Ryan said little of the talks beyond, 'We’re making progress. We’re talking.' Ryan, Murray closer to budget deal

House and Senate negotiators are pushing to finalize a small-scale deal to set spending levels and replace sequester cuts for the next two years, a potential respite in the bitter budget wars consuming Congress.

The two congressional budget leaders — Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) — are considering a plan that would give relief to some of the domestic and defense programs most burdened by the sequester through 2015 by replacing those cuts with budgetary savings in other areas, according to sources familiar with the negotiations. New revenue through fee increases — not tax hikes — is likely .


The emerging plan also would attempt to find a middle ground between overall federal spending levels sought by Ryan and Murray in their respective budget plans. Under one proposal still under consideration, overall discretionary spending levels would be set in the $1 trillion range for 2014, sources say. That’s an uptick from the $967 billion spending level under the Budget Control Act but lower than the $1.058 trillion level initially sought by Senate Democrats.

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If the two sides agree to that approach, the increase in spending would be split about evenly between defense and nondefense spending, sources said. Roughly $80 billion of the sequester cuts would instead be shifted to other programs in the federal budget, but overall deficit reduction would remain unchanged.

On Monday evening, Ryan said little of the talks beyond: “We’re making progress. We’re talking.”

The target to reach a deal is Dec. 13 and a pact would reduce the chances of a government shutdown in 2014 — a midterm election year in which House Republicans are trying to keep the majority.

The details are still being hammered out — and there remains a distinct possibility that the effort will flounder, as so many budget deals have. Still, the fact that Ryan and Murray are this close to inking a deal is significant. It was just two months ago that Democrats and Republicans were so firmly entrenched on fiscal policy that Washington tumbled into the first government shutdown in 17 years.

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The Ryan-Murray discussions are playing out as another potential shutdown looms next month.

Recognizing that the talks could always collapse, Speaker John Boehner (R-Ohio) is prepared to pass a bill next week that would fund the government past Jan. 15 at $967 billion if no deal is reached between Murray and Ryan. While Senate Democrats are adamantly opposed to setting spending at that low level, sources said Tuesday that Senate Majority Leader Harry Reid (D-Nev.) would be prepared to accept a fallback, stop-gap measure at $967 billion to avoid another shutdown.

But if Murray and Ryan can agree on a budget framework it would restore order to the dysfunctional congressional budget process since the two sides will have agreed to overall spending levels, possibly for the next two fiscal years. For that reason, House GOP leaders — burned by the previous shutdown fight — are eager to reach a deal now and take the prospects of another politically disastrous episode off the table in an election year.

House GOP insiders say a deal could be introduced as soon as late this week, with floor action next week. Boehner has been eager to adjourn for the year by Dec. 13. Senior GOP sources on Monday said the House would stick around past Dec. 13 if it were clear a deal would come together.

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Sources said the two sides have been centering on a plan that would set 2014 spending levels around $990 billion, but on Monday aides said that level was not the exact target and that the level may exceed $1 trillion for the next two fiscal years.

In a sign of the serious nature of the talks, Murray is expected to return to Washington this week to pick up on the ongoing staff-level negotiations with Ryan’s aides — even though the Senate is still in recess for Thanksgiving.

“Patty’s coming back,” Ryan said. “We’re talking, but it’s premature to say anything right now.”

The improving prospects are built on the belief in both parties that a deal would benefit each politically. If Congress doesn’t change the sequester — 10 years’ worth of $1.2 trillion in automatic spending cuts enacted as part of the 2011 Budget Control Act — roughly $21 billion would be sliced from defense programs next year. GOP defense hawks are vowing to protect the Pentagon from those cuts that the Defense Department says would significantly hamper national security.

But Democrats, too, are trying to reverse how the sequester affects a range of their favored domestic programs, including Head Start and transportation and housing programs — and they see the Ryan-Murray talks as their best avenue to do that. A fiscal deal, Democrats say, could also give the White House an opening to enact at least one major domestic policy measure next year — like an immigration overhaul — if Congress is not consumed with yet another fiscal crisis.

Nevertheless, there are still a number of hurdles facing Ryan and Murray. Ryan advanced a budget plan setting overall spending levels next year at $967 billion, whereas Murray’s proposal calls for $1.058 trillion in spending — and any major deviation from those numbers are certain to anger their respective bases.

Moreover, while Ryan is strongly opposed to raising any tax revenue as part of a deal, Democrats said Monday some new taxes are not off the table in the negotiations. And if the sequester is overhauled by shifting some cuts to mandatory entitlement programs, it would anger many Democrats.

To strike a middle ground, both sides have discussed new fees to raise revenue — rather than tax increases. Those include new revenue from auctioning broadband spectrum, higher fees on airport security and changing federal retirement benefits. But doing so may not raise enough revenue to make up the difference between Murray and Ryan, sources say.

Ryan has briefed a meeting of top House Republican leaders in recent weeks, and multiple sources in that small closed session said he sounded optimistic about the prospects of moving this package through Congress.

Ryan’s chamber will be the biggest hurdle, sources in both parties say.

House GOP leaders are prepared to argue that any deal would preserve the level of cuts envisioned under sequestration but would replace them with smarter, more targeted deficit reduction. They hope to build a broad coalition to help pass any plan: appropriators, defense hawks, leadership, middle-of-the-road Republicans and a good number of Democrats. And House GOP leaders are prepared to argue that the modest cuts to mandatory programs in the emerging framework are precisely what Republicans have long been seeking.

But such a deal won’t impose cuts to Medicare and Social Security that the GOP has been proposing.

Still, both sides are looking at clearing a low bar — even for a Congress that could go down as one of the least productive in history. Indeed, both parties ruled out a major grand bargain that would overhaul entitlement programs and the Tax Code — guidelines seen as key to the positive signs emerging. And as of early this week, they were looking at possibly changing just $80 billion of the sequester cuts spread out over two years, even though one full year of the sequester amounts to $110 billion.

But a bipartisan, bicameral deal could at least offer a reprieve ahead of the next big fight next year: the spring brawl over lifting the federal borrowing limit.