By Steve Holland
LEESBURG, Va. Feb 7 (Reuters) - President Barack Obama told congressional Democrats on Thursday he is willing to agree to a "big deal" with Congress on spending cuts and tax reforms to end uncertainty over the U.S. budget deficit, but insisted that new revenues be part of the package.
"I am prepared, eager and anxious to do a big deal, a big package, that ends this governance by crisis where every two weeks, or every two months, or every six months, we are threatening this hard-won recovery," Obama told House of Representatives Democrats attending a three-day retreat.
In a foreshadowing of more budget battles to come, Obama said he would insist that taxes be raised by closing loopholes that benefit the wealthy, as a way to raise money for spending projects.
"The rest of the way moving forward, we can do some additional reforms, and make our health care programs work better, and make them more efficient, and we can cut out programs that we don't need," he said.
"But it also means that we've got to be able to close some tax loopholes that the average American cannot take advantage of, to raise the revenue to actually do the job in a way that allows us to continue to grow," the president told House Democrats.
The months following Obama's re-election in November have been dominated by confrontations with congressional Republicans over budget and fiscal issues. While the two sides were able to avoid steep cuts and tax hikes from going into effect at year end and have for now put off the immediate risk of a U.S. debt default, Washington will again face the prospect of painful across-the-board spending cuts March 1 if it doesn't act.
Congress also must grapple with how to continue funding government operations after a stopgap funding measure expires March 27.
Obama has asked Republicans for a short-term budget package to avoid the deepest of the automatic spending cuts, but has said it needs to "balanced," that is, include some increases in revenue from closing tax loopholes. House Speaker John Boehner has said he would block any delay in those cuts unless other spending cuts and reforms are agreed to.
The White House has attacked congressional Republicans for suggesting they may be willing to let the harsh cuts - referred to as "sequestration" - go into effect automatically. Uncertainty over the year-end "fiscal cliff" led to steep reductions in defense spending, contributing to a contraction in the world's largest economy's output at the end of last year.
At the retreat, Obama urged Democrats, who remain in the minority in the House, to take heart from his re-election and Democrats' gains in both houses of Congress to press for an agenda in line with their political beliefs.
"Even as it's important not to read too much into any particular victory ... I think it's also important for us to feel confident and bold about the values we care about and what we stand for," he said.
The president asked for lawmakers' backing as he presses forward on programs he has identified as priorities for the early days of his second term: immigration reform and gun control.
Obama said he would keep strengthening the modest economic recovery at the top of his agenda for his second term.