WASHINGTON (AP) — Top negotiators on the budget maintained a conciliatory tone and promised Wednesday to genuinely try to find agreement to spare both the Pentagon and domestic agencies from automatic, indiscriminate spending cuts that are the price for Washington's repeated failures to strike a fiscal accord.
Members of the official House-Senate negotiating committee may have struck the right notes, but as soon as the session began a familiar rift opened over taxes, with the top GOP negotiator taking a firm stance against using tax revenues to ease the automatic cuts known as sequestration.
"I want to say this from the get-go: If this conference becomes an argument about taxes, we're not going to get anywhere," said House Budget Committee Chairman Paul Ryan, R-Wis.
The chief protagonists had already signaled that the idea of a "grand bargain" blending hundreds of billions of dollars in new tax revenues and politically painful savings from fundamental restructuring expensive benefit programs is highly unlikely. Instead, their efforts are focused on a smaller agreement to smooth the rough edges of the automatic cuts.
The cuts are the consequence of Washington's failure to strike a follow-up budget pact to a 2011 agreement to cut agency budgets. The threat of the cuts was intended to force the 2011 deficit "supercommittee" to reach an agreement but the panel failed to do so.
The administration Wednesday reported that the deficit for the 2013 budget year, which ended on Sept. 30, registered $680 billion, a drop of more than $400 billion from 2012 and half the size of the deficit in 2009, Obama's first year in office.
Wednesday's talks represent a brief cease-fire in a long-running battle over deficits, spending and taxes between Democrats controlling the White House and the Senate and Republicans leading the House. President Barack Obama and House Speaker John Boehner, R-Ohio have yielded the limelight to lieutenants such as Ryan and Senate Budget Committee Chairman Patty Murray, D-Wash.
"We won't resolve all our differences here. We won't solve all our problems," Ryan said. "But we can make a good start."
Murray said she's willing to consider longer-term cuts to autopilot-like "mandatory" spending on certain benefit programs in order to ease immediate across-the-board cuts to agency operating budgets. But she insists Republicans put revenue into the mix, too.
"I'm ready to make some tough concessions to get a deal," Murray said. "But compromise runs both ways. While we scour programs to find responsible savings, Republicans are also going to have to work with us to scour the bloated tax code — and close some wasteful tax loopholes and special interest subsidies."
Lawmakers generally are trying to put together a smaller-scale deal that would ease, for a year or two, the across-the-board sequestration cuts, which began hitting federal agencies in March and threaten more than $100 billion in cuts in the 2014 budget year when measured against spending "caps" agreed to in the 2011 budget pact.
Even achieving a modest agreement will prove challenging. Democrats are pressing to use revenue from ending tax breaks like those awarded the oil and gas industry to ease sequestration and they say they won't use cuts in domestic programs to help out the Pentagon.
Republicans want to use money from closing tax breaks to reform the loophole-cluttered tax code and lower income tax rates on both individuals and corporations.
The top negotiator for House Democrats offered a cautious prognosis.
"There's a long way to go," said Rep. Chris Van Hollen, D-Md., after the session "I think we just have to see whether there's a genuine willingness to compromise in deeds, not words."
Wednesday's meeting involved speechmaking rather than real negotiating, with lawmakers mostly stating long-held positions rather than exploring avenues for agreement.
"Washington spends more and more and more, and yet our problems are getting worse and worse and worse," said Rep. Tom Price, R-Ga. "Taking more out of the pockets of hard-working Americans just to satiate Washington won't solve anything."
The real action isn't in the cumbersome 29-member official conference committee, but between Ryan and Murray.
Ryan has focused most of his efforts on the budget in forging consensus among Republicans and is mostly untested in cutting deals with Democrats. Murray cut her teeth in the Senate on the Appropriations Committee, which has a long history of bipartisanship and has been stacked over the years with pragmatic Republicans. She later served as co-chair of the failed deficit supercommittee.
The top priority for Democrats is to ease cuts to domestic programs like Head Start preschools, education grants to local schools and infrastructure projects. They want to get the moribund appropriations process — by which Congress passes annual agency budgets — back on track.
Republicans are especially worried about cuts to the Pentagon, which would grow even deeper after the turn of the year. But they are, generally speaking, more willing to let sequestration remain in place.
If the negotiations fail, the most likely outcome would seem to be for Congress to maintain agency spending at current levels. That's a problem for the Pentagon because the upcoming round of cuts will hit the Defense Department even harder than it's been hit this year. The Pentagon and domestic agencies have found ways to manage the automatic cuts through bookkeeping tricks and one-time maneuvers, but worries are running high that the round coming next year will be far worse.
Another obstacle to a deal is the reluctance of Democrats to cut domestic programs to pay for easing cuts to the Pentagon budget. If Republicans won't allow new revenues to be used to offset additional defense spending, negotiators would have to look at the Pentagon's popular Tricare health care program and its generous pension benefits.
In addition, top House and Senate lawmakers want to permanently fix flaws in Medicare's payment system for physicians instead of having to do annual fixes. A permanent "doc's fix" would cost $140 billion, however, and could make it more difficult to come up with savings to address sequestration.
Expectations for the talks are limited at best, given the acrimonious history, but both sides have an incentive to reach a bargain that would win favor among both GOP defense hawks and Democratic defenders of domestic programs.
"In addition to furloughs for Defense employees and reductions to military readiness, the Department of Defense will lose $20 billion more in mid-January if we don't act to avoid another year of sequester cuts," said New York Rep. Nita Lowey, the top Democrat on the Appropriations Committee. "Everyone in this conference has reason to find common ground."