Spending

Obama and Republicans already agree that domestic spending levels must be cut. Obama's budget proposed a five-year freeze on discretionary programs (which don't include Social Security and Medicare), part of a 10-year plan to reduce the deficit by $1.1 trillion.

Republican leaders want more: Cut spending back to 2008 levels. But it's not easy. With a $100 billion target, Republican appropriators struggled to get to $61 billion. The conflict will intensify as lawmakers debate Obama's new $3.7 trillion budget proposal. Already, conservatives in the Republican Study Committee have proposed $2.5 trillion in cuts over 10 years. Targets include Amtrak, housing programs, beach replenishment, health care, legal services to the poor, and weatherization grants.

Hastert knows enacting cuts is especially hard. The $150 billion in spending cuts the House passed when he was speaker was whittled to $40 billion by the time the legislation was adopted by the Senate and became law.

One immediate concern is this year's planned $250 million cut in the Low Income Home Energy Assistance Program, says John Rother, AARP executive vice president. Further, he said, the freeze proposed by the president affects programs that benefit older Americans. "As the older population grows, that funding — which is already pretty slim — is going to be stretched even more," he says, adding that the freeze would hit Meals on Wheels, senior center funding and some health care programs.

Jobs and the economy

Polls show that jobs and the economy top the public agenda. Obama will get the credit — or the blame — for how the economy is doing when Election Day 2012 rolls around, says Carroll Doherty, associate director of the Pew Research Center. If the economy begins to grow again — as it did for Ronald Reagan and Bill Clinton, helping propel them back into office — it will reduce the deficit and create jobs.

"A strong economy makes a lot of these problems less serious," Doherty says. The challenge for Obama is that many of the young and independent voters who were crucial to his 2008 victory are among the most impatient with the sluggish economy.

Voters are skeptical of Obama's health care reform >>