Sputnik Moment: Regaining US Competitiveness

In his State of the Union, Barack Obama calls for investment in education, innovation and infrastructure.

President Barack Obama has urged Congress to invest in America’s future in order to be able to compete with rising powers in South and East Asia tomorrow. “We’ll invest in biomedical research, information technology and especially clean energy technology,” he said during his State of the Union address on Tuesday night — “an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.”

The president reminded the country that when the Soviet Union beat America into space with the launch of the first Sputnik satellite in 1957, the science to put an American on the Moon did not exist yet. “But after investing in better research and education, we didn’t just surpass the Soviets,” he said; “we unleashed a wave of innovation that created new industries and millions of new jobs.”

Developing economies in Asia, including China and India, are now leading in economic expansion. If America is to regain its competitiveness, it has to invest in education, innovation and infrastructure, the president said.

We will put more Americans to work repairing crumbling roads and bridges. We will make sure this is fully paid for, attract private investment and pick projects based on what’s best for the economy, not politicians.

He promised to veto any bill that has earmarks attached to it.

To help pay for investment, the president asked Congress to eliminate billions in dollars in subsidies for the oil industry. To help companies succeed, he urged lawmakers to “knock down barriers that stand in the way of their success.” Specificially, he called for a major reform of the tax code to eliminate loopholes and “use the savings to lower the corporate tax rate for the first time in 25 years — without adding to [the] deficit.”

Previewing the president’s State of the Union, Republicans were critical of further investments in the economy. “When we hear invest,” Majority Leader Eric Cantor told NBC’s Meet the Press on Sunday, “to me, that means more spending.” He identified “excessive government spending” as one of the reasons for the country’s slow recovery.

With Republicans now in the majority in the lower chamber of Congress, the president is forced to work with the opposition to pass legislation. Conservatives have criticized his administration’s “big government” approach during the past two years. In a move to the center, Obama has attempted to ally with business and promised a review of government regulation to eliminate rules that “put an unnecessary burden on businesses.”

The federal government is currently borrowing one of every three dollars it spends. “That is not sustainable,” the president said. In order to balance the budget, he proposed to freeze annual domestic spending for the next five years. “This would reduce the deficit by more than $400 billion over the next decade,” he added, “and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was president.”

Discretionary spending represents but a third of total federal spending however at $1.3 trillion. Defense accounts for more than $960 billion of that number. A five year freeze as the president proposed would not balance the budget. Entitlements, including Medicaid, Medicare and Social Security, have to be reformed if the United States is to regain fiscal balance in the long run.

The president recognized that and stressed the need to bring down health-care costs. He also called for a “bipartisan solution to strengthen Social Security for future generations.” Previously, he rejected proposals to privatize the pension system and he reiterated his concern last night. Reform of Social Security, the president said, should happen “without subjecting Americans’ guaranteed retirement income to the whims of the stock market.”

Cutting government waste is something both parties can agree on. So the president announced to “develop a proposal to merge, consolidate and reorganize the federal government in a way that best serves the goal of a more competitive America.”