"In an economy where knowledge is the most valuable commodity a person and a country have to offer, the best jobs will go to the best educated, whether they live in the United States, or India, or China," Obama said announcing the competition on Friday.
"In a world where countries that out-educate us today will out-compete us tomorrow, the future belongs to the nation that best educates its people," he said in an address at the Department of Education. "We have talked about it for decades but we know that we have not made the progress we need to make."
Dubbed the "Race to the Top," the competition aims to ease limits on charter schools, which receive public funding but generally are exempt from some state or local rules and regulations, link teacher pay to student achievement and move toward common US academic standards.
"America will not succeed in the 21st century unless we do a far better job in educating our sons and daughters," Obama said announcing the education grant programme created under the $787 billion economic stimulus plan.
"Rather than divvying it up and handing it out, we are letting states and districts compete for it. That's how we can incentivise excellence and spur reform and launch a race for the top in America's public schools," he said.
"That race starts today," said Obama portraying the drive to improve education as part of a broader push to promote economic growth in the face of the worst US financial crisis in decades.
The US that has always led the way in innovation is now being outpaced in math and science education, he noted.
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