Obama called for a tax credit for small-business new hires, the elimination of capital-gains taxes for small-business investments and an extension of tax cuts and credits for the purchase of new equipment or facilities. Treasury Secretary Tim Geithner and Small Business Administrator Karen Mills will be the point people for the new proposals.
The administration is facing mounting pressure to do something about the rising national debt, which has become a political liability. The latest ABC News/Washington Post poll found that 56 percent of Americans disapprove of Obama's handling of the federal budget deficit.
Among independents, who have flocked to Republicans in recent elections, the president fares even worse, with 2-1 disapproval.
In a move that is raising alarms among many liberals, Obama proposed a three-year freeze on domestic spending not related to national security or entitlement programs like Medicare.
"Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't. And if I have to enforce this discipline by veto, I will," the president said.
The freeze saves $250 billion over 10 years -- less than 1 percent of what the government spends.
"It's only one of the things that we're going to be doing, but it's nonetheless important. It's important to draw a line somewhere," said Peter Orszag, the director of the Office of Management and Budget.
The decision has drawn heat from liberals who questioned the president's priorities.
"If people are hungry, you want to make sure that we're spending appropriately so that nobody goes hungry," said Sen. Bernie Sanders, D-Vt., who sits on the Senate Budget Committee. "If we're spending money on weapons systems that are no longer relevant in the fight against terrorism, you want to eliminate that."
Obama acknowledged concerns from his own party that the government cannot freeze spending in tough economic times.
"I agree, which is why this freeze will not take effect until next year, when the economy is stronger," he said. "But understand -- if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -- all of which could have an even worse effect on our job growth and family incomes."
Meanwhile, conservatives say that the president is not cutting nearly enough federal spending.
"We've been on quite a binge over the last 12 months, and it's going to take a lot more than just this kind of modest freeze to get us back on the right track," said Sen. Minority Leader Mitch McConnell, R-Ky.
Obama tonight pushed for a bipartisan commission to make recommendations on how to reduce the national debt, despite the Senate's voting Tuesday against a measure that would have created an entity, modeled after the Base Closure Commission, to issue such recommendations.
The fiscal commission vote failed with 53 votes, seven shy of the required 60. Even seven of the bill's original co-sponsors voted against it. Obama said tonight he would issue an executive order to "allow us to go forward" with such a measure because he refused "to pass this problem on to another generation of Americans."
The president said tonight that the commission "can't be one of those Washington gimmicks that lets us pretend we solved a problem."