WASHINGTON (Reuters) - President Barack Obama accused Republicans on Friday of holding the middle class hostage and defended his efforts to stimulate the sluggish economy as he tries to reverse grim election prospects for his fellow Democrats in November.
With opinion polls showing more Americans questioning his economic leadership, Obama used a rare news conference at the White House to hammer home a campaign-style message painting Republicans as obstructionist and the party for the rich.
Obama has been on the defensive as recession-weary Americans have grown skeptical about the steps he has taken to bring down an unemployment rate persistently near 10 percent.
But during his 77-minute news conference on Friday, he was clearly on the offensive, drawing battle lines for the November 2 congressional election that is widely expected to be a referendum on his economic policies.
"If it was just a referendum on whether we've made the kind of progress that we need to, then people around the country would say 'We're not there yet,'" Obama said.
"If the election is about the policies that are going to move us forward, versus the policies that will get us back into a mess, then I think Democrats will do very well."
With voters anxious over jobs, federal bailouts and a record budget deficit, analysts see little Obama can do to boost the economy before November, when Democrats risk losing control of the House of Representatives and maybe the Senate.
Obama's main tool between now and then will be to highlight policy differences with Republicans and convince voters that no matter how slow the economic recovery, Democrats still have the better plan.
"I didn't hear anything new or anything with the potential to help Democrats," said Larry Sabato, a political science professor at the University of Virginia. "Unfortunately for Democrats, reality trumps rhetoric when you have a really bad economy and high unemployment."
A Washington Post/ABC News poll released on Tuesday found 53 percent of respondents planned to cast their ballot for Republicans, versus 40 percent for Democrats.
The president said Republican policies under his predecessor George W. Bush had led to "a financial crisis and a terrible recession that we're still digging out of today."
"Even though the economy is growing again and we've added more than 750,000 private sector jobs this year, the hole the recession left was huge and progress has been painfully slow," he said.
The news conference capped a week in which Obama rolled out modest tax cuts and spending proposals aimed at jump-starting job growth.
But the steps, which the White House says will cost around $180 billion, were described by economists as too small to make much of a difference in the $13.2 trillion U.S. economy.
On Friday, Obama zeroed in on the Republican call for a two-year extension of Bush-era tax cuts for all Americans.
The president called on Congress to extend tax relief for the middle class by this month but repeated his position that the country cannot afford to keep tax rates low for families earning more than $250,000 a year, which would cost an estimated $700 billion over 10 years.
He said Republicans were punishing the middle class and delaying the recovery to deliver tax breaks to millionaires and billionaires.
"We can have a further conversation about how they want to spend an additional $700 billion to give an average of $100,000 to millionaires. That I think is a bad idea," Obama said.
"Why hold the middle class hostage in order to do something that most economists don't think make sense?"
His comments about a "further conversation" were seen by some as a hint that he may be willing to work with Republicans on the tax cut issue but others said his strong tone all but ruled out a compromise.
The Republican leader in the House, John Boehner, swiftly dismissed Obama's criticism.
"Half-hearted proposals and full-throated political attacks won't end the uncertainty that is keeping small businesses from creating jobs," Boehner said in a statement as Obama spoke.
U.S. financial markets showed little reaction to Obama's remarks. The stock market's mood has been improving, especially after jobs data on Thursday showed new claims for unemployment benefits fell to a two-month low in the latest week.
Obama formally announced long-time economic adviser Austan Goolsbee as the new head of the White House Council of Economic Advisers, a key source of policy advice for the president.
Already a familiar face on financial news television, Goolsbee is an effective communicator and will likely be a persuasive advocate for Obama's approach to the economy.
During the wide-ranging news conference, Obama also said:
-- "Enormous hurdles" remained to achieving a Middle East peace deal.
-- He continued to press Afghan President Hamid Karzai to tackle rampant corruption but there was still much to do.
-- He had fallen short on his campaign promise to close the U.S. military prison for suspected militants at Guantanamo Bay, Cuba, within a year and said he still wanted to transfer detainees from there to prisons in the United States.
-- Killing or capturing al Qaeda leader Osama bin Laden remained a top priority for his administration.
-- A Florida pastor's plan to burn the Koran, the Muslim holy book, on Saturday could cause "profound damage" to U.S. interests abroad if it went ahead.
Additional reporting by Patricia Zengerle, Steve Holland, Matt Spetalnick, Jeff Mason, John Whitesides and Rick Cowan; Writing by Alister Bull and Ross Colvin; Editing by John O'Callaghan