Obama calls for budget compromise

By CNN Wires Staff

WASHINGTON (CNN) - President Barack Obama called on congressional Republicans to engage in an "adult conversation" about the federal government's long-term financial health Tuesday, warning that serious debt reduction will remain impossible without bipartisan agreement on how best to stabilize Social Security, Medicare, and Medicaid costs.

Leaders of both parties have to be willing to make unpopular concessions, he said, while declining to specify exactly what form those concessions should take.

"All sides will have to do a bit of posturing on television" to "rally the troops," he told reporters at a hurriedly scheduled news conference. But eventually there needs to be a "quiet and toned-down conversation" on where compromise can be reached.

The president defended his $3.7 trillion budget plan for fiscal year 2012, characterizing it as a responsible first step on the road to stability - an assertion sharply disputed by top Republicans calling for more budget cuts.

Obama said he was using a budget "scalpel," as opposed to the GOP's "machete."

The president noted that his proposed budget includes a five-year freeze on domestic discretionary spending, and said that "there are some provisions in this budget that are hard for me to take," including a 10% reduction in community development block grants.

"Just like every family in America," the government has to live within its means while investing in the future, Obama said.

The president said the fact that his blueprint adds $7.2 trillion in new debt over the next 10 years does not make it fiscally irresponsible.

The federal government has "all this accumulated debt as a consequence of the recession" and decisions made over the past decade, he said. Washington has "piled up" a lot of debt and, as a result, has a "big problem" in terms of accumulated interest. That problem will have to be "whittled down" over time, he said.

Obama said he wants to deal with the growing debt crisis in stages, starting with the government getting control over its discretionary budget before taking on "long-term drivers" of the debt such as Medicare and Medicaid.

His hope, he said, is that "we have an adult conversation where everybody says, 'here's what's important and here's how we pay for it.'"

Tax reform also needs to play a key role in stabilizing the fiscal situation, he said.

Asked about the need to provide leadership on entitlement reform, Obama insisted that "it doesn't matter who goes first" in terms of making substantive proposals. Republicans have slammed the president for a lack of specifics, but have also failed to reach agreement within their own caucus on how best to address the issue.

I am "confident we can get Social Security (reform) done" with "modest adjustments" and without "slashing benefits," the president said. But Medicare and Medicaid reform will be a bigger problem, largely because medical costs are rising as the population ages, he said.

Last year's health care overhaul represented a "down payment" on needed cost controls he said - an assertion Republicans strongly dispute.

"Nobody's more mindful than me that entitlements" have to be reformed, Obama insisted.

The president said he agrees with some - but not all - of the recommendations put forward by his deficit reduction commission. While the commission's suggestions were largely ignored in the president's budget, he praised its members for providing a framework for future negotiations.

He also took Republicans to task for continuing to defend the Bush-era tax cuts for the wealthiest Americans, which were extended in a deal he reached with GOP leaders last December. Extending tax cuts for the rich, he said, is incompatible with fiscal responsibility.

Asked about anger among Democratic liberals with some of his proposed budget cuts, said there are times he wishes he could "be a case worker" for all of the people who need help. "I definitely feel folk's pain," he said.

But Obama said it is his job to focus on the long term, and the most important priority now is to ensure the country lives within its means while laying the foundation for long-term economic growth.

He defended his proposed cut in low-income heating fuel assistance, noting that his administration previously increased funding for such aid at a time when prices for heating fuel were rising. Those prices are now lower, he said.

Turning to the unresolved debate over funding for the current fiscal year's budget, Obama said he's willing to work with the GOP but doesn't want to make "a series of symbolic cuts" that endanger the economic recovery. Democrats have ripped their Republican counterparts in the House for pushing $61 billion in cuts that more liberal leaders say go too far.

The president also warned about the dangers of potential government shutdown if the current budget impasse is not resolved.

"I think people should be careful about being too loose in terms of talking about a government shutdown because this is not an abstraction," he said. "If people don't get their Social Security checks, if they don't get their veterans payments, basic functions shut down and that also would have adverse effect on our economic recovery. It would be destabilizing."
- CNN's Alan Silverleib contributed to this report