"Thank goodness somebody is finally getting tough on Big Bird," Obama added. "It's about time. We didn't know that Big Bird was driving the federal deficit."
During Wednesday's 90-minute debate, neither presidential candidate scored dramatic blows that will make future highlight reels, and neither veered from campaign themes and policies to date. Moderator Jim Lehrer of PBS had trouble keeping the duo within time limits for responses, especially Obama, who ended up speaking four minutes longer than Romney.
Romney criticized Obama's record and depicted the president's vision as one of big government, while the Democratic incumbent defended his achievements and challenged his rival's prescriptions as unworkable.
But Romney came off as the more energized candidate overall by repeatedly attacking Obama on red-meat issues for Republicans such as health care reform and higher taxes, while the president began with lengthy explanations and only later focused more on what his opponent was saying.
The former governor's strongest moments came in criticizing Obama's record, saying the nation's high unemployment and sluggish economic recovery showed the president's policies haven't worked.
"There's no question in my mind if the president is re-elected, you'll continue to see a middle-class squeeze," Romney said, adding that another term for Obama also will mean the 2010 Affordable Care Act, known as Obamacare, "will be fully installed."
At another point, he noted how $90 billion spent on programs and policies to develop alternative energy sources could have been devoted to hiring teachers or other needs that would bring down unemployment.
Obama argued his policies were working to bring America back from the financial and economic crisis he inherited, and that Romney refused to divulge specifics about his proposed tax plans and replacements for the health care law and Wall Street reform that the Republican has pledged to repeal.
In one of his strongest lines of the night, Obama said Romney lacked the important leadership quality of being able to say "no" when necessary.
"I've got to tell you, Governor Romney, when it comes to his own party during the course of this campaign, has not displayed that willingness to say no to some of the more extreme parts of his party," Obama said in reference to his challenger's swing to the right during the primaries to appeal to the GOP's conservative base.
Romney rejected Obama's characterization of his tax plan, insisting it won't add to the deficit, and criticized the president's call to allow tax rates on income over $250,000 for families and $200,000 for individuals to return to higher 1990s rates as a job-snuffing tax hike on small business.
Romney repeatedly went after Obama on the health care reform bill, criticizing the president for focusing so strongly on a measure that passed with no Republican support instead of devoting more attention to creating jobs.
"I just don't know how the president could have come into office, facing 23 million people out of work, rising unemployment, an economic crisis at the -- at the kitchen table, and spend his energy and passion for two years fighting for Obamacare instead of fighting for jobs for the American people," Romney said.
"The right answer is not to have the federal government take over health care," Romney added, quickly noting his plan would include popular provisions of Obamacare such as allowing children up to age 26 stay on family plans and preventing insurers from denying coverage for pre-existing conditions.
With polls narrowing less than five weeks before Election Day, Obama and Romney launched a new phase in a bitter race dominated so far by negative advertising as both camps try to frame the election to their advantage.
Whether it matters is itself a topic of debate. According to an analysis by Gallup, televised debates have affected the outcome of only two elections in the past half century -- Nixon-Kennedy in 1960 and Bush-Gore in 2000.