Republican budget leader Paul Ryan faces key test in fiscal talks

By David Lawder WASHINGTON (Reuters) - Paul Ryan, the Republican Party's fiscal visionary, faces a major test in budget talks starting this week: Can he move from ideology and theoretical blueprints to practical deal-making? The influential House of Representatives Budget Committee chairman has a lot at stake, including his clout among Republican members of Congress and any aspirations he may have for the party's presidential nomination in 2016. Ryan will be his party's leader on the budget negotiating panel that sprang from this month's deal to end a federal government shutdown and avert a potential default. It will convene on Wednesday for opening statements from its 29 members and faces a December 13 deadline to reach a deal that can be considered by the full House and Senate. In the past few years, Ryan hasn't been much for negotiating, and he hasn't had to. Since he took over as budget committee chairman in 2011, there haven't been formal budget negotiations, as Congress has simply lurched between stopgap spending extensions. Ryan's budgets passed in the House have served mainly as manifestos for his conservative small-government budget vision: deep cuts to social programs, dramatically lower tax rates and radical reforms to expensive federal benefits programs. "Congressman Ryan has been instrumental in putting the large-scale issues of fiscal reform on the national agenda. What he's never done is lead an effort where you have to compromise to get something done," said Maya MacGuineas, who heads the Committee for a Responsible Federal Budget, a group pushing for deficit reduction. Squaring off against Ryan will be the negotiating panel's Democratic leader, Senate Budget Committee Chairwoman Patty Murray. The talks will start on well-trod ground: Republican demands for cuts to federal benefits programs and Democratic demands for increased tax revenue. Ryan avoided participation in another panel created to resolve an impasse - the 2011 "supercommittee" - predicting that it had more than a 50 percent chance of failure. It did fail in its quest to find $1.2 trillion in budget savings over a decade, triggering the automatic "sequester" spending cuts. For several months this year, the 43-year-old Wisconsin Republican resisted calls to negotiate over Republican and Democratic budget plans, saying the differences were too vast for a public conference committee of the House and Senate. Now thrust into the position of having to haggle, he is trying to shrink expectations for anything larger than a modest easing of the sequester cuts. An elusive "grand bargain" is simply too ambitious, he told Reuters. PARTY CLOUT But even diminished hopes are riding on Ryan's ability to sell a deal to a fractious House Republican caucus, where he commands respect, even among Tea Party conservatives. Republicans, including Ryan, have refused to consider additional revenue increases to ease the sequester, and working around that line in the sand will be the talks' the biggest challenge. Democrats have insisted that revenue gains from eliminating tax deductions and loopholes make up at least half of any alternative savings. They say they are willing to cough up some cuts to federal benefits programs, but not unless Republicans consider revenues. The two sides would need to find about $91 billion to eliminate the sequester cuts for fiscal 2014 and go back to prior spending limits. Democrats want about $45 billion of that to come from closing tax loopholes, a Democratic Senate aide said, adding that Ryan will be forced to make some hard choices. "There will be no gimmick that we can use that's going to let him say there's no tax increase," the aide said. Unless he can persuade Democrats to give up some cuts without revenue gains, Ryan's fallback position is to keep the sequester cuts in place. This would please House conservatives, but would not sit well with many other Republicans who support strong spending on the military and national security programs. The sequester will hit the Department of Defense harder in 2014, with estimates of about $20 billion in additional cuts compared with 2013. Analysts and some lawmakers see that as a significant motivator for Republicans to make a deal. BUDGET SALESMAN, VP CANDIDATE Ryan was a member of the 2010 deficit commission known as Simpson-Bowles, but he voted against the panel's recommendation for about $4 trillion in budget savings, which were never adopted. Since then, he has authored three Republican budget plans that have relied heavily on deep cuts to social services while lowering tax rates. His most controversial proposal is a far-reaching restructuring of Medicare, which would turn the popular fee-for-service health care program for the elderly into a voucher-like system that would provide a subsidy for seniors to buy private health insurance. The latest version of his budget aims to reach a surplus within 10 years. Democrats charge that to achieve this, he would have to eliminate most tax breaks for the middle class, including the exclusion for employer-provided health care insurance and deductions for home mortgage interest and charitable donations. Ryan's budgets catapulted him onto the national stage, prompting Mitt Romney to choose him as the Republican vice presidential candidate in 2012, and he is viewed as a leading contender for the party's 2016 presidential nomination. Any deal he makes that increases tax revenue would likely alienate fellow Republicans. "Tax increases? If he does that, obviously he's finished," said Larry Sabato, director of the University of Virginia's Center for Politics. "The grassroots activists in the Republican Party will never let him get a national nomination if he does that." (Editing by Fred Barbash and Doina Chiacu)