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Obama urges unity to rebuild the economy; Says bipartisanship needed to confront big domestic challenges

President Obama on Tuesday challenged Democrats and Republicans to work together to rebuild the economy for a new era, proposing additional investments in innovation and education while simultaneously saying Congress should freeze spending on many government programs.

Facing a divided Congress and a nation worried equally about economic stagnation and the record-setting federal deficit, the president used the annual State of the Union address to advocate bipartisan solutions to everything from jobs to government spending to the spiraling costs of Medicare and Social Security.

"At stake right now is not who wins the next election; after all, we just had an election," Obama told Congress and the nation in a 62-minute speech. "At stake is whether new jobs and industries take root in this country, or somewhere else."

Obama spoke before a Congress in which his Democratic allies control the Senate while Republicans now run the House -- but where they sat with one another for the first time in a century in the wake of a shooting rampage earlier this month in Tucson that took six lives and nearly killed Rep. Gabrielle Giffords, D-Ariz. Many lawmakers wore black-and-white ribbons in honor of Giffords and the other victims.

In a speech that was long on economic policy ideas but short on dollar-sign details, he told lawmakers that this better not be the only time they mix and mingle.

"New laws will only pass with support from Democrats and Republicans," he said. "We will move forward together, or not at all."

Moving forward is necessary, he said, to meet the demands of an increasingly competitive world.

More than three years after the start of the most bruising economic downturn since the Great Depression, and two years into his presidency, Obama noted that the stock market and corporate profits are up and that the economy is growing.

"We are poised for progress," he said.

But to ensure a strong future for the nation and its children, he said, it's necessary to shift priorities and spend additional money so that America can beat back foreign competition.

"We know what it takes to compete for the jobs and industries of our time," he said. "We need to out-innovate, out-educate, and out-build the rest of the world. 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."

Key to all of that will be additional government investments in innovation, Obama said.

"We'll invest in biomedical research, information technology, and especially clean-energy technology -- an investment that will strengthen our security, protect our planet and create countless new jobs for our people," he said, adding that the clean-energy investments would be funded by eliminating tax breaks for the oil industry.

Obama noted that in the 1950s, like now, the United States seemed to be falling behind the international competition. Then the Soviets launched the Sputnik satellite -- and the United States had not even begun a space program.

Soon, though, the United States caught up and surpassed the Soviets by investing in innovation and education.

Moreover, "we unleashed a wave of innovation that created new industries and millions of new jobs," Obama said, adding: "This is our generation's Sputnik moment."

Making that moment happen depends in large part on improving America's education system, the president added.

Obama said he will be outlining a series of proposed education reforms built on his Race to the Top initiative, which rewards states with federal funding if they meet federal standards for improving their schools. Those reforms would replace the No Child Left Behind effort under President George W. Bush.

While rebuilding its schools and boosting college enrollment, America also must rebuild its infrastructure, Obama said.

"To attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods and information -- from high-speed rail to high-speed Internet, he said.

The fiscal 2012 budget proposal that Obama plans to unveil in February will include details of investments he seeks in highway, rail, airport and Internet infrastructure.

Beyond that, the president challenged Congress to begin the arduous effort of tax reform -- particularly for businesses, which are saddled with some of the world's higher tax rates.

"Get rid of the loopholes," Obama said of the corporate tax code. "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."

Throughout the address, Obama sought to balance his passion for government investment with the public's growing concern with deficit spending -- which, in part, led to huge Republican gains in last November's elections.

Obama proposed freezing spending on most domestic programs for five years. He said this would cut the deficit by more than $400 billion and bring the optional part of the federal budget to its lowest level since Dwight D. Eisenhower's presidency in the 1950s.

But that freeze exempts the biggest parts of the federal budget -- most notably Social Security and Medicare, whose costs threaten to spiral out of control as the baby boomers age.

A bipartisan solution to Social Security and Medicare is necessary, Obama said, without suggesting one. He also said that while homeland security and defense spending will be exempt from the spending freeze, the Pentagon will see big cuts as well.

In addition, Obama took his hardest stand ever against the once-popular but now poisonous pork-barrel congressional projects known as earmarks.

"If a bill comes to my desk with earmarks inside, I will veto it," he said.

One thing Obama said he would not do, though, is agree to cuts in innovation and education.

"Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine," he said. "It may feel like you're flying high at first, but it won't take long before you'll feel the impact."

In the long term, Obama added, his administration will propose a massive reorganization of the federal government aimed at consolidating agencies and making operations more efficient.

The quest for efficiency also applies to Obama's signature health care law, which the GOP House voted last week to repeal.

"If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you," Obama said.

That eagerness was one of the themes of Obama's address, a year after he used his State of the Union speech in part to criticize the Supreme Court for relaxing regulations on campaign finance.

Despite Obama's criticism last year, six justices -- including Chief Justice John G. Roberts Jr. -- attended the address Tuesday. Justice Samuel A. Alito Jr. was in Hawaii, and Clarence Thomas and Antonin Scalia did not attend.

What they missed was a long and policy-laden address that frequently drew bipartisan applause from a Congress that seemed muted by the tragedy in Arizona earlier this month.

In the first lady's box in the gallery above the House floor, the guests included Giffords' trauma surgeon, the congressional intern credited with saving her life and the family of 9-year-old Christina Taylor Green, who was killed in the mass shooting.

Lawmakers kept a seat empty in Giffords' honor, and 1,400 miles to the southwest at a Houston rehabilitation hospital, the wounded congresswoman watched the speech while holding hands with her husband, astronaut Mark Kelly.

Despite Obama's admission of economic tough times and his challenging call for reinventing the economy and cutting the deficit, he ended his speech with the kind of hopeful, soaring rhetoric that helped win him the presidency in 2008.

"We do big things," he said. "The idea of America endures. Our destiny remains our choice. And tonight, more than two centuries later, it is because of our people that our future is hopeful, our journey goes forward, and the state of our union is strong."

e-mail: jzremski@buffnews.com

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