WASHINGTON — Microsoft Chairman Bill Gates warned a panel of senators Wednesday that America is facing an "acute crises" because immigration policies make it difficult for talented foreign-born scientists and engineers to work in the U.S.

Testifying before the U.S. Senate Committee on Health, Education, Labor and Pensions, Gates said the federal government should lift a cap on highly skilled foreign workers allowed into the country on temporary H1-B visas.

The U.S. now hands out 65,000 H1-B visas annually. But Gates noted that the supply of visas in fiscal 2007 ran out eight weeks into the filing period for applications and that in fiscal 2008, beginning Oct. 1, the quota is expected to be met even earlier.

"I see the negative effects of these policies every day at Microsoft," Gates said.

Other rich countries such as Canada and Australia are taking advantage of the U.S. restrictions and are attracting the "world's best and brightest" with more favorable policies, Gates said.

In the past five years, 7 percent of Microsoft hires have acquired an H1-B visa, according to a Microsoft spokeswoman.

Gates talked about the importance of education, but in his opening remarks, he also emphasized the pressing nature of what he considers to be an immigration problem.

In response, senator after senator — including committee chairman Edward Kennedy, D-Mass., and presidential candidate Hillary Clinton, D-N.Y. — wondered aloud how U.S. schoolchildren could regain the spirit of innovation exemplified by the Sputnik generation.

"Obviously, the senators would prefer a homegrown high-skilled work force," said Bob Sakinawa, associate director of business immigration advocacy at American Immigration Lawyers Association.

The Washington Alliance of Technology Workers, which for years has been attempting to organize technology workers in the Puget Sound area, has been critical of immigration policies and overseas outsourcing. Reporting on its Web site about Gates' testimony, WashTech urged supporters to contact members of Congress expressing opposition to expanding the H1-B program.

Last year, the Senate passed a bill that would raise the number of H1-B visas to 115,000, as part of a comprehensive immigration package. But a House immigration bill stalled because lawmakers could not agree on the more controversial issue of illegal immigration by low-skilled workers.

Gates stressed the importance of investing in high schools, where U.S. students rank relatively low in achievement compared with their counterparts abroad.

He challenged lawmakers to push for higher educational standards and also said teachers should be paid according to their performance.

Gates, whose charitable foundation has given away more than $3 billion since 1999 for educational programs and scholarships, noted that about 30 percent of U.S. ninth-graders fail to graduate on time.

Despite Gates' concerns, the senators tried to be upbeat.

Republican Sen. Johnny Isakson of Georgia asked Gates to talk about the "good things" connected with running a business in America. And Kennedy concluded the hearing by saying that Gates had "raised our sights and raised our spirits."

The Seattle Times business staff and The Associated Press contributed to this story.