He wants higher taxes on wealthy individuals and corporations.
"This is not class warfare. It's math," he argued.
To reduce the deficit $3 trillion, the president's plan would cut $580 billion from Medicare and Medicaid, save a trillion in Iraq and Afghanistan and hike taxes by $1.5 trillion using the "Warren Buffett" rule: Tax the rich.
"If we're going to make spending cuts, many of which we wouldn't make if we weren't facing such large budget deficits, then it's only right that we ask everyone to pay their fair share," Mr. Obama said.
The well-off would go back to mid 1990s rates and lose some deductions.
"It is a modest change in revenues, and if you do it sensibly through tax reforms that strengthen
investment incentives, you'll make growth in the United States stronger," explained Treasury Secretary Timothy Geithner.
House Speaker John Boehner says the plan won't pass Congress.
"It's not going to get our economy going again, and it's not going to put people back to work," Boehner said.
Democrats are hoping the plan will score points with voters.
In a new NBC poll 80% want a surtax on millionaires.
"The president's on the high side of public opinion. What he hasn't been able to do so far is make that work for him in Congress. Now he's trying to go over the heads of lawmakers and force them to go along with it," says CNBC political analyst John Harwood.
The president did not detail how he'd cut Medicare, but he vowed to veto any benefit cuts if they're not linked to tax hikes on the rich.