Michael Reynolds / EPA Republican presidential candidate Mitt Romney speaks at the Americans for Prosperity Foundation's fifth annual 'Defending the American Dream Summit', in Washington, Nov. 4, 2011.

Dick Cheney was once memorably quoted as declaring, during a Bush White House debate about tax cuts, “deficits don’t matter.” In the telling, Cheney insisted that Ronald Reagan had proven the axiom by overseeing a huge expansion of federal debt without paying a political price. Cheney’s view clearly prevailed in the Bush administration, which chopped taxes without ever imposing spending discipline.

Nearly a decade later, conservatives won’t stop talking about how much deficits matter. Deficits are going to wreck America and condemn our children to indentured servitude to China, they warn. The right lays primary blame for this problem on Barack Obama, conveniently ignoring how much of it preceded Obama’s administration. Yet the basic tension Cheney addressed in that White House meeting still exists. Republicans are fixated on lowering taxes, but tax cuts increase the deficit. If you agree that deficits matter, you need to make politically-toxic spending cuts. And to a large degree, the 2012 election will hinge on how Republicans resolve that dilemma.

That was the issue at the heart of Mitt Romney’s fiscal policy speech on Friday. In it, Romney sought to claim the deficit high ground, inverting Cheney’s famous phrase with the statement: “Deficits do in fact matter.” Romney wasn’t referring to Cheney, of course; he was zinging Texas Governor Rick Perry, who in a recent interview expressed some ambivalence about the impact his 20% flat tax plan would have on the near-term deficit. (We know this because Romney’s campaign prominently cited that quote in a Thursday press release headlined ROMNEY TO PERRY: DEFICITS MATTER.) But Romney’s address did implicitly repudiate the borrow-now, cut-later philosophy of the Bush-Cheney administration’s tax and spend policies.

“We cannot with moral conscience borrow trillions of dollars that can only be repaid by our children,” Romney said. “We cannot so weaken our economic foundation that we jeopardize our ability to preserve freedom.”

Living up to that rhetoric will be a mighty challenge, however. After all, Romney’s economic plan extends the Bush tax cuts now set to expire at the end of 2012 at a cost of more than $5 trillion. So just like Perry, Romney will need to find massive spending cuts to avoid a fiscal disaster. Romney does call for a slightly higher level of federal spending–twenty percent of gross domestic product–than Perry, who would cap spending at eighteen percent of GDP. But neither will be easy. The recent historical average of federal spending is around twenty-one percent of GDP, and budget experts argue that an aging population and rising health costs will demand a higher level simply to keep pace.

Romney and Perry have both offered a few specific examples of domestic discretionary spending cuts they’d make: Perry would end earmarks and streamline education programs; Romney offered a checklist of federally-funded conservative villains, including NPR and Planned Parenthood. But especially when you consider that neither man would touch defense spending (Romney actually wants to increase it substantially) that’s not nearly enough to get us out of hock with China.

Finding real savings means digging into entitlements like Medicare, Medicaid and Social Security. Perry is already talking about “restructur[ing]” Medicaid, which mostly serves the poor and the disabled, and on Friday Romney said he would trim the program by $100 billion per year and convert it into a block grant to the states. But the real money is in Medicare, and to a lesser extent Social Security. That’s where Romney’s speech got interesting. On the latter program, the former Massachusetts governor said he’d like to gradually raise the retirement age and “slow the growth in benefits for those with higher incomes”. That’s roughly in sync with centrist Washington thinking of the moment. But he waded more deeply into the Medicare reform debate, which Congressman Paul Ryan started with a bang earlier this year when the Republican House passed his budget plan that would essentially end Medicare and send seniors into the private marketplace with federal vouchers.

Romney’s plan borrows from Ryan’s, which is beloved by the right but toxic with the general electorate, by offering seniors vouchers to purchase private health insurance. But it features a crucial difference: Romney would give seniors the choice to stick with Medicare in its current form. (None of this, by the way, would affect seniors currently on Medicare or Social Security.) This was a classic move for Romney, a politician who has played both sides of so many issues: rather than choose between a plan that will please Iowa conservatives and one that will be easy to defend in a general election, Romney did both.

Romney left some important questions unanswered, including how much those vouchers would be worth. (Ryan’s plan wouldn’t give most seniors enough to keep up with rising health care costs.) But it’s more detail than we’ve seen from Perry; the Texas governor has suggested raising the eligibility age for both Social Security and Medicare, but has nothing resembling a detailed plan for either. And Romney’s blueprint is enough to win early praise from Ryan himself.

So for now, give Romney a slight edge on Perry when it comes to deficit politics. But also keep in mind the narrow parameters of this conversation. It’s entirely based on the idea of cutting taxes and spending. Tax increases are not even on the table. Times have changed since Dick Cheney’s declaration, and no one can deny that deficits matter. But for conservatives, and the presidential candidates who court them, they still don’t matter more than cutting taxes at all costs, and never raising them.