WASHINGTON (AP) — Forget a grand bargain. Reaching even a small budget deal will be a challenge when negotiators start meeting next week in an effort to salvage any kind of agreement in the aftermath of this month's shutdown debacle and debt limit crisis.
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 increase on upper-income earners that Obama and Democrats muscled through 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," House Budget Committee Chairman Paul Ryan, R-Wis., 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, Senate Majority Leader Harry Reid, D-Nev., agreed that a large-scale grand bargain isn't in the cards.
Ryan, his party's vice presidential nominee a year ago, and Senate Budget Committee Chairman Patty Murray, D-Wash., are two of the key congressional figures in the talks. They both say they're seeking "common ground" between the sharply different Republican and Democratic budgets.
Common ground, however, is a much different concept that compromise. It involves finding ideas upon which they can agree rather than compromising principles such as Republican opposition to tax increases or the unwillingness on the part of 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 relentless growth of benefit programs like Medicare and Medicaid, Ryan says he's seeking a "smaller, more achievable objective." The talks, he said, will also focus on alleviating another upcoming round of automatic spending cuts known as sequestration and replacing them with longer-term cuts.
"If we can agree on sensible medium- and long-term policies to replace these short-term cuts, we can do something good for the economy and our national security," Treasury Secretary Jacob Lew said in a speech Thursday before the Center for American Progress, a liberal think tank.
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 so-called 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 that a one-time spending cut in discretionary spending."
Reid reiterated that Democrats aren't interested in doing that until Republicans are willing to look at raising tax revenues.
The automatic spending cuts are mandated by the failure of the 2011 deficit supercommittee to reach an agreement. They would carve $91 billion from the day-to-day budgets of the Pentagon and domestic agencies in 2014 compared with the limits set by the 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 already been talking.
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, or COLAs, 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.
So where might common ground be found? One option embraced by Murray and utilized earlier this year to ease $12 billion worth of sequestration cuts would be to lower spending "caps" in future years to offset some of the automatic cuts now. That would save $142 billion over the coming decade.
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.
There are also lots of fee proposals contained in Obama's budget, but most of them promise lots of irritation while raising relatively little money. Lawmakers have annually repelled attempts by Obama to increase airline security fees by $18 billion over a decade to help pay for Transportation Security Administration operations.
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.
Even a small deal promises to be a challenge. Those watching the talks say there's no shortage of issues that could cause them to unravel.
"I think you would always bet on failure if you had to pick an outcome. This is the Congress after all, and repeated experiences with this issue set would say that failure is the most likely scenario," said former longtime Senate GOP aide Rohit Kumar, a tax policy expert with PricewaterhouseCoopers LLP. "For a deal to come together both sides have to be able to declare victory."