The official, who spoke on a condition of anonymity to describe a budget that has yet to be released, said Obama would reduce the federal government deficit by $1.8 trillion over 10 years. It would do so by lowering cost-of-living adjustments to government social safety net spending.
Obama's budget proposal includes features from an offer he made to House Speaker John Boehner during fiscal negotiations last year. Those talks ultimately failed but Congress did agree to increase tax rates on the wealthiest Americans.
A key feature of the plan Obama is proposing for the federal budget year beginning October 1 is a revised inflation adjustment formula that would effectively curb annual increases in a broad swath of government programs, but would have its biggest impact on Social Security pensions.
The reductions in growth of benefit programmes, which would affect veterans, the poor and the older Americans, is sure to anger many Democrats. Labour groups and liberals have long been critical of Obama's offer to Boehner for including such a plan.
Obama's budget proposal also calls for additional tax revenue, including a proposal to place limits on tax-sheltering retirement accounts for wealthy taxpayers. Obama has also called for limits on tax deductions by the wealthy.
Obama's budget, to be released next week, comes after the Republican-controlled House of Representatives and the Democratic-run Senate passed separate and markedly different budget proposals. House Republicans achieved long-term deficit reductions by targeting safety net programs and with no tax increases; Democrats instead protected those programs and called for tax increases.