Taking questions from college students in central New York, Obama decried the Republican Party approach as "penny-wise and pound-foolish," predicting the US will fall further and further behind other nations in decades to come unless it prioritises creating opportunities for young people.
"When Congress gets back to Washington, this is going to be a major debate," Obama said during a town hall at Binghamton University.
"My position is going to be that we can have a budget that is sensible, that doesn't spend on programs that don't work, but does spend wisely on those things that are going to help ordinary people succeed," he said.
These and other testy issues will come to a head in the fall, when Congress will face deadlines to increase the federal government's borrowing limit and to continue funding the government.
Instead, those lawmakers should focus on the "pocketbook, bread-and-butter" issues that affect Americans, Obama said, citing college affordability as one such issue.
Despite the deepening crises in Egypt and Syria, all 10 of the questions posed to the president focused on domestic issues, mainly education. While the questions were not screened, Obama's advisers have aimed this summer to keep the president's public agenda focused on domestic priorities, even as international issues compete for his attention.
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