try to mend fences.
Obama used his speech to accuse Republicans of suffering from "collective amnesia" about the recent financial crisis, and he strongly defended his Wall Street regulatory overhaul that many Republicans opposed and want to roll back.
He said he would call for legislation to toughen penalties against Wall Street companies that break anti-fraud rules.
"Too often, we've seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there's no price for being a repeat offender. No more," Obama said.
He again prodded Republican lawmakers to extend the expiring payroll tax cut beyond this year.
Many Republican lawmakers are skeptical that it will spur job creation, but party leaders, fearing a possible backlash from voters in 2012, have expressed a willingness to find a way to prevent the tax cut from lapsing .
They remain at odds with Democrats on how to fund it.
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