America's ungovernable budget: a policy at war with itself.

• Author: Sachs, Jeffrey D.

The heart of any government is found in its budget. Politicians can make endless promises, but if the budget doesn't add up, politics is little more than mere words.

The United States is now caught in such a bind. In his recent State of the Union address, President Barack Obama painted a convincing picture of modem, twenty-first-century government. His Republican Party opponents complained that Obama's proposals would bust the budget. But the truth is that both parties are hiding from the reality: without more taxes, a modem, competitive U.S. economy is not possible.

Obama rightly emphasized that competitiveness in the world today depends on an educated workforce and modem infrastructure. That is true for any country, but it is especially relevant for rich countries. The United States and Europe are in direct competition with Brazil, China, India, and other emerging economies, where wage levels are sometimes one-quarter those in high-income countries (if not even lower). America and Europe will keep their high living standards only by basing their competitiveness on advanced skills, cutting-edge technologies, and modern infrastructure.

That is why Obama called for an increase in U.S. public investment in three areas: education, science and technology,

and infrastructure (including broadband internet, fast rail, and clean energy). He spelled out a vision of future growth in which public and private investment would be complementary, mutually supportive pillars.

Obama emphasized these themes for good reason. Unemployment in the United States now stands at nearly 10 percent of the labor force, in part because more new jobs are being created in the emerging economies, and many of the jobs now being created in the United States pay less than in the past, owing to greater global competition. Unless the United States steps up its investment in education, science, technology, and infrastructure, these adverse trends will continue.

But Obama's message lost touch with reality when he turned his attention to the budget deficit. Acknowledging that recent fiscal policies had put the United States on an unsustainable trajectory of rising public debt, Obama said that moving towards budget balance was now essential for fiscal stability. So he called for a five-year freeze on what the U.S. government calls "discretionary" civilian spending.

The problem is that more than half of such spending is on education, science and technology, and infrastructure--the...