House and Senate budget negotiators say they’re not close to an agreement but plan to keep at it.

“We’re trying to find common ground but we’re not there yet,” said House Budget Committee Chairman Paul Ryan, R-Wis. He said Republicans and Democrats have spent lots of time in the recent past airing their differences but it’s now time to find a way to strike an accord. “The hard part is figuring out where we agree,” Ryan said.

Ryan convened a public meeting of negotiators on Wednesday, but the session was devoted to speechmaking and hearing testimony from Congressional Budget Office Director Douglas Elmendorf rather than actual negotiation.

The real talks are taking place behind closed doors between Ryan and Senate Budget Committee Chairman Patty Murray, D-Wash. The duo met most recently on Tuesday evening.

Murray said the two “have had a number of discussions since our last meeting, regarding the parameters of a potential deal, and I’ve been very encouraged by those conversations. They are going to continue in the days ahead and I’m hopeful we will get to a bipartisan compromise very soon.”

The talks are centered on finding ways to cut spending and special interest tax breaks to replace automatic across-the-board spending cuts that are slamming the Pentagon and domestic agencies. Ryan and Murray are tight-lipped about how well the negotiations are going but many outside observers think the negotiations will get hung up over taxes.

Murray wants to use tax revenue generated by closing tax loopholes and preferences to pay for some of the cost of providing relief from the automatic cuts known as sequestration. Options including eliminating a “carried interest” exemption that allows wealthy hedge fund managers to pay a lower tax rate than salaried workers.

But Ryan and other Republicans oppose using such revenues to finance government spending. They instead want to curb loopholes and other major tax breaks but use the resulting revenue to lower income tax rates while reforming the hopelessly complex U.S. tax code. Ryan wants to cut so-called mandatory spending from the roughly two-thirds of the budget that operates on autopilot instead of being funded through annual appropriations bills.

Ryan has suggested ideas like requiring wealthier Medicare beneficiaries to pay higher premiums and curbing the explosive growth of the military’s Tricare health program.

Elmendorf issued familiar warnings about the corrosive effects on the economy of the growing national debt and said a larger budget agreement addressing the nation’s long-term fiscal ills would be better than simply addressing sequestration for a couple of years.

“Big steps are better than small steps, but small steps are better than no steps at all,” Elmendorf said.

“This is my third time around so I’m not going to make any predictions,” said Rep. James Clyburn, D-S.C., who’s participated in prior talks in 2011 on the deficit “supercommittee” and a group led by Vice President Joe Biden. “All I’m going to say is I’m very hopeful. And I think there’s a much better climate this time than last time.”

Meanwhile, CBO released a 300-plus page book of options to cut the budget. A plan to use a less generous inflation measure to curb cost-of-living increases to Social Security would save $108 billion from the program over the upcoming decade while raising $140 billion in new revenues by slowing the indexation of tax bracket for inflation. Democrats say that’s a nonstarter in the kind of smaller budget deal being pursued.

A 25 percent increase in federal taxes on alcoholic beverages would raise $6-7 billion in new revenues every year while eliminating the ability of higher-income veterans without service-related disabilities to enroll in the Veterans Administration health care program would save $71 billion over a decade.

House-Senate negotiators are working against an informal Dec. 13 deadline to reach a deal, but top members of the House and Senate Appropriations committees — responsible for drafting an “omnibus” spending measure to fund agency budgets — want an earlier agreement that would give them more time to do their work.

Some Republicans, like Charles Grassley of Iowa and tea partyers in the House, oppose easing the sequestration cuts. Others, especially defense hawks worried about the Pentagon’s budget, are eager for an agreement.

“Sequestration is working,” Grassley said. “You can’t raise taxes high enough to satisfy the appetite of Washington to spend money.”

(AP)