He says any budget proposals that would undermine economic growth, national security and contain earmarks would immediately be vetoed.
Both sides have about a month to come to an agreement. Otherwise, there could be a government shutdown.
Obama called it a carefully honed budget.
"We've taken a scalpel to the discretionary budget rather than a machete," Obama sad.
But Republicans say a scalpel doesn't cut deep enough.
"Over the last two years since President Obama has taken office, the federal government has added $200,000 new federal jobs, and if some of those jobs are lost in this, so be it. We're broke," said Speaker of the House John Boehner.
Even House Democrats have joined the fight, concerned about cuts that provide services to the poor.
"We're concerned that Draconian austerity measures will directly impact and harm our communities," said Rep. Emanuel Cleaver.
Both sides agree the country has a debt problem. The nation is more than $14 trillion in the red. If you stacked 14 trillion dollar bills on top of each other, they'd reach all the way to the moon almost four times.
Secretary of Health and Human Services Kathleen Sebelius was put on the hot seat on Tuesday, defending a budget that would slash $2.5 billion from a program that helps low-income people pay their heating bills and eliminate subsidies to children's hospitals and graduate medical education.
"Years of deficits have put us in a position where we need to make tough choices. We can't invest for the future unless we also live within our means," Sebelius said.
Republicans say they would drop the president's plans to boost spending on research and development, education and transportation, and their biggest concern - the fate of entitlement programs like Social Security.
"Tell me where I need to go and who I need to meet with about finding a way to save Social Security on what I think is an unacceptable demise," said Sen. John Thune.
So far, neither Republicans nor Democrats have proposed any reforms for Social Security, Medicare or Medicaid. Those three programs, along with national security, take up 84 percent of the budget.