Budget talks kick off; lawmakers cautiously optimistic

A group of 29 lawmakers charged with crafting a budget deal by a post-shutdown mandated Dec. 13 deadline met for the first time Wednesday. While their opening statements expressed cautious optimism the group can reach a deal to avert another fiscal crisis or government shutdown, the chances of reaching a large-scale bargain that combines tax increases with entitlement cuts is virtually nonexistent.

"I want to say this from the get go: if we look at this conference as an argument about taxes, we're not going to get anywhere," said Rep. Paul Ryan, R-Wis., the chairman of the House Budget Committee and one of the two leaders of the group.

Democratic lawmakers aren't seeking tax increases, but are looking to raise revenues by closing loopholes and special interest subsidies in the tax code. They are also going to look for ways to replace the across-the-board sequester cuts with other changes to the country's spending.

"The very least this conference should be able to do--the absolute minimum--is find a way to come together around replacing sequestration and setting a budget level for at least the short-term," Senate Budget Committee chairwoman Patty Murray, D-Wash., said.

"I know there are many Republicans who would be very interested in swapping some of the inefficient and damaging sequester cuts with structural changes to programs that would save many multiples of the cuts they replace over the coming decades," she added in her opening remarks. "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."

Rather than replacing the sequester cuts with increased revenue, Republicans would prefer to look for deeper cuts in non-defense spending or dip into the mandatory side of spending, which includes entitlement programs like Medicare and Social Security. Many lawmakers from both parties agree that they should offset thebillions of dollars of cuts to defense spending coming next year if Congress fails to act, but they will disagree on how to get there.

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"Nobody has to abandon their principles. Instead, we need to find out where our principles overlap. We all agree Washington isn't working. We all agree there's a smarter way to cut spending," Ryan said. "We won't solve all our problems. But we can make a good start. And we should--because we owe it to the country."

Republicans believe that they already offered a tax increase at the beginning of the year when they allowed some of the Bush-era tax cuts to expire.

"President Obama got his tax increase in the fiscal cliff deal of January 2013. We increased taxes on job creating Americans by $600 billion. Now is the time to focus on the other side of the ledger--the spending side," said Sen. Chuck Grassley, R-Iowa.

Many Republicans are also holding firm that Congress not undo the sequester cuts, which were mandated by the Budget Control Act that passed in 2011.

"The Budget Control Act reduced the growth in federal spending by $2.1 trillion. This is an important first step. That bipartisan agreement is in law and must be maintained. Congress and the White House must keep their promises to the American people," said Sen. Jeff Sessions, R-Ala., the top Republican on the Senate Budget Committee.

Grassley suggested agency heads, including the Defense Department, be given more flexibility in managing their spending cuts. Unlike many of his colleagues who want to see defense spending increase again, Grassley argued that "there should be no illusion that the Department of Defense is immune from wasteful spending, fraud and mismanagement that costs taxpayer millions and billions of dollars."

The group was formed earlier this month after Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., made a deal to end the government shutdown and lift the debt ceiling. The lawmakers are expected to produce a budget proposal by Dec. 13, which would give both chambers of Congress a month to debate before funding to keep the government open runs out again on Jan. 15, 2014.

An agreement that touches on taxes is all but certain not to come out of the budget conference, especially because they have only six weeks to complete their work. The next full meeting of the group will not occur until Nov. 13 when both chambers of Congress are back in session - just a month until their deadline.

Tax reform will likely be left to other lawmakers. "We need to write a tax code that encourages economic growth--not stifles it. And luckily, Democrats and Republicans in the House and Senate are working together to do just that," said Ryan. But, he acknowledged, "Today, our tax code is full of carve-outs and kickbacks. We need to get rid of them--and those bipartisan talks are just the way to do it."