Obama's goal is 'smart government'

Thirty-two years after US President Ronald Reagan proclaimed that "government is the problem", and 17 years after President Bill Clinton stated that the "era of big government is over," Barack Obama has made a case for closing out the politics of austerity.

In a state-of-the-union address largely focused on economic issues, Obama asserted that "we can't just cut our way to prosperity". He suggested it was time for a more balanced approach, including accepting government has a vital role to play in assuring economic growth and a secure middle class.

"Most of us agree that a plan to reduce the deficit must be part of our agenda," Obama said. "But let's be clear - deficit reduction alone is not an economic plan."

In setting out how government could reach what he considers an acceptable level of fiscal stability through Medicare cuts and tax increases, Obama was doing more than trying to set the terms for the next rounds in his fiscal fight with congressional Republicans.

He was also building a broader argument that the nation needs to shift away from the focus on shrinking the government that has dominated politics for the past several years and towards an agenda aimed at tackling persistent inequality and the dislocating forces of a globalised, technology-driven economy.

At the same time, Obama explicitly recognised the political and policy limitations of his stance after four years of budget deficits in excess of US$1 trillion and broad public unease about saddling future generations with a crippling debt burden. There was no new stimulus plan, no mission to Mars, no ambitious plan to address the hangover from the housing market crash.

"Let me repeat, nothing I'm proposing tonight should increase our deficit by a single dime. It's not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth."