State Of The Union Address - Obama challenges Republicans on cuts, spending

By Steve Holland
WASHINGTON | Tue Jan 25, 2011 9:13pm EST
(Reuters)

- U.S. President Barack Obama challenged Republicans on Tuesday to adopt limited spending cuts and invest in new research and education to generate a job-creating "Sputnik moment" for America in a speech designed to revitalize his leadership.

Obama, seeking to assure Americans weary of stubbornly high 9.4 percent unemployment and fearful of rising debt, was to lay out his plan to reinvigorate economic growth in a State of the Union address at 9 p.m.

At the midpoint of his four-year term and now preparing for his 2012 re-election campaign, Obama sought to strike a centrist tone, saying that what's at stake is "not who wins the next election."

"At stake is whether new jobs and industries take root in this country, or somewhere else. It's whether the hard work and industry of our people is rewarded," he will say, according to a White House speech text.

Obama proposed a five-year freeze on domestic spending that he said would reduce the budget deficit by $400 billion over a decade. The freeze would not apply to big entitlement programs -- such as Social Security and Medicare -- at the heart of America's deficit problem.

Obama insisted the country needs to increase its investment in research and education to achieve a "Sputnik moment" -- akin to the space race unleashed when the Soviets launched the Sputnik satellite in 1957. The aim would be to trigger a wave of innovation and create jobs at home.

The Democratic president said to cut spending, as Republicans want, in research and education would be "like lightening an overloaded airplane by removing its engine."

"It may feel like you're flying high at first, but it won't take long before you'll feel the impact," he said.

TAX PROPOSALS

Obama called for closing tax loopholes and using the savings to lower the corporate tax rate for the first time in 25 years.

He also proposed an end to tax subsidies for oil companies to help pay for clean energy innovation. And he will set a goal of having 80 percent of U.S. electricity production to come from clean energy sources, nuclear, solar, wind and "clean coal," by 2035.

He made clear he opposed permanently extending tax cuts for wealthier Americans after agreeing to a two-year extension in a December compromise with Republicans.

Obama vowed to pursue trade deals with Panama and Colombia similar to a recently concluded pact with South Korea, a move likely to be welcomed by trade-friendly Republicans.

Republicans were unhappy with the five-year spending freeze, saying more cuts were needed. They say voters in November gave them increased power in order to roll back the size and scope of government.

"A few years ago, reducing spending was important," Wisconsin Republican Representative Paul Ryan was to say in the Republican response to Obama. "Today, it's imperative. Here's why. We face a crushing burden of debt."