His incentives would allow businesses to write off 100 percent of their spending on new plants and equipment through the end of 2011 and retroactive to Sept. 8.
The proposal, White House officials said, would benefit 1.5 million companies and would be "the largest temporary investment incentive in American history," resulting in tax cuts of $200 billion over two years. The president also urged the Senate to pass the small business jobs bill that has stalled because of partisan deadlock.
Asked by Stephanopoulos whether he would veto a Congressional extension of tax cuts, the president replied: "There are a whole bunch better ways to spend the money."
That Obama faces disagreement from within his own party doesn't make his job any easier.
Even Obama's former budget director Peter Orszag said Tuesday that the tax cuts should be extended for two years.
"Higher taxes now would crimp consumer spending, further depressing the already inadequate demand for what firms are capable of producing at full tilt," wrote Orszag, the former director of the Office of Management & Budget, in a column in the New York Times.
A handful of Senate Democrats also have weighed in against letting the tax cuts expire.
The president also responded to critics of his handling of the economy, and to polling that shows Republicans appear to have a decided advantage in the upcoming midterm elections.
He said he believed people had hoped his administration could turn the corner more quickly than it has after coming into a tough situation.
"I think what people feel is 'Gosh, we should be able to do something faster to solve these problems.' And I desperately wish that we could."
According to the latest ABC News/Washington Post poll, 33 percent of Americans believe Obama's economic program has made the economy worse, while only 30 percent believe it has improved the situation. Moreover, a record 57 percent disapprove of how the president has handled the economy.
While he acknowledged having made mistakes, including ineffective communication to the public at times, he maintained that his administrations had taken the right steps to move the country forward "after a very devastating recession … ."
He pointed out that the recession and the financial crisis was "a direct culmination" of a series of decisions made by the Republicans when they were in charge.
"And we have now spent two very difficult years trying to pull the economy out of the ditch, and I just want the American people to understand exactly what the choice is in November," he said.
During his tenure, his administration had to take a series of unpopular "emergency measures" that included making sure the auto industry and the banks didn't fail, he said.
"My belief is in the free market, and the private sector generating jobs, generating growth … But we have had so much neglect, such lax regulation of key sectors like the financial industry, that we had to take some very difficult decisions early," he said, adding that he knew those decisions would "carry a political cost."
When Americans were deciding how to cast their votes in their various Congressional districts, they should think about whether the opposition had ideas that could advance the country, he said.