Obama's State of the Union speech will sound a lot like Bush's and Reagan's.

Commentary about business and finance.
Jan. 25 2011 3:13 PM

Repeat Competition

Why Obama's State of the Union speech will sound a lot like Bush's and Reagan's.

US President Barack Obama and GE Chairman and CEO Jeffrey Immelt. Click image to expand.
President Barack Obama and General Electric CEO Jeffrey Immelt

In the lead up to the president's State of the Union address, reports are that he plans to focus on America's competitiveness: creating jobs, supporting businesses, leading the world in innovative products and technologies. "We must continue to lead the world in human talent and creativity," reads the text of the speech, which also unveils an "American Competitiveness Initiative, to encourage innovation throughout our economy, and to give our nation's children a firm grounding in math and science." Other proposals include plans to "double the federal commitment to the most critical basic research programs in the physical sciences over the next 10 years" and to bump up research-and-development tax credits.

Well, those quotes aren't actually from President Obama's speech, the text of which has yet to be released. They're from George W. Bush's 2006 State of the Union, which also focused on competitiveness. But as these speeches go, plus ça change: Plenty of presidents, not just Obama and Bush, have cited the need for America to produce smarter workers to help more businesses bring better products and services to more of the world. It's a popular message (and largely unheeded, as it's repeated so often). What is "competitiveness," anyway, at least in the way Obama will talk about it? And how well is America doing in the global stakes?

To answer the first question, look back to 1983 and yet another major initiative on competitiveness. Twenty-eight years ago, the country perceived a growing economic threat from a highly productive, highly industrialized country in the East—not China, but Japan. In response, President Reagan created the President's Commission on Industrial Competitiveness.

The group produced a report a few months later and penned a useful definition of competition—as between nations rather than firms or individuals. A country's "competitiveness is the degree to which it can, under free and fair market conditions, produce goods and services that meet the test of international markets while simultaneously expanding the real incomes of its citizens," the report says. It also notes that "competitiveness at the national level is based on superior productivity performance." Then it identifies ways to help the country on the international stage while aiding workers at home: boosting the technology sector, freeing up capital for new businesses and products, improving the quality of human resources through education, and bolstering international trade.

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Those have remained the central tenets of national-level competitiveness projects for decades. The rhetoric might imply that the United States is engaged in a zero-sum fight with other nations, a fight it needs to win. But realistically, everyone benefits from having better technologies and products—if a Chinese scientist cures cancer, the world benefits. And the real competition happens at the firm level anyway.

To that end, in his 2006 speech, Bush emphasized the need to keep the tax burden on businesses low, immigration policies sensible, research-and-development credits high, and education a strong priority. He mentioned the need to boost exports. He mentioned green energy as a major sector for growth, as well as an environmental and security priority in and of itself.

Obama reportedly plans to focus on much of the same. Rather than an initiative (Bush) or a commission (Reagan), this time the president is convening a council: the President's Council on Jobs and Competitiveness, to be led by General Electric CEO Jeffrey Immelt. And he road-tested his competitiveness State of the Union in an address last week, saying: "Leading the world in innovation. Opening new markets to American products. That's how we'll create jobs today. That's how we'll make America more competitive tomorrow. And that's how we'll win the future."

So how well is the United States doing at winning the future? It depends on your yardstick, of course. But some international groups have taken a stab at ranking the world's countries, competition-wise. Every year, most notably, the World Economic Forum publishes a competitiveness report—in the last ranking, the United States is fourth, behind Switzerland, Sweden, and Singapore. In INSEAD's Global Innovation Index Report, the United States does worse, coming in 11th. But again, it is behind a host of smaller countries—and the States bests its closest competitors, such as the United Kingdom, Germany, and old foe Japan.

None of which is to say that the United States couldn't become more "competitive," whatever that may mean. America needs more entrepreneurs and more highly skilled engineers, scientists, and programmers. (One easy way to aid competitiveness is just to let them in.) Its children continue to fall behind in science and math skills. And small businesses remain tethered by unnecessary regulatory burdens. So look for Obama to tackle those, along with promising a freeze on federal spending, reductions in the military budget, and a host of infrastructure plans. And don't be surprised if it all sounds vaguely familiar.

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