President Obama, entering the second half of his presidency, has to tread warily as Republicans, who took control of the House of Representatives in the November mid-term elections, are determined to freeze Federal spending to 2008 levels, shrink the government, and undo some of the signature reforms of the Democrat President, especially the health-care law.

The President called for investments in areas like innovation, education, clean energy and infrastructure, all of which are designed to promote jobs and enhance America’s competitiveness. At stake is whether new jobs and industries would take root in this country or somewhere else, “whether we sustain the leadership that has made America the light of the world”. He referred in this context to the rise of competing powers in a technologically-changing world like China, India and others.

At the same time, he tried to put the Republicans on the defensive by proposing a five-year freeze on annual domestic spending which would reduce deficit by more than 400 billion dollars over the next decade, and also expressed his willingness to work with them “ to eliminate whatever we can honestly afford to do without”. He also referred to review of regulations he had already ordered to remove those which put unnecessary burden on business and said in coming months, his administration would develop proposals to merge, consolidate and reorganise the Federal Government that best services the goal of more competitive America.

The President also favoured reduction of the US corporate tax rate – the highest at 35 per cent among developed countries – by getting rid of loopholes and raising savings for lowering the tax rate without adding to budget deficit.

Earlier in the day, Republicans had voted a resolution in the House calling on the Obama Administration to drastically lower the ceiling on government spending in the remaining seven months of the current budget year, ending September.. Mr. Paul D. Ryan, Chairman of the House Budget Committee, who gave his party’s official reply to the President’s address, said the country faced “a crushing burden of debt” which could become “catastrophic”.

Republicans, he said, would honour their electoral pledge to provide Americans “ a better choice and a different vision”. Thus, President Obama’s plea for Democrats and Republicans to work together now that they had “shared responsibilities” in a divided government did not resonate with the Republicans who contended the President was proposing more stimulus and adding to the debt.

The President had himself underlined the need to make sure that the nation does not get buried in a mountain of debt. He said the legacy of deficit that began almost a decade ago (in the Bush era with tax cuts and two wars unfunded) and had grown because of the financial crisis and recession. US public debt is currently nearing 14 trillion dollars, the ceiling set by Congress in 2006.

The President also referred to simplification of the Tax Code as proposed by the Fiscal Commission appointed by him last year, on which both parties have shown interest and said he was prepared to join them in forging a “principled compromise”. (The Commission suggested elimination of most of the tax breaks and reduced individual Tax rates of between 15 and 25 per cent. Similarly, it proposed 25-28 per cent for the corporate tax). “If we can make hard choices to rein in our deficits, we can make investments we need to win the future” the President said.

Dealing with competitiveness on which he based the future of American leadership and prosperity, President Obama pointed out how China and India are preparing themselves for global competition by expanding education, with greater emphasis on math and science, and investing in research and new technologies. “Just recently, China became the home to the world’s largest private solar research facility, and the world’s fastest computer.” America cannot stand still and “we need to out-innovate, out-educate and out-build the rest of the world”.

The President did not offer many specifics for his vision but said he would send to the Congress his budget for fiscal 2012 in February in which he would propose investments in biomedical research, IT and clean energy technology. With more research and incentives on renewable energy, already showing promise, America can reduce dependence on oil and become the first country with a million electric vehicles on road by 2015. The President called upon the Congress to join him in setting a new goal of achieving 80 per cent of electricity being derived from clean energy sources by 2035. To get behind this energy innovation, he wanted elimination of billions in tax dollars given to oil companies which are doing fine on their own. “Instead of subsidizing yesterday’s energy, let us invest in tomorrow’s”.

Other goals of the President are faster. more reliable high speed rail and high speed internet. He hoped 80 per cent of Americans would have access to high speed rail within the next 25 years. President Obama also talked of other infrastructure programmes and more trade deals to achieve the goal he has set for doubling exports by 2014. Recent agreements with India and China would support more than 250,000 jobs while the free trade agreement with Republic of Korea (before the Congress for ratification) would support at least 70,000 jobs. He proposed to sign trade deals with Panama and Colombia, 'deals that keep faith with American workers and promote American jobs'. The President will make his first visit to Latin America in March and go to Brazil, Chile and El Salvador 'to forge new alliances across Americas'.

'Our success in this new and changing world will require reform, responsibility and innovation', he said, and it would also 'require us to approach the world with a new level of engagement in foreign affairs'

The President referred to his administrations' foreign policy initiatives across the continents and said, “America’s moral example must always shine for all who yearn for freedom and justice and dignity. He could say on the basis of work experience that 'American leadership has been renewed and America’s standing has been restored'. (IPA Service)