President Barack Obama has outlined plans to reduce the US deficit and to kick-start economic growth. At the White House, he proposed cuts to healthcare benefits but said business and the wealthy must pay higher taxes.
He unveiled a plan to save more than 3 trillion dollars over a decade that would pay for his plan to boost jobs, with roughly half coming from tax increases.
Republicans in Congress, who oppose tax rises, quickly criticised the plan, which they say will not boost jobs.
Pitting one group of Americans against another is not leadership, House of Representatives Speaker John Boehner said.
In a televised address from the Rose Garden at the White House, Mr Obama said that if the US did not act now, the burden of debt would fall on future generations.
“Washington has to live within its means, Mr Obama said. We have to cut what we can't afford, to pay for what really matters.
Among the plans are proposals to cut some $250bn of spending on Medicare - the healthcare programme for the elderly.
But that proposal came with a caveat - a promise from Mr Obama that he would veto any bill eventually passed by Congress that cut healthcare but did not include new taxes on the rich.
Republicans were quick to respond to the speech.
House Speaker Boehner, whom Mr Obama singled out in his speech for having walked away from a grand bargain during the debt-ceiling debate in July, said the president's approach was unhelpful.
This administration's insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programmes are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain, he said.
Senate Republican leader Mitch McConnell said the president's combination of veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth - or even meaningful deficit reduction.
Mr Obama said the wealthy and corporations should pay their fair share to cut the deficit. Middle-class families shouldn't pay higher taxes than millionaires and billionaires, he said. It's hard to argue against that.
Mr Obama suggested a Buffett rule, which would see Americans who earn more than $1m pay the same rate of tax as those who earn less.
The proposal refers to billionaire financier Warren Buffett, who has complained that he and his wealthy peers pay relatively less tax than the people who work for them.
Many high-income Americans benefit from tax loopholes that see earnings on investment taxed at lower rates than wages.
On Sunday Republican Paul Ryan, chairman of the House budget committee and a proponent of deep cuts and no tax rises, described Mr Obama's plans as class warfare.
The president referenced Mr Ryan's criticism on Monday, justified his tax-and-cut package by saying simply: It's not class warfare, it's math.”