At the same time, Obama called for legislators to work together for the good of the country, saying Americans "expect us to put the nation's interests before party."
In delivering the Republican response, Rubio repeated longstanding GOP criticism of Obama's proposals as job-killing, growth-stunting bigger government.
"Presidents in both parties -- from John F. Kennedy to Ronald Reagan -- have known that our free enterprise economy is the source of our middle-class prosperity," said Rubio, a tea party favorite considered a rising star in the Republican Party. "But President Obama? He believes it's the cause of our problems."
The night of competing messages showed that despite Obama's election victory in November, hopes for a more pragmatic political climate appeared unrealistic.
"In many ways, what we heard tonight is the same old, same old argument," noted CNN Chief Political Analyst Gloria Borger.
Taking aim at the bitter partisanship of his first term, Obama's State of the Union address included a call to "set party interests aside, and work to pass a budget that replaces reckless cuts with smart savings and wise investments in our future."
"And let's do it without the brinksmanship that stresses consumers and scares off investors," he continued to applause, mainly from Democrats. "The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next. We can't do it. Let's agree, right here, right now, to keep the people's government open, and pay our bills on time, and always uphold the full faith and credit of the United States of America."
In a jab at congressional Republicans who seek to shrink deficits and government through spending cuts, he said "deficit reduction alone is not an economic plan."
Rubio's response blamed Obama for weakening U.S. stability and potential by continued deficit spending and failing to confront needed reforms to entitlement programs like Social Security and Medicare.
"The real cause of our debt is that our government has been spending $1 trillion more than it takes in every year. That's why we need a balanced budget amendment," he said, accusing Obama of wanting to leave Medicare unchanged so that it goes bankrupt.
However, Obama called for "modest" reforms to Medicare in his speech, repeating proposals raised in previous deficit-reduction negotiations but regarded by Republicans as insufficient.
Obama also continued his push for Congress to act on politically volatile issues such as immigration reform. Other measures proposed in the speech included a paycheck fairness act intended to make it easier for women to fight salary discrimination without losing their jobs, raising the minimum wage to $9 an hour, developing new alternative energy hubs in the country, and helping people refinance their mortgages at today's lower interest rates.
With former U.S. Rep. Gabrielle Giffords, seriously wounded in a 2011 shooting in her home state of Arizona in the House chamber along with families of other victims of gun violence, Obama continued his push for tighter firearms restrictions.
He mentioned 15-year-old Hadiya Pendleton, the Chicago girl killed by gun violence after returning home from taking part in inauguration activities in Washington, saying she was shot a mile from his home in the city.
The girl's parents were guests of first lady Michelle Obama at the address. Also attending was former rock star Ted Nugent, a vocal critic of Obama and any efforts to strengthen gun controls.
Obama cited the major provisions of his package of gun proposals, including background checks on all firearms sales, a ban on semi-automatic weapons that mimic military weapons, and limiting ammunition magazines to 10 rounds.
In the most emotional moment of the speech, he listed people whose lives have been "torn apart by gun violence." They included Pendleton's parents, Giffords, and the families of the Newtown victims.
Obama repeatedly insisted "they deserve a vote" as the audience cheered loudly.
But the powerful National Rifle Association and legislators from both parties oppose key provisions of Obama's plan.
Rubio echoed the NRA position that "unconstitutionally undermining the Second Amendment rights of law-abiding Americans is not the way to" reduce gun violence.
Meanwhile, NRA President David Keene conceded there would be votes on some issues, but he accused Obama of playing up the emotional side of the issue to try to force through gun control laws before they can be properly debated.
On foreign policy, Obama announced that this time next year, another 34,000 U.S. troops will have returned home from Afghanistan. The move will reduce by more than half the current force level there of 66,000 troops as Afghan forces prepare to take the lead in combat missions. The plan is for all U.S. combat troops to leave by the end of 2014.
On climate change, Obama promised executive action if Congress failed to address what he called a litany of evidence that the nation and the world face such as more frequent and powerful storms, wildfires and drought.
On cybersecurity, Obama signed an order on Tuesday making it easier for private companies controlling critical infrastructure to share information about cyber attacks with the government. In return, the government will share certain information with companies about attacks believed to be occurring or that are about to take place.
Congress has failed to pass any of the dozens of bills aimed at meaningfully securing critical infrastructure from cyber attack.