You can cut the deficit by raising taxes, slashing spending
, or some of each. Obama says he'll hit both sides of the ledger if he's reelected. "Raising taxes on the rich won't by itself balance the budget," notes economic forecaster Rajeev Dhawan of Georgia State University.
In addition to the tax hikes, Obama's September proposal included significant cuts to defense spending
and even reforms to Medicare. That plan went nowhere. But those programs and others now face automatic cuts as a result of the Super Committee's failure to strike a deficit-cutting deal. The Republicans:
For the Republicans
, balancing the budget is just another way of saying "cut spending." (It has to be, when you're cutting taxes.)
The three leaders tout a "cut, cap, and balance" agenda. In Romney's version, that means slashing the federal workforce by 10%, capping government spending at 20% of GDP, and pursuing a balanced-budget amendment.
Today, thanks in part to the weak economy, spending is 24% of GDP. So the cuts would be felt by a lot of Americans. "The government's role would be very different than it is today," says economist Gary Burtless of the Brookings Institution. Where you stand:
If it seems as if the two parties are speaking different languages on the deficit, so do their voters. MONEY readers who are Democrats have a very different view from Republicans about where to lay the blame for the deficit.
"The deficit arithmetic is the simple part," says Chris Varvares, senior managing director at Macroeconomic Advisers. "It comes down to the economic values of each side." Interestingly, only a third of all respondents cited Medicare as a problem -- but that's a big driver of the long-term gap.
Which are the major reasons for the deficit problem?Democrats
1. Defense spending
2. Bad economy
3. Taxes too lowRepublicans
1. Social spending
2. The stimulus
3. Bad economy
NEXT: Medicare and Social Security