He also said relying on continuing resolutions to fund the federal government through the current fiscal year that ends Sept. 30 was "irresponsible."
"We can't keep on running the government based on two-week extensions. That's irresponsible," Obama said.
With the war in Afghanistan and a host of domestic issues, "the notion that we can't get resolved last year's budget in a sensible way with serious but prudent spending cuts I think defies common sense," Obama said.
Concerning the 2012 budget, Obama said since the Senate rejected both the House Republican's 2012 proposal as well as a budget document offered by Senate Democrats, "both sides are going to have to sit down and compromise on prudent cuts somewhere between what the Republicans were seeking that's now been rejected, and what the Democrats had agreed to that has also been rejected," Obama said.
"It shouldn't be that complicated," he said, adding that he discusses the budget daily with his team, providing them instructions on the negotiation process and indicating what suggestions are acceptable.
Certain cuts advocated by House Republicans -- such as reduction in Pell Grants for higher education and reductions in Head Start programs -- won't be acceptable, Obama said.
"And the reason I won't accept them is not because I don't think we've got to cut the budget. We do," Obama said. "The principle that I've tried to put forward since the State of the Union is we've got to live within our means, we've got to get serious about managing our budget, but we can't stop investing in our people, we can't stop investing in research and development, we can't stop investing in infrastructure … ."
He said he told House Speaker John Boehner and Senate Republican Leader Mitch McConnell the administration wants to work with them to get a "sustainable discretionary budget."
He said it was important to stop funding programs that don't work but "we're going to make sure that we hold the line when it comes to some critical programs that are either going to help us out-educate, out-innovate, or out-build other countries."
The country's long-term debt and deficit primarily are driven by escalating healthcare costs in Medicare and Medicare, Obama said, not Head Start or the Corporation for Public Broadcasting.
"That's why I think it's going to be important for us to have a conversation, after we get the short-term budget done, about how do we really tackle the problem in a comprehensive way," Obama said.