RENEE MONTAGNE, host:
It's MORNING EDITION from NPR News. I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep. Good morning.
President Obama told the nation last night, with the economy moving out of crisis, it's time to refocus. He says he wants to look to the future.
MONTAGNE: In a time of big deficits, the president called for spending cuts, but also called for investments to make America more competitive.
We have coverage throughout our program, and we begin with NPR's Mara Liasson.
MARA LIASSON: Last night, Mr. Obama reached across the aisle, just like the dozens of lawmakers who sat with members of the other party. We will move forward together, the president said, or not at all. He delivered an optimistic vision of America's economic future, never once mentioning the stubbornly high unemployment rate. Instead, he described an economy two years after the recession, by noting the stock market and corporate profits had come roaring back. Now, he said, it's time to out-innovate, out-educate, and out-build the rest of the world.
President BARACK OBAMA: We have to make America the best place on Earth to do business. We need to take responsibility for our deficit and reform our government. That's how our people will prosper. That's how we'll win the future.
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LIASSON: Many Americans feel the country is in decline and the president struck a nationalistic note, pointing out that China and India educate their children earlier and longer, with more emphasis on math and science. He called for new government-led investment in technology, education and basic research, so that new jobs and industries take root in the U.S., not somewhere else.
President OBAMA: China's building faster trains and newer airports. Meanwhile, when our own engineers graded our nation's infrastructure, they gave us a D. We have to do better.
LIASSON: The president said he'd pay for new investments in areas like clean energy by getting rid of tax breaks for oil companies. But he also offered business an olive branch, a plan to bring down U.S. corporate tax rates, currently the highest in the world.
President OBAMA: So tonight I'm asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years without adding to our deficit.
(Soundbite of applause)
President OBAMA: It can be done.
LIASSON: And the president reached out to his Republican opponents on healthcare, saying he'd be happy to work with them to improve the law, by reigning in frivolous medical malpractice lawsuits, for instance. But he defended the law that House Republicans have already voted to repeal, painting them as preoccupied with the past.
(Soundbite of applause)
President OBAMA: So I say to this chamber tonight, instead of refighting the battles of the last two years, let's fix what needs fixing and let's move forward.
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LIASSON: The president also promised to develop a proposal to reorganize the federal government and make it more efficient.
President OBAMA: Then there's my favorite example: The Interior Department is in charge of salmon while they're in fresh water, but the Commerce Department handles them when they're in saltwater.
(Soundbite of laughter)
President OBAMA: I hear it gets even more complicated once they're smoked.
(Soundbite of laughter)
LIASSON: He also promised to veto any bill with earmarks in it - sparking an immediate intramural fight with his own Democrats in Congress. And he offered his opening gambit in the big fight with Republicans over spending. They want to return to 2008 levels. The president offered a five-year freeze at 2010 levels. He said that would reduce the deficit and make room for investments.
White House aides say they're happy to have the contrast between what they call the president's thoughtful, targeted approach and the Republicans deep across-the-board cuts.
President OBAMA: Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. It may make you feel like you're flying high at first, but it won't take long before you feel the impact.
LIASSON: This argument over the size and role of government will preoccupy both parties all the way through the next presidential election. But Mr. Obama was careful not to be too specific about controversial subjects, like the deficit. Maybe he was feeling safer now that the economy and his own poll numbers have improved a bit. But he did acknowledge that his proposed freeze was just a down-payment on real deficit reduction.
President OBAMA: Most of the cuts and savings I proposed only address annual domestic spending, which represents a little more than 12 percent of our budget. To make further progress we have to stop pretending that cutting this kind of spending alone will be enough. It won't.
LIASSON: Real deficit reduction, the president said, will have to include cuts in health care, tax breaks, Medicare and Medicaid. White House aides promise more details in his budget due out in mid February.
In the State of the Union address, the president began to tell a new story about American competitiveness and jobs. Now he has to follow it up over the next two years, as he works to find areas of compromise with the Republicans and tries to convince voters that he has a plan to make America number one again.
Mara Liasson, NPR News, Washington.