Republicans were the first to put out plan for cutting the deficit they call it their path to prosperity. However, the president sharply criticized that path saying it protected the wealthy and punished the poor.
The president says his plan will cut the deficit by $4 trillion over the next 12 years.
"The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week," said Obama.
The president also wants to cut military spending, reduce health care spending -- largely through his health care reform legislation -- and raise taxes on the rich by getting rid of the Bush era tax cuts on the wealthiest 2 percent.
"We cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society, we can't afford it and I refuse to renew them again," said Obama.
Republicans leaders in the House quickly jumped on that.
"The only concrete thing he came out with today was to raise taxes," said Rep. Eric Cantor, R-Virginia.
"All we got is what he won't, not what he wants to do," said House Budget Chair Rep. Paul Ryan, R-Wisconsin.
The Republican plan, put forward by Ryan, would cut $6 trillion over 10 years and would extend the Bush tax cuts for the wealthy.
Outside the U.S. Capitol Building on Wednesday, Democratic members of the progressive caucus presented their own plan centered around ending the war in Afghanistan and establishing a public option for health care coverage.
"We are reflecting the values that we believe are the people's values," said Rep. Mike Honda, D-Campbell.
"And since nearly two-thirds of the American people don't think the war in Afghanistan is worth fighting, our budget calls for finally bringing the troops home," said Rep. Lynn Woolsey, D-Santa Rosa.
"I think this is a budget that will gain momentum and support and hopefully will have a strong vote," said Rep. Barbara Lee, D-Oakland.
Whether or not the so-called "people's budget" does ever come up for a vote, it's a significant step in the debate says ABC7's political analyst Bruce Cain, Ph.D.
"It provides a framework. If Obama is really going to make the case that what he's presenting is in the middle, people have to see both ends and if all they're hearing the Ryan plan and they're not hearing the Democratic plan, then they don't really have a perspective on where Obama is coming from," said Cain.
The president's strategy is to appeal to the middle of the political spectrum and he believes taxing the wealthy will appeal to most voters. However, Republicans in the House aren't buying. So expect to see the president going directly to voters in the hopes that he will win over public opinion and that public opinion will convince GOP lawmakers.