President Obama’s plan to limit charitable tax deductions for wealthy people was “hotly debated” in the White House, but ultimately the administration decided that the government should hold onto more tax revenue to improve health care, Melody Barnes, director of the White House domestic policy council, told foundation officials at the Council on Foundations meeting.

During a question-and-answer session after her speech, which focused on the creation of the Social Innovation Fund, she acknowledged the concerns that the tax plan, which would go into effect in 2011, may hamper charitable giving. “It’s certainly an issue we recognize,” she said.

However, she said the money the change would generate is a key facet of President Obama’s agenda — it would be used to support a cash reserve to make the country’s health-care system more affordable and accessible.

The decision was a “tough choice” in the White House, said Ms. Barnes, describing scenes in the White House Roosevelt Room where the issue was debated along with other budget changes.

The robust discussions were dubbed “Project Dave”, a reference to the 1993 movie in which the actor Kevin Kline played the president and tried to curb government spending by recruiting his accountant friend to go line-by-line through the federal budget.

“When we’re addressing tough issues,” she said, “everything’s on the table.”

Ms. Barnes also responded to a foundation official who raised concerns about the fate of projects that are started with money from the $780-billion economic-stimulus package when that cash flow dries up.

Ms. Barnes said the administration wants to make sure there is not a “dramatic cliff” in government spending in the years ahead, although it faces an historic deficit.

“I won’t deny that is a very real problem,” she said. “It’s part of the conversation we need to have about how we can leverage the work that you all are doing and the work that we’re doing to try mitigate that and continue the progress that we hope will be made in this period.”