Both sides agree: No major budget deal foreseen

Instead, the Wisconsin Republican and the Nevada Democrat both say the best Washington can do in this bitterly partisan era of divided government is a small-ball bargain that tries to take the edge off of automatic budget cuts known as sequestration.

Official Capitol Hill negotiations start next week, but Ryan and Reid both weighed in Thursday to tamp down any expectations that the talks might forge a large-scale agreement where several previous high-level talks have failed.

Long-standing, entrenched differences over taxes make a large-scale budget pact virtually impossible, according to lawmakers, their aides and observers who will be monitoring the talks.

Republicans say they simply won't agree to any further taxes atop the 10-year, $600 billion-plus tax increase on upper-income earners that President Barack Obama and Democrats muscled through Congress in January. Without higher taxes, Democrats say they won't yield to cuts in benefit programs like Medicare.

"If we focus on some big, grand bargain then we're going to focus on our differences, and both sides are going to require that the other side compromises some core principle and then we'll get nothing done," Ryan, who chairs the House Budget Committee, said in an interview Thursday. "So we aren't focusing on a grand bargain because I don't think in this divided government you'll get one."

In an interview Thursday with Nevada public radio station KNPR, Reid, the Senate majority leader, agreed that a large-scale grand bargain wasn't in the cards.

"They have their mind set on doing nothing, nothing more on revenue, and until they get off that kick, there's not going to be a grand bargain," Reid said. "We're just going to have to do something to work our way through sequestration."

Ryan, his party's vice presidential nominee a year ago, and Senate Budget Committee Chairwoman Patty Murray, D-Wash., are two of the key congressional figures in the talks. Both say they're seeking common ground between the sharply different Republican and Democratic budgets.

Common ground, however, is a much different concept than compromise. It involves finding ideas upon which they can agree rather than compromising principles such as Republican opposition to tax increases or the unwillingness by many Democrats to consider cutting future Social Security benefits by decreasing the annual cost-of-living adjustments.

Instead of a broad agreement encompassing tax hikes and structural curbs on the growth of benefit programs like Medicare and Medicaid, Ryan says he's seeking a "smaller, more achievable objective."

The talks, he said, also will focus on alleviating another upcoming round of automatic spending cuts and replacing them with longer-term cuts.

Sequestration mostly hits so-called discretionary spending, the money approved by Congress each year to run agency operations. Ryan wants to cut autopilot-like spending on entitlement programs like Medicare to ease sequestration's effects on both the Pentagon and domestic programs.

"I think we all agree that there's a smarter way to cut spending" than sequestration, Ryan said. "If I can reform entitlement programs where the savings compound annually ... that is more valuable for reducing the debt than a one-time spending cut in discretionary spending."

The White House and Democrats are pressing to include new revenue from closing tax loopholes and infrastructure spending to boost the economy. Before departing the White House on Friday for stops in New York City, Obama discussed the budget process by phone with Senate Majority Leader Harry Reid of Nevada, House Democratic Leader Nancy Pelosi of California, Murray and Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee. He did not make a similar call to congressional Republicans.

"Even if we do not have the big grand bargain, if you were to have a medium deal or small deal, those deals could have permanent loophole closures and permanent mandatory savings that would help our permanent long-term fiscal situation," senior White House official Gene Sperling told a business group Friday.

The automatic spending cuts are required because a 2011 deficit-reduction supercommittee failed to reach an agreement. The cuts would carve $91 billion from the day-to-day budgets of the Pentagon and domestic agencies in 2014 compared with the spending caps set by a 2011 budget deal. The Pentagon would absorb almost 60 percent of the cuts.

While the first official meeting of the larger House-Senate negotiating team is scheduled for next week, Ryan and Murray have been talking already.

Republicans are looking at a bushel basket of cuts to Medicare health care providers contained in Obama's budget. They also have voiced support for curbing Social Security cost-of-living adjustments, an idea Obama has backed, but only in the context of a broader deal in which Republicans would allow tax increases. That proposal won't fly in the current talks.

There are also several supercommittee ideas like curbing Postal Service cost overruns, making federal workers contribute more to their pensions and raising premiums on higher-income Medicare beneficiaries.

Democrats, meanwhile, are wary of using cuts to Medicare and other entitlement programs to ease cuts in the defense budget. Negotiators still might explore curbing generous military retirement, health care and prescription drug benefits as a way to restore cuts to readiness and procurement of weapons systems.

"Congressional Democrats and the White House, rightly in my view, don't want to use domestic entitlement cuts to offset easing or eliminating the defense side of sequestration on top of the nondefense discretionary side," said Robert Greenstein, president of the Center on Budget and Policy Priorities.