"Fiscal cliff" has become such a catch phrase that it now shows up regularly in non-U.S. media around the world. Avoiding going over it is certainly President Obama's number one concern between now and the end of the year.

Or is it? Well, if it is, it's not stopping him from leaving Washington and flying half way around the world to Cambodia next week to attend the East Asia Summit meeting of top Asian leaders. So "take that" John Boehner. You may be the Speaker of the U.S. House of Representatives, but you're no Xi Jinping or whomever the Chinese pick as their new leader. This is the first time an American president has attended the summit, and it is a measure of the importance of China/Asia to the United States that Obama is taking part despite the fiscal pressures he, America, and the world are facing.

This is not the first move Obama has made that reflects his concern with China and Asia. The so-called "pivot to Asia" that he adopted earlier in the year as the main focus of American foreign policy in the post-Iraq, post-Afghanistan war world has already resulted in an ongoing shift of U.S. troops, ships, and military presence to the Asia-Pacific region. It has also been manifested by the attempt to negotiate a free trade agreement under the rubric of the Trans Pacific Partnership and by the reaffirmation of U.S. ties with, and support of, Asian countries such as Vietnam, the Philippines, and Japan in some of their contested issues with China.

That Obama's concern is justified is evident on the basis of many factors. There is a constant din of triumphal commentary in Asia and much of the rest of the world about China displacing the United States as the world's largest economy. Put aside for the moment the fact that the U.S. economy is not the world's largest economy -- and hasn't been since being displaced by the EU a number of years ago -- and put aside the fact that China will not soon displace the EU, and may well not surpass the United States if its growth rate continues its broad slow down. The fact is that there is a widespread anticipation and even fervent hope that America will fall behind in terms of the size of its GDP. Many around the world see this as a kind of liberation from American hegemony. As one Chinese analyst said to me recently, "America must at last face facts. It's power is ebbing rapidly and it will no longer be able to get what it wants as easily as in the past."

Good advice. Face the facts. My concern with Obama is not that he's going to Asia in the middle of the fiscal negotiations with Boehner, but that he's not properly facing the facts.

The main fact is that while it's true that U.S. power is ebbing, it's not ebbing for lack of military presence or capability. It's ebbing because the U.S. trade deficit appears to be irreducible and U.S. industry continues to offshore not only production but also R&D and innovation while some of America's greatest educational institutions slash their budgets, even as those of China and most of the rest of Asia expand geometrically. In short, the U.S. is seen in Asia as a declining power because it can't compete, not because it can't fight.

Increasing the American military presence in the Asia-Pacific region will only cost more money and goad the Chinese to redouble their own military efforts. It won't produce a single new semiconductor or new company or higher American wages. In his post election speeches, the President has frequently talked about doing nation building at home and about rebuilding America. He's right. An economically stronger America wouldn't have to deploy 2,500 marines in the northern reaches of Australia or put 60 percent of its naval ships in the western Pacific.  So how do we rebuild America?

For starters, we pivot not to Asia, but to America. Look, the Aussies are reducing their own forces. Why are we sending more troops to Australia? China has an economy growing at 7.5 percent while we struggle to hit the 2 percent mark. Why do we want to challenge China to an arms race that is likely to be more costly to us than to them? Remember that U.S. oil does not come across the Pacific. There has been a lot of concern about the off-shoring of U.S. jobs and technology. Yet, the U.S. military presence in Asia promotes a degree of stability that makes the Asian supply chain safe. In effect the Pentagon guarantees corporations who offshore their operations that they have nothing to fear in terms of disruption by doing so. This is like a subsidy for off-shoring. Why is America paying this subsidy?

Halting its payment would be a good way to avoid going over the fiscal cliff.

Similarly, the negotiation of the Trans Pacific Partnership (TPP) and other free trade agreements should be halted and re-defined. These deals are not about creating American jobs. No serious analysis is being done about how many jobs they might actually create or destroy. It is likely that the TPP would result in an increase in the chronic U.S. trade deficit and a net loss of jobs, but the negotiators are not thinking about that. Obama should. His negotiators get points for doing deals whether or not they create jobs, but Obama doesn't. He should put the talks on hold until an analysis has been done that shows in concrete terms how such a deal might contribute to rebuilding America.

Of course, these steps are only a beginning. They are measures to remove distractions while we concentrate on the main thing by adopting a whole new set of domestic policies. I'll tell you what they should be in the next installment.

I just watched an online interview by the New York Times' Tom Friedman with Bill Gates. Friedman notes that as recently as six years ago there was no Facebook, no cloud, barely a Twitter, no iPad, and 4G was a parking place. Gates nods emphatically and says this shows that America is still number one in innovation. Indeed, he emphasizes that more innovation occurs in America than in the rest of the world combined. Then he gives a puzzled face and says that in view of all this innovation, he can't understand why poll after poll now shows Americans to be worried about their future and that of the United States. He adds that he guesses it must be because of uncertainty created by the political gridlock in Washington.

Well, it's always safe to blame Washington, but what I wonder is what Gates knows about innovation or worry. Don't get me wrong, I admire Gates as one of the great business minds of our time. But he's no Steve Jobs. Jobs knew about innovation. Gates knows about negotiation and standard setting and business strategy, but he's never been an innovator. The original MS DOS personal computer operating system on which the Microsoft empire is based was bought by Gates from a friend and then licensed by Microsoft to IBM. Gates bamboozled IBM by persuading it to take only non-exclusive rights to the system, but he didn't invent the system.

Or take the Microsoft Explorer browser. Mosaic and Netscape were the first browsers. Microsoft had no clue and was scared to death when Netscape debuted. Gates bundled Explorer to his Windows monopoly operating systems and, with the help of sleepy U.S. government anti-trust oversight and friendly courts, killed off Netscape. Brilliant, perhaps, but not innovative. More a copy of the Rockefeller Standard Oil model than of Apple.

Gates also doesn't know much about worry because he's a rich kid who always had a job and then bargained his way into one of the history's greatest monopolies. Again, let's give him credit for single-minded drive and focus, clever bargaining, and great business strategy. But he never had to worry. He never had to look at life through the eyes of an everyday American.

He does, however, present a perfect view of the world as seen through the eyes of the American elite. It worships at the alter of innovation and sees the future as an endless series of Facebooks, Twitters, and Groupons. If America is suffering from declining competitiveness and rising trade deficits, innovation, according to the elite, is the philosopher's stone that will turn everything around.

Well, as Santayana said, "Those who cannot remember the past are condemned to repeat it." The British have a long tradition of innovation. Indeed, Japan's Ministry of International Trade and Industry (MITI) once found that 54 percent of the world's most important inventions were British while only 25 percent were American and 5 percent Japanese. The first commercial jet liner was the British Comet. The first digital audio system was British, as was the first operating television system. I could go on and on, but the point is that British industry wound up far behind U.S. industry in all of these sectors, and in many more as well. The British economy reaped very little benefit from these innovations because it did not fully commercialize or mass produce them. They created nice jobs for a relatively few brilliant scientists and engineers in Britain, but none for the average bloke. It was the American companies who came along behind and copied the Brits that garnered most of the sales and profits, American workers who got most of the jobs, and the American economy that gained most of the GDP growth from the innovations.

This history is now being repeated between the United States and Asia with the United States in the role of Great Britain. Average Americans are worried because they can see that, even as the elite is blinded by its own brilliance.

Another great American business leader has been making this point recently from his base in Silicon Valley. Former Intel CEO and Chairman Andy Grove, whose company accounts for half of the WinTel standard that has dominated the PC industry for the past thirty years, wrote in Bloomberg BusinessWeek a bit over a year ago that innovation without follow-up on scale and production is not a great wealth producer. In short, it is a necessary but not sufficient generator of jobs, wealth, and economic growth.   

President Obama and his administration no doubt richly deserved the victory laps they took this week in the wake of their high stakes success in tracking down and doing away with Osama bin Laden. Now, however, they must quickly confront the fact that in a fundamental way he is still winning.

I don't mean that the terrorism and medieval brand of Islam he fomented are gaining support. Indeed, if anything, we have been over-estimating the terrorist threat posed by al Qaeda for some time. I even allowed myself briefly to wonder this morning if we might again be allowed to keep  our shoes on in airport security lines. But terror was only a tactic for bin Laden. His larger strategy, as he wrote to Taliban leader Mullah Omar shortly after 9/11, was to force the United States to over-reach in its reaction to the terror attacks and thereby to incur "great long-term economic burdens" that would "lead to further economic collapse." In that, the late al Qaeda leader continues to be only too successful.

The news of his demise is providing only a brief respite from a looming political clash over the United States' rising debt and how to cap and reduce it. Moreover, this debate is taking place in the context of an international flight from the dollar, slowing recovery from the recent Great Recession, stubbornly high unemployment, rapidly rising trade and current account deficits, and a Standard and Poor's warning of a possible downgrade of the AAA rating on U.S. sovereign debt. Over all this, bin Laden is smiling from his watery grave.

Thus, to really defeat him, President Obama must change his emphasis from geo-politics to geo-economics and revitalize the United States' flagging economic competitiveness. Here's how:

National security

Cut total U.S. national security spending (military and intelligence) in half over the next six years. Even at this reduced amount the United States would still have by far the largest, most powerful military forces in the world. Part of this could be achieved by rapidly drawing down U.S. force levels in Afghanistan and Iraq and by withdrawing U.S. ground forces that have now been stationed in Europe, Japan, and South Korea for well over half a century even as these countries have prospered and become powerful in their own right.

Spending and taxes

Get federal budget deficits under control by closing tax loopholes and adopting a combination of tax increases and spending cuts similar to those recommended by the Bowles/Simpson Commission. Marginal tax rates might actually be reduced if the tax base is broadened. In particular, the mortgage interest deduction should be substantially limited.

Adopt a Value Added Tax (VAT) similar to those of virtually all other advanced industrialized countries which rebate these taxes on their exports.

Reduce the corporate tax rate to the 25 percent levels prevailing in most of the world.

Gradually increase the age of eligibility for early Social Security to 65 and for full Social Security to 70.

Shift the medical payments system from pay for procedures to pay for care and adopt a national system of digitized, on-line medical records.

Trade/globalization policy

Set a target not just to double exports but to halve the trade deficit in the next three years. Because there can be no more stimulus spending and no further cuts in interest rates, this will be the only way to cut unemployment.

Adopt the Colombian and Panamanian Free Trade Agreements, but reject the Korea-U.S. Free Trade Agreement. The Korean deal will increase the U.S. trade deficit and impose a net loss of jobs as it is presently structured. It should be renegotiated to cover the items like currency policy that are the main drivers of our bi-lateral trade.

Establish a new template for free trade agreements with the Trans-Pacific Partnership by including coverage of currency manipulation, competition policy, investment incentives, and third party adjudication of intellectual property disputes.

Emphasize INVEST IN THE UNITED STATES. Establish a fund to match the investment incentives being used by many other countries to induce both foreign and domestic direct investment. Ensure that no business person leaves the presence of the President or any other top U.S. official without being asked about plans to invest in the U.S. Make it the top priority of the Commerce Department to maintain awareness of the investment thinking of the United States' and the world's leading corporations.

Embrace and lead global efforts to reduce the role of the dollar as the world's major currency. A system of several competing reserve currencies or of a global basket of currencies or of a global currency backed by commodities would place discipline on all global market participants to avoid chronic trade surpluses and deficits.

Self-initiate enforcement of U.S. and global trade rules to offset the impact of mercantilist policies on the U.S. productive base. Aggressively use the facilities of the World Trade Organization to challenge practices that tend to negate the intent of the global free trade rules.

American economic strategy

Recognize that the sum of regulatory, anti-trust, tax, government procurement, and a host of other policies greatly influences the structure and productivity of the economy. It is a de facto national economic strategy. Because it is never recognized as such, it is never analyzed in a coherent, comprehensive fashion. It should be the job of the National Economic Council to do this. At the same time, a Congressional Economic Strategy Office a la the Congressional Budget Office or inclusion of a strategy analysis as part of the budget office's remit would be advisable

I could go on, but have probably gone too far already. The main point is very simple. The top priority of Obama in the wake of the demise of bin Laden must be to reconstitute America's economic vitality.