US 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 $3tn (£1.9tn) 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.
Divisions reopened 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.
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Tax war or simple mathematics? The White House says this is the president's vision, not a legislative compromise, but it's certainly loaded with enough populism to raise Republican eyebrows.
The "Buffett Rule", for a minimum tax rate on anyone earning more than a million dollars a year, will certainly appeal to millions of middle and lower income Americans. But critics argue that hitting "job creators" will do more harm than good. And threatening to veto any deal that does not match cuts in entitlements with tax increases on the wealthy is also designed to reassure disaffected Democrats.
Coupled with the president's recently unveiled package of middle class tax cuts and infrastructure spending, it all amounts to a big economic gauntlet thrown down before Republicans ahead of the 2012 presidential election. Expect both the politics and the economics of it to be thrashed out endlessly over the coming months.
Analysis
The "Buffett Rule", for a minimum tax rate on anyone earning more than a million dollars a year, will certainly appeal to millions of middle and lower income Americans. But critics argue that hitting "job creators" will do more harm than good. And threatening to veto any deal that does not match cuts in entitlements with tax increases on the wealthy is also designed to reassure disaffected Democrats.
Coupled with the president's recently unveiled package of middle class tax cuts and infrastructure spending, it all amounts to a big economic gauntlet thrown down before Republicans ahead of the 2012 presidential election. Expect both the politics and the economics of it to be thrashed out endlessly over the coming months.
"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".
'Buffett rule' 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."
Back-and-forth Mr Obama began the speech describing the proposals as "finishing what we started this summer".
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Where do the savings come from?
- Existing $1.2tn planned cuts from debt ceiling bill
- Existing $1.1tn from planned drawdown of troops in Iraq and Afghanistan
- $1.5tn in tax reform, loophole-closing and 'Buffet Rule' tax rises
- $580bn in reforms in Medicare and Medicaid, agricultural subsidies among others
In July, Mr Obama and Republicans in Congress clashed over a vote on the debt ceiling limit.
The political back and forth resulted in a last-minute formation of a deficit-reduction "super-committee" of lawmakers.
That panel, made up of six Democrats and six Republicans, is seeking $1.5tn in spending cuts to offset a rise in the debt ceiling agreed in the summer.
Mr Obama's latest plans will also go before the committee, which is not obliged to accept the president's ideas.
The debt-reduction proposals are the latest part of a growing package of plans from the Obama administration.
In early September, Mr Obama outlined a $447bn job-creation proposal in front of a prime-time joint session of Congress, vowing that new spending would be paid for as part of the latest deficit-reduction plan.
Correspondents say that Mr Obama is staking out his position on the economy in advance of the presidential race in 2012.
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