Obama Seeks Budget Bandage to Forestall 'Sequester' Cuts

debt crisis money budget deficit
Kyoungil Jeon | E+ | Getty Images

President Barack Obama, having missed the statutory deadline for submitting his budget to Congress, is proposing instead that Congress pass a short-term plan to delay across-the-board spending cuts due to take effect March 1.

Obama said Tuesday a full budget may not be finished before the March 1 "sequestration" deadline, so if Congress cannot act in time to get a complete budget done, the White House says it should pass a smaller package to delay the automatic cuts.

"There's no reason that the jobs of thousands of American who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy just because folks in Washington couldn't come together to eliminate a few special interest tax loopholes or government programs that we agree need some reform," he said.

The sequester, which originally called for $1.2 trillion in spending cuts over 10 years unless Congress passed a new plan, was delayed for two months in a fashion similar to the Democrats and Republicans' compromise to avoid the "fiscal cliff" on Jan. 1.

Senate Republicans quickly called on Obama to detail the cuts he has in mind. But a White House official said the president would not do so on Tuesday.

If Congress goes along, it would make another effort by the two sides to de-escalate the sort of brinkmanship that has rattled financial markets and damaged consumer confidence in the past. House Republicans took a step to do so in calling for a suspension of the federal debt ceiling until mid-May, a plan that the Democratic Senate subsequently ratified and that Obama signed into law.

The deal putting off the debt ceiling called for lawmakers to meet their statutory obligation to approve a budget resolution or face a delay in their own pay. Obama cited that process in proposing a short-term deal to delay the budget sequester, which was designed to be unpalatable to both parties by cutting equally from defense and non-defense programs.

The fundamental obstacle toward achieving a deal is Obama's insistence that any budget deal going forward include additional tax revenue from closing loopholes; the president specifically cited the tax break for "carried interest," which benefits private equity and hedge fund executives, in his interview over the weekend with CBS News. (Read More: Obama Seeks Closed Loopholes, 'Smart' Reductions)

Republicans, by contrast, say the need for additional tax revenue has been satisfied by the fiscal cliff deal returning the top tax rate to the Clinton-era 39.6 percent level for individuals earning more than $400,000 and couples earning more than $450,000.

—By CNBC's John Harwood; Follow him on Twitter: @JohnJHarwood