President Obama has released a $3.73 trillion budget for 2012, including $1 trillion in deficit reductions over 10 years (3/4 spending cuts, 1/4 tax hikes). Those reductions fall woefully short even of the $4 trillion recommended by Obama's own deficit commission. And the House GOP are calling for far greater short-term cuts ($62 billion in the remainder of 2011).
Obama's failure is in his unwillingness to confront Medicaid and Social Security (and, adversely, to correct corporate and individual tax codes). Some in the GOP would surely love to stand back and watch Obama touch the "third rail" of politics, but Republicans are honestly offering to take bipartisan credit/blame for a massive overhaul. The (Tea Party) moment will never be better for reform - this is the only time in recent history such a venture could prove popular among a majority of Americans. All that's missing is presidential leadership and will.
The GOP should stake their flag on these economic issues and live or die on principle. Compromise around the edges, but take the middle ground while the fates are with you.