By David Lawder
WASHINGTON (Reuters) - A new round of budget negotiations starting next week should focus more narrowly on replacing automatic spending cuts rather than attempt to reach an elusive "grand bargain," House Budget Committee Chairman Paul Ryan said on Thursday.
Ryan told Reuters in an interview that reduced expectations could make the talks more successful than past efforts, such as the failure of the 2011 "supercommittee" to find $1.2 trillion in savings.
"My hope is that it has a better chance because we'll set more rational expectations of what we're setting out to achieve," said Ryan, a Wisconsin Republican.
"If we focused on doing some big grand bargain, like those prior efforts ... then I don't think we'll be successful because we'll focus on our differences. Each party will demand that the other compromises a core principle and then we'll get nothing done."
Ryan, who will lead Republicans on the 29-member negotiating panel that convenes on October 30, said there is a better chance of finding common ground with Democrats on "smarter" spending cuts to replace the across-the-board reductions to discretionary spending. He said these include reductions and reforms to expensive federal benefits programs known as entitlements, such as Social Security, Medicare and some farm subsidy programs.
He noted that President Barack Obama has proposed some entitlement changes, such as a lower inflation gauge for the Social Security retirement program's cost-of-living increases. His Democratic counterpart, Senate Budget Committee Chairwoman Patty Murray, also has proposed some ways to reduce healthcare costs.
And both parties want to mitigate the sequester's impact, especially with another $109 billion round of cuts due to launch on January 15 - the same date that the latest stopgap spending extension ends. Military programs favored by Republicans would bear more than half of those cuts.
Ryan reiterated his long-standing opposition to any further tax revenue increases as part of the budget negotiations, saying that a major tax hike for the wealthiest Americans in January was already hurting the economy.
Top Democrats on the negotiating panel say that proposals such as the cost-of-living change or charging wealthier seniors more for their Medicare healthcare coverage will not be offered unless Republicans are willing to raise revenue from elimination of some tax breaks.
"If people see this conference as an excuse to raise taxes, I don't think it's going to be successful," he said.
If the two sides remain at loggerheads over revenues and entitlement cuts, then he said the sequester cuts will simply remain in place.
"It's not our preferred route to reducing deficit and spending, but it works," he said. "If we can't replace these spending cuts with smarter spending cuts, then we'll take what we have."
He also said that he believes that the panel can help ease some sequester pain on federal agencies and the military by offering them more flexibility to spend their reduced budgets more effectively.
(Reporting by David Lawder; Editing by Sandra Maler and Eric Beech)