WH: Despite outreach to GOP, difficult path to "grand bargain"

President Obama speaks as House Speaker John Boehner, R-Ohio, Senate Majority Leader Harry Reid, D-Nev., look on during a meeting with bipartisan group of congressional leaders in the Roosevelt Room of the White House on November 16, 2012 in Washington, D.C.
Olivier Douliery / Pool / Getty Images

Top White House officials said the House Republican budget was full of false promises and magic asterisks. Rep. Paul Ryan, R-Wis., unveiled his budget resolution Tuesday.

They also said President Obama will continue his outreach to Senate Republicans through dinners and phone conversations but the path to bipartisan compromise on budget matters was narrow and fraught with difficulties. The senior officials said Washington needed to temper its expectations about a so-called grand bargain matters - that one dinner and a trip to Capitol Hill won't bridge all policy divides.

On Ryan's budget, senior White House economists projected it would cut non-defense discretionary spending by 20 percent over ten years, repeal Mr. Obama's health care law and cut Medicaid spending by one-third. The White House dismissed this as the kind of austerity that could hurt economic growth in ways reminiscent of Europe's experience with budget cuts.

The White House also doubts whether Ryan's budget can achieve its tax reform goals without raising taxes on middle-income taxpayers. Ryan wants to reduce the top tax rate from 39.6 percent to 25 percent. Ryan would also have a lower rate of 10 percent in a two-rate structure.

In the 2012 campaign, GOP nominee Mitt Romney (with Ryan as his running mate) proposed a 28 percent top rate, down from the then-current top rate of 35 percent. Ryan's budget would create a tax rate cut twice the size of Romney's in percentage point terms (Romney 7 percentage points, Ryan 14.6 percentage points).

Top White House officials said Ryan could not pay for tax cuts of this magnitude without sharply reducing tax deduction for mortgage interest and charitable giving enjoyed by many middle-income taxpayers. Officials described Ryan's approach to tax policy, which they said would cost at least $5 trillion in revenue, as an absurd fiction riddled with accounting gimmicks.

"We have profound differences at a substantive level with the budget proposed by Chairman Ryan," White House spokesman Jay Carney said today. "It is in many ways a reiteration of his proposals of the past."

As for efforts to forge a big budget deal, senior officials said Obama will focus almost all of his attention on Senate Republicans and attempt to persuade them to accept hundreds of billions in new tax revenue. The officials said House Republicans, adamantly opposed to higher taxes, will only budge if forced by Senate Republicans. The vehicle for a grand bargain could be the budget resolutions unveiled this week by Ryan and Senate Democrats.

Mr. Obama will no longer try to strike a big budget compromise with Senate GOP leaders or House Speaker John Boehner, R-Ohio. Like Boehner and Senate Minority Leader Mitch McConnell, R-Ky., Obama has given up on deals hatched in secret with no rank-and-file participation or buy-in. Officials said Obama keeps Democrats aware of his talks with Senate Republicans and had detected no signs of revolt - though the senior officials conceded Senate Democrats put some questions to Mr. Obama at their private Capitol Hill luncheon Tuesday about how far he would go on entitlement reform.

Senate Democrats will not touch the issue in their budget. It will not contain Mr. Obama's proposal to reduce current annual cost-of-living adjustments to Social Security and other federal pensions and does not seek higher taxes on wealthy Medicare recipients.

In other words, if there's going to be a grand bargain, it will require Republicans to give up substantial ground on taxes and Democrats to give more than they currently are on entitlements. But senior officials predicted if Republicans offer up more on tax revenue, Mr. Obama will be able to keep enough Democrats in line to seal a deal.