"The first step in winning the future is encouraging American innovation. ... 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."

With those remarks at the heart of his State of the Union address - and a 2012 Budget proposal to back them up - President Obama drew a line in the sand and articulated a vision of American economic renewal fueled by key investments in the kind of public-private partnership that brought us the railroads and jet aviation, microchips and the Internet, countless biomedical breakthroughs and a portfolio of clean energy alternatives.

As we wrote in January, "Obama's [State of the Union address] was a rejection of proposals to cut federal spending across the board, as he finally made the case before the American people about why public support for innovation is critical for the country's long-term prosperity."

It was a plan to "win the future" and restore American prosperity that embraced the crucial distinction between government spending - consumptive, transitory, and sometimes even wasteful - and public investment - that small portion of our federal budget that catalyzes the enduring innovation, entrepreneurship, and economic growth that makes this nation strong. We hailed the speech as "Obama's breakthrough" moment.

But that was January...

Today, we're veering closer to a very different vision of America's budgetary future, one that seems to embrace the logic of "across-the-board" spending cuts proffered by Republicans, including decreasing budgets for major national research agencies and clean energy innovation programs.

Budget Deal Cuts Investment in Innovation

Late on April 8th, President Obama's negotiators gave his imprimatur to a compromise to fund the government through the remainder of the 2011 fiscal year that would see federal investments in energy innovation fall by nearly 11% (or $325 million) below 2010 levels while stripping over $1 billion from the budgets of the nation's major non-defense research agencies.

These cuts amount to a veritable funding cliff, when one considers the nearly simultaneous expiration of the temporary investments flowing to innovation agencies in 2009 and 2010 under the American Recovery and Reinvestment Act.

If this is the opening battle in the war to win America's future, it is a clear defeat.

Funding for advanced energy innovation will fall 14% below the President's 2011 budget and 29% below levels outlined in his 2012 budget outline - a budgetary vision drafted just after his State of the Union and designed to contrast with H.R. 1, a program of steep budget cuts advanced by the House GOP in February.

At the same time, funding for the major non-defense research agencies will fall 5% and about $3.4 billion below the investment targets in the President's 2012 budget outline.

We've always been clear that political efforts to secure significant increases in innovation funding would take time to bear fruit. But essential investments in innovation are now falling not rising. And the terms of debate are now dangling dangerous close to a choice between eviscerated innovation budgets on the one hand and only slightly decreased investments on the other.

Clouded Vision on Taming the Deficit

If the 2011 budget compromise is the first battle, the next chapter of the war began Wednesday, as the President outlined his strategy for taming the deficit in his first major address on the subject.

The clear vision economic vision articulated by President Obama just a few short months earlier has now become clouded and contradicting.

The President rightly lampooning the even steeper cuts proposed by the GOP, yet failed to present any clear defense of the kind of limited but direct investment in innovation necessary to grow America's economy and tame the deficit.

Obama vowed to "protect ... our investments in the future" in one breath while promising in his very next sentence to "build on the savings that both parties agreed to" in the 2011 budget deal, a compromise that cuts key innovation investments.

He embraced "tough cuts ... including to the programs I care about" while simultaneously declaring "I will not sacrifice the core investments we need to grow and create jobs" and promising to "invest in medical research and clean energy technology ... new roads and airports ... education and job training."

Despite the welcome rhetorical embrace of "investment," there's little here on par with the core themes of Obama's State of the Union.

Not once did the President make it clear that a truly responsible strategy to tame the nation's long-term debt must embrace increased investment in the building blocks of an innovation economy, those key public investments in research, education, and infrastructure that paved the way for American technological leadership and economic prosperity in the 20th century and must once again play a central role in "winning the future."

Can Obama Right America's Economic Trajectory?

It's not too late for President Obama to return to the clear path to "winning the future" articulated in his State of the Union.

But righting the nation's economic trajectory demands a concerted and consistent effort to help Americans understand and embrace the difference between spending and investment, and to recognize that a growing economy fueled by new innovations, new technologies, and new industries is an essential component of any strategy to tame the debt.

After explaining that the hollow deficit debates in Washington to date "have focused almost exclusively on that 12%" of the federal budget encompassed by non-defense, discretionary spending, President Obama's message to Americans Wednesday was this:

"[C]uts to that 12% alone won't solve the problem. So any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget."

The Barack Obama of January would have had an entirely different message to the American people, one that went something like this:

Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%. But cuts to that 12% alone won't solve the problem. In fact, many of those cuts will exacerbate the deficit challenge.

Cutting back on key investments in innovation, education, and infrastructure destroys the foundations of American economic prosperity and hampers economic growth. That's why any serious plan to tackle our deficit requires us to reject the notion that taming the deficit demands "across the board" cuts that "put everything on the table."

And that's why today, I'm proposing a budget plan that increases key investments in America's economic future, even as we take aim at controlling the major drivers of our national debt, including enacting smart reform to our nation's health care system and social safety net that protect the middle class, a responsible draw down of military spending, and across-the-board reform of our sprawling tax code.

These essential investments will not be free. But they will amount to just a scant few percent of our nation's multi-trillion dollar budget, and they will return far more in economic growth - and future tax receipts - than they require in investment today.

 

Obama failed to articulate anything like that essential message this week. The battle isn't over, but if Wednesday's speech and last week's budget deal are a sign of things to come, America's economic future may well be lost.