Obama's plan includes a repeal of the Bush-era tax cuts on families making more than US$250,000 annually -- something sought by Democrats but strongly opposed by Republicans. The president also called for the creation of a "debt fail-safe" trigger that would impose automatic across-the-board spending cuts and tax changes in coming years if annual deficits are on track to exceed 2.8 percent of the nation's gross domestic product.

The president claimed that by building on or adjusting the health care reform bill passed last year, US$480 billion would be saved by 2023, followed by an additional US$1 trillion in the following decade. For example, he proposed tightly constraining the growth in Medicare costs starting in 2018.

Obama's approach seeks to carve out a political middle ground between conservatives - who are pushing for deficit reduction based solely on spending cuts and expected economic growth - and liberals, who are generally resisting entitlement reform and seeking higher corporate and personal taxes.

In total, nonsecurity discretionary spending - Washington jargon for the 12 percent of the federal budget aside from defense spending, debt payments and the big entitlements such as Medicare, Medicaid, and Social Security - would be cut by a total of US$770 billion over the next 12 years.

The US$770 billion figure is in line with recommendations put forward by Obama's bipartisan debt reduction commission last December, according to the White House.