Senator Kerry's remarks as prepared for delivery follow. _________________________________________________________________________________

In the last weeks America has experienced the consequences of the failure to heed warning signs of impending or potential disaster. The nation has been painfully reminded of the price we pay - all of us - in lives and in dollars - for waiting too long to address critical challenges that are right before our eyes if we bother to look.

Sometimes these warning signs are so big and bright and alarming that they just can't be ignored. I'll never forget as a teenager standing in a field in October of 1957 watching the first man made spacecraft streak across the night sky. The conquest, of course, was Soviet - and while not everyone got to see that unmanned craft pass overhead at 18,000 miles per hour that night - before long every American knew the name Sputnik. We knew we weren't competing hard enough. We knew we had been caught unprepared. And we knew that failure to maintain our supremacy in science and technology was not simply a blow to our pride and prosperity; it was a blow to our strength and security as a nation in a dangerous world.

It was no accident that America's most immediate response to Sputnik was to enormously expand our national investment in higher education, with special attention to math and science. And it was no accident that the legislation taking this step was entitled the "National Defense Education Act."

Today, we recognize Sputnik as the symbol of an awakening of our country to a new competitive challenge. And now, the question staring us in the eye is whether the number "9/11" and the name "Katrina" will be remembered the same way by future generations of Americans. In fact, we've heard it said that 9/11 "changed everything" for government. I think it's more accurate to say that it changed too little.

The truth is we had warnings well before 9/11 that we were dangerously unprepared for terrorist attacks on our country, most notably in the report published by former Senators Gary Hart and Warren Rudman in 2000. Amazingly, Washington has yet to implement most of that report's top recommendations. We should not just be alarmed by that; we should be outraged. And as the chairman of the 9/11 Commission, former Governor Thomas Kean, recently noted, the federal response to Katrina showed we have yet to take the most basic steps to fix the problems that left us in the dark four years ago. Think about that - four years later - longer than it took to fight and win WWII - and the federal government is still not prepared.

Katrina itself provided a vivid and painful reminder of all the unmet challenges our country faces, from protecting our people against terrorist attacks and natural disasters, to protecting the environment; from building a true partnership among different levels of government, to building the physical infrastructure that spurs economic growth and makes safety from wind and water possible; from achieving energy independence, to addressing entrenched poverty by offering hope of health care, jobs and housing to every citizen.

Many of the ideas emanating from Washington about how to rebuild Louisiana and Mississippi show how ill-equipped Washington truly is to rebuild America's competitive strength in a global economy as perilous and as ever-changing as a Category 5 hurricane.

And the current Administration's response to Katrina is a perfect microcosm of its response to our country's economic challenges. There really is no mistaking the pattern of willful negligence. When a crisis approaches, do the bare minimum, if that. When all hell breaks loose, shift the blame to others. When public action is needed, ignore fiscally responsible options and instead borrow lavishly from foreign creditors - the friendly bankers of Beijing and Riyadh. If innovative policies are called for, simply dust off every ideological gimmick you can find: vouchers, sub-minimum wages, "ownership" initiatives, corporate subsidies and wholesale abandonment of environmental regulations. And above all, don't forget the prime directive, the philosopher's stone, the alpha and omega, the answer to every question: never stop cutting taxes on the wealthiest individuals and the most powerful corporations, come hell or high water, in war as in peace, and in debt as well as in surplus.

Well, here's the reality: America simply cannot calmly accept the course we're on without inviting devastating consequences. Just as there was no plan for Katrina, there really is no plan to make the United States more competitive in the global economy. Yet we are surrounded by flashing warning signs of failed economic leadership as clear and dramatic as Sputnik's appearance in the night sky.

I think it's urgent that we put in place an economic strategy geared to the huge challenges to our competitiveness. Most of all, we need a clear understanding of government's role in fostering economic growth, spreading its benefits, managing its risks, and shaping the global economy we largely created. The effort to rebuild New Orleans cannot obscure the need to rebuild our country at the same time. We must retool our nation to prepare for the challenge we already face to maintain our position in the global economy. And this much is certain: America will not have national security without economic security.

For America to prosper in a competitive 21st century global economy, Washington must at last meet two critical obligations: provide people the building blocks they need for a successful life, and remove the road blocks to our country competing. Today, we're not even close to prepared.

Unfortunately, building blocks for too many people are disappearing or nonexistent, while more and more roadblocks to a competitive America are set up. The combination is lethal. It's government's job to help remove these roadblocks like high energy costs, failing schools, soaring health insurance premiums, unbalanced trade agreements, aging infrastructure and insufficient funding for innovation. But today, in every one of these areas, shortsighted policy in Washington holds us back as competitors leap ahead.

How many times have you heard a public official say: it all starts with education, the building block to every child's future? Well, education in America is under-funded by billions every year. And what we do spend could be used more wisely: Only half of every education dollar gets to the classroom in large school districts. We don't even crack the top 20 in math and science rankings, and our kids make about a quarter less progress in reading than other industrial nations.

That's just not good enough, yet the barriers to a good education in America grow higher and higher. The cost of tuition and fees for a private four-year public college have increased 35 percent in only four years. Not surprisingly, as those costs rise, loans have become the predominant form of financial aid, and that debt is just another hurdle to a kid considering a college degree. Washington isn't fixing that, it's making things worse by cutting student financial aid.

Our international competitors have national plans to prepare their kids for the global economy. China produces more engineers than Japan, the U.S. and Europe combined. In five years' time, China will produce more PhD's than the U.S. You know something is wrong when American students can't even earn half the engineering spots at MIT.

Firms are finding skilled talent overseas that will work just as hard for less. Foreign industry is on its way to capturing our competitive advantage. Believe me, our competitors have a plan. They're not racing us to the bottom; they're racing us to the top.

When China and India are graduating tens of thousands more engineers and PhDs than we are, America needs to close the growing math and engineering skills gap between America and the rest of the world. We should support all-girls math and science schools and special after-school and summer programs that aim to get more girls and minorities engaged in math and science at an early age. We also should give colleges new financial incentives to increase the number of science, technology and math majors they graduate, and double the National Science Foundation's graduate scholarships in these fields.

In the end, America must make college education affordable and accessible for every child willing to work for it. And America has to stop making a mockery of the words No Child Left Behind.

But it's not enough just to educate our kids. That's only one of the building blocks. We need to put that education to work inventing a better future. Whether the cotton gin, the Model T or the silicon chip, America has always been built on innovation.

Every one of us knows what innovation means to our economy. Fifty percent of U.S. economic growth in the last half-century is due to scientific breakthroughs and technological innovation. Most of our productivity comes from it. And yes, our competitors know this too, and they're catching up. Collectively, the world's fastest growing economies are on track to match our research and development investments. Yet, inexplicably, the Administration is set to cut basic research for the first time in a decade.

Federal funding for fusion research at Princeton and MIT, for nuclear physics at our national labs and for much more is all slated for deep cuts. The Administration wants to cut the Manufacturing Extension Program, and even the Advanced Technology Program. In Massachusetts companies like Lexia Learning Systems, Tissue Engineering, and Kopin Corporation, now the number one exporter of LCD displays to Japan, have utilized these programs to create jobs and growth. These programs led to the invention of the digital mammogram. It make no sense to cut a partnership that creates high-paying high-tech jobs when we know Asia and the EU are implementing large scale, long range R&D projects aimed at developing leading edge commercial technologies.

The bottom line is: a national budget should reflect your values and priorities, but the choices in our budget today have a dramatic negative impact on our nation's ability to innovate and compete. This moment is screaming for focus on skills training and technical education. We should ease access to loans, venture capital and R&D. We need trade that protects intellectual property and levels the playing field. We need a tax code that rewards investment in American production and American workers. And instead of more tax cuts to the wealthiest Americans, we must make the long-term investments that create wealth in America.

Unfortunately, our poor commitment to R&D isn't the end of it. Washington creates another roadblock for American business by failing to invest in high-tech infrastructure. The U.S. has dropped from 4th to 16th in broadband Internet usage. The digital divide is still enormous. Our transportation infrastructure is aging. We've spent more in Iraq this year than we'll spend on infrastructure for the next six years.

Sadly, Washington is so shortsighted that it helps ideology become a roadblock to innovation and progress. If today's biology students in America don't do the groundbreaking stem cell research tomorrow, the biology students in Europe or Asia will, and they'll take the high-paying jobs and commercial revenue with them.

Another roadblock to a competitive America that's been staring us in the face for years is our dependence on foreign oil. Gas prices shot up 70 cents when Katrina slowed domestic production. Small businesses and farmers are suddenly forced to cope with 30% cost increases they never budgeted for. Some lose hard earned profits. Others have to lay off good people. The least fortunate go out of business altogether. And all of this was predicted. Imagine if something happened in Saudi Arabia and production was delayed not for days or weeks, but months or years.

The list of other countries moving in a different direction - from Asia to Europe - is too long to recite. Even oil companies are acting: Chevron has declared the era of easy oil over and is touting conservation in their commercials. But Washington continues its blind obsession with oil, despite the inevitable economic repercussions. You can already see it in the automobile market, where we're losing the race on hybrid vehicles. The global market for hybrids by one estimate will be 4.5 million units by 2013, perhaps $65 billion in the U.S. If we don't build them, someone else will, and they will take our market share and take our jobs.

Today, Japan is far ahead of us. Toyota is rebuilding their production lines to market a new line of ten hybrid cars. No U.S. auto maker is close. It's true that Ford has the Escape, but it's also true that Ford licenses it hybrid technology from Toyota. It comes down to this choice: do we want to invest in efficient domestic automobile production or buy foreign oil? Washington chooses more oil.

It's long since time to put America on the path towards energy independence. We can create tens of thousands of jobs by focusing America's ingenuity on new technologies and alternative fuels. We need to create tax incentives that help automakers produce more fuel efficient cars, and reward the consumers who buy them. We must conserve energy and create clean, renewable sources of energy that no terrorist can sabotage and no foreign government can seize.

Healthcare costs are another devastating roadblock for a competitive America. We know kids who see a doctor do better in the classroom. And the sad truth is that only because of Katrina, many children will get vaccinations for the first time and thousands of adults will see a doctor after going without a check-up for years. Illnesses lingering long before Katrina will be treated by a healthcare system that just weeks ago was indifferent, and will soon be indifferent again. For the rest of the year this nation silently tolerates the injustice of 11 million children and over 30 million adults in desperate need of healthcare. Their plight is no less tragic - no less worthy of our compassion and attention.

The stark reality for our economy is that by 2012, health care costs will account for 17.7% of our GDP and, expenditures will total $3.1 trillion. This is an incredible burden on our country - it amounts to a tax our competitors aren't paying. GM's health care costs now account for $1,400 per vehicle. Toyota recently put a major new plant in Canada, instead of the U.S because of healthcare costs.

The picture gets even bleaker for small businesses. Only 60 percent provide insurance - and that's a decline from 69 percent just a year before. I am working on a compromise bill with Republican Senator Olympia Snowe that will fundamentally reform the health care system for small businesses and give them access to a more affordable range of options to care for their employees. We are in the final stages of drafting our proposal and look forward to bringing it to the Senate floor in the coming months. Maybe we can get something done.

And here in Massachusetts, the healthcare community is working hard with legislative leadership to address this issue. I applaud their efforts and urge you to complete this project soon. The benefits to our economy, and the example you can set for the nation, can be enormous.

In fact, a reformed healthcare system can be a real opportunity for our economy. We should be the worldwide leader in health information technology, but we're not making the national investments necessary to make it happen. Health IT can save money and lives at home, and we can export our technology and expertise abroad for profit. But the president's budget invests just over $100 million in Health IT standards and development nationally - less funding than what one hospital system in Massachusetts spends all by itself.

When you try to figure out why Washington is moving so slowly, or even backwards on competitiveness, the reasons are not so different from what we saw in New Orleans. What's missing is the urgency - the roll up your sleeves leadership - the sit at the table until you get it done decision-making - the forward-looking set of priorities.

Washington has failed to realize the scope of the challenge we face - in this case the global economy. But the reality is that globalization is here to stay. We created it, and we must embrace it to realize the full benefit. Let there be no doubt: globalization has, in fact, been an astonishing success. Consumers across America enjoy lower prices. Our businesses have access to new markets. Nations who may have once turned to violence to compete now compete through trade and the talents of their own workforce.

The door has been opened to more prosperity than America has ever known if we're willing to walk through. This shift isn't easy, but we shouldn't be distracted from the real opportunity. In just decades globalization will spawn over a billion new members of the global middle class. They will have extraordinary purchasing power, and they should be our customers. The people of China and India and Eastern Europe will finally be able to purchase the sophisticated, high-quality products and services that American industry is known for. But to take advantage of this opportunity, and capture this business that will fuel another generation of prosperity, we have to embrace the full responsibility of globalization.

One thing is certain: we can't wall ourselves off from the rest of the world. The French are building those walls and pursuing protectionist policies. And they're doing that because they can't compete. We're America. There is no one America can't compete with when we put our minds to it. The problem is that government is not competing as hard as you are, and in many cases actually makes it harder for you to compete. Washington's inattention to the road blocks and building blocks is costing every one of you.

We have to acknowledge that there's something wrong when 22% of college freshmen require remedial math. When U.S. students only outperformed Cyprus and South Africa in a major international mathematics competition. When American kids spend less time on homework than any of our competitors' do. And as Tom Friedman says, when in China Bill Gates is Brittany Spears - and in America Brittany Spears is - well - Brittany Spears.

Washington still acts like our primary competition is with other Americans. Nothing could be more self-defeating. The great risk is not jobs lost by South Dakota to South Carolina, but jobs lost to South Korea. To succeed -- even just to compete -- in this global economy we need a national economic innovation strategy to race against countries closing in on our heels. Otherwise, the truth is, we'll lose company after company - job after job - and we won't create the new jobs to replace them. That's why our nation cannot afford an achievement gap. That's why we can't afford for Americans to fall through the cracks of our education system, small businesses to be eaten alive by the cost explosion in our health care system, or companies to be strangled by other nations' superior commitment to research. We are all in this together, and Washington needs to start acting like it.

This Administration and the Republicans who control Congress give in to special interests and rob future generations. Real leadership stands up to special interests and sets the course for future generations.

For 225 years, America has been defined by our sense of limitless possibility. We've always approached the future with imagination and daring. What other nation could dream of flight - and have two bicycle mechanics from Ohio make it happen? What other nation could put the first footprints on the moon and find a path to the stars? What other nation could set out to learn more about disease and illness - and then lead an international coalition to map every single gene in the human body?

In this remarkable time for the world, I refuse to believe it's time to stop believing in the possibilities of our remarkable country. I refuse to accept the downsizing of the American Dream. I refuse to bet against American entrepreneurial spirit and American ingenuity.

The competition's tough, and it requires us to be tougher - tough-minded, never hard hearted.

Some ask, how can we do it? My question is, how can we commit ourselves to anything less? Together, we can restore America's competitive edge - and together, we can win.

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