President Barack Obama reminded Congress in his annual address Tuesday that in the U.S. We do big things, as he urged a united approach to resolving the nation's jobs and economic problems by spending in ways that will boost U.S. competitiveness globally while simultaneously reducing the nation's high deficits.

We do big things. From the earliest days of our founding, America has been the story of ordinary people who dare to dream. That's how we win the future, Obama told a joint session of Congress in the nation's capital.

The idea of America endures. Our destiny remains our choice, he said. [A]nd the state of our union is strong.

Obama urged Congress to set aside thoughts of the next general election in nearly two years, and resolve to boost spending on education, infrastructure, and policies that will improve U.S. innovation as a way to get the economy back on track.

Obama also proposed ways to rein in spending in other areas, but acknowledged that his specific proposals Tuesday night only dealt with 12 percent of the budget.

He said the major cuts would come from other areas, which he addressed generally in Tuesday's speech. Cuts would need to come in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes, although he didn't give specifics. The President's budget to be presented next month is expected to give a very detailed look.

Economists foresee that U.S. unemployment will remain above 8 percent for more than two-thirds of the nation's metropolitan areas in 2011 and above 9 percent in at least one third.

The speech was encouraging in that the President sounded like someone ready to get serious about fixing the deficit. But if he is going to get serious, he is going to need to get specific, and if not now, when? said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. The longer we wait, the greater the risk we don't get it done in time.

The President's address to the nation also comes a year ahead of the flurry of activity that will accompany the next general election in November of 2012. That will include a battle for Congress - which is currently divided between Democrats and Republicans. The Presidential race, which will likely feature Obama on the Democratic side, will also include a Republican candidate who will go through a long selection process within the party over the next year.

Liberals will say Obama has moved to close to the center with a proposal for a five year spending freeze in domestic spending, and push for corporate tax cuts, notes Wendy Schiller, an associate professor of political science at Brown University, but adds that conservatives will say the president does not propose enough cuts.

[M]ost objective political observers will say that this was a centrist speech designed to unify the country behind initiatives that will benefit the largest portion of the voting population - the middle class, Schiller said.

President Obama began his address by saying that the events surrounding the shootings in Arizona earlier in the month had reminded Washington that each person is a part of something greater - something more consequential than party or political preference.

We are part of the American family, he said.

Obama also said he believed that Congress could and must work together since voters had decided to split power among the two major parties in the House and Senate.

 We will move forward together, or not at all - for the challenges we face are bigger than party, and bigger than politics.

 

U.S. Competitiveness

The President said that the main issue at stake was not the 2012 election but rather U.S. jobs and U.S. leadership in the world.

At stake is whether new jobs and industries take root in the country, or somewhere else. It's whether the hard work and industry of our people is rewarded. It's whether we sustain the leadership that has made America not just a place on a map, but a light to the world. Obama said.

Obama called on Congress and the country to take Action.

[T]o win the future, we'll need to take on challenges that have been decades in the making, he said.

We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world, Obama said in highlighting his competitiveness agenda.

 

Innovation

Obama said the rules had changed in a single generation as technology increased efficiency and lowered the costs of doing business.  He said that while none of us could predict with certainty what the next big industry would be, the U.S. was the best innovator.

We are the nation that put cars in driveways and computers in offices; the nation of Edison and the Wright brothers; of Google and Facebook. In America, innovation doesn't just change our lives. It's how we make a living, he said.

Our free enterprise system is what drives innovation. But because it's not always profitable for companies to invest in basic research, throughout history our government has provided cutting-edge scientists and inventors with the support that they need, he said. 

Obama called for investments in biomedical research, information technology, and clean energy technology. He called for Congress to pay for innovation  by eliminating billions in taxpayer dollars we currently give to oil companies.

I don't know if you've noticed, but they're doing just fine on their own. Son instead of subsidizing yesterday's energy, let's invest in tomorrow's he said.

Allocating funds for innovation was an investment that will strengthen our security, protect our planet, and create countless new jobs for our people, he said.

 

Education

Obama noted that higher education in the U.S. has taken hit, with the percentage of people with college degrees ranking 9th globally.

He said the start of greater educational achievement needed to begin with parents, but commended his administration's programs that reward states for providing new ways of tackling problems.

If you show us the most innovative plans to improve teacher quality and student achievement, we'll show you the money, he said of his Race to the Top program, which takes the form of a competition between the 50 U.S. states.

Obama also addressed a teachers' shortage and greater financing opportunities for students.

 [W]e want to prepare 100,000 new teachers in the fields of science, technology, engineering, and math, Obama said noting that the older generation of teachers is retiring.

He also urged Congress to approve a permanent college tuition tax credit worth $10,000 for four years of higher education, a move to make college more accessible in the long-term.

Obama also tied education to immigration policies, calling on Congress to change policies that today expel the children of undocumented workers born in the U.S. studying in the nation's schools. He also said policies were pushing students from abroad to leave the country after completing advanced degrees.

Obama reiterated a call for a broad approach illegal immigration which not only enforces current laws and protects the nation's the borders, but also by addresses the millions of undocumented workers who are now living in the shadows.

 

Infrastructure

The last component of his competitiveness agenda was  for infrastructure spending, urging that the U.S. redouble efforts to improve the nation's crumbling roads and bridges and create jobs.

He urged creating incentives private investors to tackle the infrastructure priorities. He also called for 80 percent of Americans to have access to high-speed rail transportation within 25 years. In five years he said it would be possible for 98 percent of all Americans to have high-speed Internet access.

 

Deficit

To rein in the deficit, Obama proposed a spending freeze on annual domestic spending for the next five years, saying it would reduce the deficit by more than $400 billion over the next decade.

He noted his specific proposals only dealt with little more than 12 percent of our budget.

He said that cuts needed to be made [b]ut let's make sure that we're not doing it on the backs of our most vulnerable citizens, he said.

There is some but not total agreement on the issue of cuts between the President and Republicans, MacGuineas said.

We will certainly see a clamping down on domestic discretionary spending over the next few years--the area both the President and House Republicans are focusing on, she said.

But when it comes to entitlement and tax reforms, the heart of a comprehensive budget deal, the areas of agreements seem much, much slimmer, and thus the likelihood for action much less, she said.

The spending freeze is not a big cut for now, Schiller said.

Given that inflation is so low now it is not that big a cut, but if inflation rises at all, this freeze will have a more significant impact, she said.

Obama also called on Congress to address Social Security issues to make sure the pension system was strengthened going forward, although he showed openness to some changes.

The President then drew the line against a permanent extension of tax cuts for the richest 2 percent of Americans, those earning more than $250,000.

Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break, he said.

 

Tax Reform, Healthcare, Free Trade

The President also urged reforms in the tax code, urging Congress to get rid of loopholes that benefit only some companies at the expense of others, and lower the corporate tax rate for the first time in 25 years without adding to our deficit. He called for simplifying the individual tax code.

Obama's speech was very conciliatory to the new Republican majority, especially with his proposal to reduce regulations on small businesses, and to revamp corporate taxes, Schiller said.

On the healthcare reform law passed last year, the President said he would work with Congress to improve it by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small business.

While he didn't specifically mention Republican efforts to repeal the entire law, he said he would not support a taking away coverage for pre-existing conditions, increasing the health insurance costs for small businesses, reducing prescription drugs coverage for seniors, and giving uninsured students a chance to stay on their parents' coverage.

Obama also said he would pursue free trade agreements with Panama, Colombia. He said he would also continue with trade talks involving the Asia Pacific region and global multilateral trade talks.

Fixing government regulations which place unnecessary burdens on businesses, is also an ongoing effort of his Administration, he said.

 

Foreign Policy and Security

The President said the Iraq War is coming to an end as the number of troops remaining in the country dwindles and a new government is taking power.

While fighting extremism within U.S. borders, Obama urged  a fight with the conviction that American Muslims are part of our American family.

In the Afghanistan war, Obama said there was tough fighting ahead but said the U.S. and allies were helping strengthen the Afghan people so they could eventually take the lead.

And this July, we will begin to bring our troops home, Obama said. A deal reached with allies in the NATO alliance and Afghanistan late last year calls for the Afghan government to take the lead in combat operations in 2014.

Obama also touched on other foreign policy issues, such as maintaining the nation's resolve to defeate al Qaeda across the Middle East, the passage the nuclear arms reduction treaty with Russia known as START, ongoing tough sanctions against Iran, and a commitment with South Korea to get North Korea to abandon its nuclear weapons.

The President also noted that with U.S. support, South Sudan was able to vote for independence after years of war. Obama also said the U.S. supported the people of Tunisia amid strong political turmoil in the country.

He also called for providing military families with the care and benefits they have earned and noted that the law forcing gay service members to be dismissed had been repealed. He also called on colleges to accept military recruiters on their campuses.