Here's one thing President Obama and Republican presidential candidate Mitt Romney could agree on during their first debate this week: Something has to be done about the enormous gap between what the federal government collects in taxes and what it spends.
But the two men fundamentally disagree on what to do about that budget deficit.
The Problem
The gap between what the government takes in and what it shells out has exceeded $1 trillion every year of Obama's presidency. And yet — contrary to what many had once predicted — that shortfall so far has not pushed up interest rates or triggered runaway inflation.
That may be why, at the Denver debate, Romney warned of the perils of deficit spending not so much as an economic hazard, but as a moral one.
"I think it's frankly not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation," he said.
Pressed on the deficit last month on late night TV, Obama made clear to David Letterman that it could become a problem — but it's not one right now.
"We don't have to worry about it short term. Right now, interest rates are low because people still consider the United States the safest and greatest country on Earth, rightfully so," he said. "But it is a problem long term, and even medium term."
That may be another way of saying: Something should be done, though not quite yet.
The president ought to be wary of slashing government spending before the economy has truly recovered, says Paul Van de Water of the Center on Budget and Policy Priorities, a liberal Washington think tank.
"In the near term, obviously, the economy is still very weak, and there's great concern that attempting to reduce the deficit too quickly could actually throw the economy back into a recession," Van de Water says.
Obama's Approach
Still, unlike Romney, Obama has laid out a plan to reduce projected spending over the next decade by $4 trillion — not enough to balance the budget, but enough, he said at the Denver debate, to stabilize the size of the federal debt as a portion of the overall economy.
"The way we do it is $2.50 for every cut, we ask for a dollar of additional revenue — paid for, as I indicated earlier, by asking those of us who have done very well in this country to contribute a little bit more to reduce the deficit," he said.
But $1 trillion of the president's proposed cuts would come from ending the wars in Iraq and Afghanistan, something he planned to do anyway. And while letting the top Bush-era tax cuts expire could boost revenues by $1 trillion, there's still a shortfall, says Robert Bixby, head of The Concord Coalition, a budget watchdog group.
"I think sometimes one is left with the impression in the Obama campaign that all we need to do is let the taxes go up for wealthy people, and that would solve a major part of our problem," Bixby says. "In fact, I think we're going to have to do a lot more and concentrate on the spending side in order to bring the deficit under control."
Romney's Approach
Romney avoided talking numbers in Denver.
"I will eliminate all programs by this test, if they don't pass it: Is the program so critical it's worth borrowing money from China to pay for it? And if not, I'll get rid of it. Obamacare's on my list — I apologize, Mr. President."
But according to the Congressional Budget Office, eliminating the health care law would actually add more than $100 billion to the debt over the next decade.
Romney would actually increase defense spending and target domestic spending for cuts. That won't work, says the Concord Coalition's Bixby.
"If we're going to get serious about bringing the debt under control, we have to take serious measures, and focusing on the nondefense discretionary side of the budget is probably the least serious type of measure we can take," he says.
And while Romney argues that economic growth will boost revenues, even though he would cut income taxes by 20 percent, former Reagan administration official Bruce Bartlett says history would prove Romney wrong.
"Ronald Reagan recognized that his tax cut ultimately reduced federal revenues by supporting 11 major tax increases while he was president," Bartlett says.
Something Romney, unlike Obama, vows he'll never do.
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