US president calls for sacrifice from workers in effort to cut huge deficit as Republicans ready to fight to extend Bush tax cuts

Barack Obama tonight imposed a two-year pay freeze on all non-military employees of the federal government at the start of what is expected to be a bruising week of clashes with Republicans over how to bring down the US deficit.

Obama said the pay freeze would save approximately $2bn over the current fiscal year and up to $28bn cumulatively over the next five years.

That is still a drop in the ocean of the deficit, which reached $1.3tn, but is a symbol of the president's willingness to give concessions to the newly empowered Republicans as Congress returns from the Thanksgiving break. He said that he had not made the decision to impose the freeze lightly.

"These are people's lives. The doctors and nurses who care for our veterans; scientists who search for better treatments; men and women who care for our national parks, borders and skies."

But he said these were times when "all of us are called upon to make some sacrifices". He added: "I'm asking civil servants to do what they have always done: play their part."

The move will require congressional approval for it to come into effect. It will not apply to military personnel, though it will hit civilian employees at the defence department. The announcement of the pay freeze is a pre-emptive move by Obama as he prepares to confront the Republicans.

Tomorrow he will meet Republican leaders to discuss the extension of the Bush tax cuts, which is likely to be an area of intense political contention.

On Wednesday the 18-member commission set up by Obama to make proposals on how to bring the deficit under control will make its formal recommendations. Its preliminary report earlier this month included the idea of a three-year pay freeze for federal workers.

In a further important deadline this week, hundreds of thousands of unemployed people are likely to lose their jobless benefits on Tuesday when they run out.

Earlier this month Congress failed to extend the benefits amid rancour between Republicans and Democrats, having extended the deadline on four previous occasions.

The question of the federal deficit is likely to be the central battleground between the Obama administration and the emboldened Republican party that from January will take control of the House of Representatives as well as enjoy a larger minority stake in the Senate.

Cutting back the size and reach of the federal government was the key message of the tea parties that were seminal in many of the Republican victories at the 2 November mid-term elections.

In a press conference in the executive office building to announce the pay freeze, Obama said he hoped that starting from Monday there would be a new "bipartisan discussion about our future. Everyone is going to have to co-operate, we cannot afford to fall back on our old ideologies and stale soundbites".

The call for bipartisanship has been a mantra of Obama's since the 2008 campaign trail, well before he took office. But so far the search for it has eluded him amid fierce opposition between the two main parties.

Obama is likely to use the pay freeze as a bargaining chip in his negotiations with the Republicans over the Bush tax cuts. While both parties agree the cuts should be extended for lower and middle-income families, they disagree what should happen to wealthier households.

Republicans are resisting – despite claiming to be the party of fiscal rectitude – a move by Obama to end the tax cuts for individuals with incomes over $200,000 and couples over $250,000.