Congress aiming low in new budget talks, as Reid dismisses entitlement reform as 'happy talk'

FILE: Oct. 16, 2013: Senate Majority Leader Harry Reid, D-Nev., and Sen. Patty Murray, D-Wash., walk to a news conference, on Capitol Hill, in Washington, D.C.

FILE: Oct. 16, 2013: Senate Majority Leader Harry Reid, D-Nev., and Sen. Patty Murray, D-Wash., walk to a news conference, on Capitol Hill, in Washington, D.C.  (AP)

Congressional Democrats and Republicans are setting low expectations about budget talks scheduled to begin next week -- with Senate Majority Leader Harry Reid dismissing as 'happy talk' any notion of a grand bargain that would include cuts to entitlement programs.

The Nevada Democrat won't be directly involved in the formal House-Senate budget negotiations set to begin Wednesday. But he has been among the most overt in blaming the opposite party -- even before the talks begin. And he has given perhaps the bleakest assessment for a potential compromise on tax increases and cuts to entitlement spending.

"You keep talking about Medicare and Social Security," Reid said on Thursday, cutting off a Nevada Public Radio host. "Get something else in your brain. Stop talking about that. ... There is not going to be a grand bargain."

He also said Republicans would have to agree on tax-revenue increases for Congress to achieve a large-scale agreement, but they instead have their mind set on "nothing more on revenue."

"And until they get off that kick, there's not going to be a grand bargain," Reid said. "There's not going to be a small bargain. The only people who feel there shouldn't be more [tax money] coming in to the federal government from the rich people are the Republicans in the Congress. Everybody else, including the rich people, is willing to pay more. They want to pay more."

To be sure, lawmakers, their aides and observers who will be monitoring the talks say entrenched differences over taxes is perhaps the biggest roadblock toward a substantive deal.

Republicans won't agree to more taxes atop the 10-year, $600 billion-plus increase on upper-income earners that President Obama and Democrats muscled through in January. And Democrats won't yield to cuts in benefit programs like Medicare, without higher taxes.

"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," said House Budget Committee Chairman Paul Ryan, R-Wis.

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 have already talked informally and say they're seeking "common ground" between the sharply different Republican and Democratic budgets.

That would likely involve finding ideas upon which they can agree instead of compromising principles -- including Republicans' opposition to tax increases or many Democrats' unwillingness to consider cutting future Social Security benefits by decreasing the annual cost-of-living adjustments.

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

Though the pre-meeting talk appears to be limiting Americans' expectations, none so far has included the hard-line positions that led to a partial government shutdown earlier this month and almost resulted in the country exceeding its project debt limit ceiling. 

The new deal would be to fund government operations through September 2014. The temporary funding measure that allowed the government to fully reopen last week is set to expire in early January.

If Reid, Ryan and others see one potential agreement in the talks, it would be on the across-the-board federal spending cuts known as sequester.

Sequester 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."

The automatic spending cuts are mandated by the failure of the 2011 deficit super committee 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.

Republicans are looking at several cuts to Medicare health care providers found 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 super committee 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.

The Associated Press contributed to this report.