Before the disastrous shutdown I suggested that the Congressional Budget Office numbers on the debt and deficit might weigh in favor of a different sort of budget deal between the White House and Republicans than that which has been the focus of numerous failed attempts since President Obama took office.

Senate Minority Leader Mitch McConnell (R-Ky.) delivers remarks during the second day of CPAC. (Alex Wong/Getty Images) Senate Minority Leader Mitch McConnell (R-Ky.) delivers remarks during the second day of CPAC. (Alex Wong/Getty Images)

In the past Obama wanted to get tax hikes and the Republicans wanted to get entitlement reform. The former was a nonstarter for the GOP. But we now have the sequester and we see the real issue is not the current deficit, which thanks to the sequester is going down, but is the long-term debt driven primarily by entitlement programs. We also learned a couple of things (at least) in the shutdown fight. First, the president desperately wants to get rid of the sequester. Second, in their effort to outfox the president, Republicans highlighted and tried to refund popular programs like the National Institutes of Health, the national parks and veterans benefits.

This should set some basic parameters for the budget talks that Rep. Paul Ryan (R-Wis.) will now head for the Republicans.

Obamacare defunding or delay of the entire program is a nonstarter for the president; tax hikes (other than by increased revenues via tax reform) are a nonstarter for the GOP. Therefore, they should put those two items aside.

The president wants relief on the sequester; the GOP has discovered the merit of some discretionary domestic spending, has always wanted relief from defense sequestration and wants something on entitlement reform. (The president keeps saying he wants entitlement reform too, but his fellow Dems break out in hives whenever it is suggested.) The trade then is some relaxation of the sequester in exchange  for a small but significant down payment on entitlement reform, such as chained CPI. They trade millions (in discretionary spending) for billions in entitlement reform. We’re not talking about dumping the sequester or huge changes in entitlement reform; think small ball.

They then find a couple items both sides would like, perhaps a one-time infusion of infrastructure spending for the president (to be obtained from the sequester relaxation) and domestic energy development for the Republicans. Perhaps some truth in tuition legislation for higher education. That’s it. Not a huge deal, to be sure, but there is nothing either side can’t live with. Moreover, if the Dems don’t want to do anything concrete and significant on entitlement reform that should be fine with the GOP. The sequester is in place and provides minimal discretionary discipline. Better the status quo than a bad deal.

As for Obamacare, the Republicans should wait for the administration to come to them. Delink it from the budget talks, and make this about Obamacare itself and only Obamacare. There is, as Wonkblog suggests, an argument Democrats should appreciate for delaying in some fashion the individual mandate. (Conservatives, please resist the urge to smirk.) When this dawns on the administration it will have a choice: Give the Republicans what they wanted out of necessity or make it part of a package. A delay in the individual mandate for one year, an adjustment in the medical device tax (which Dems said they would favor if they didn’t have “a gun to their head”) and some limited waivers for states for Medicaid flexibility (chose one blue state and one red one). The benefits for the GOP are obvious; the benefits for the White House are that it takes some steam out of the defund-entirely efforts, gets through the embarrassment of the failed rollout, gives Dems some 2014 cover on the medical device tax and gets another crack at inducing Medicaid expansion (in return for reform), at least on a limited basis.

None of this may work, and the House radicals, liberal Senate Dems and the president may resist anything that smacks of reasonable compromise. However, each of those badly need something. Obama wants to rescue his signature legislation and have something significant to show for his second term. Republicans need to show they can govern and desperately want to make progress on the debt and chip away at Obamacare. Senate Dems want to have something to run on in 2014, especially in red states.

Now I didn’t mention tax reform. I know many Republicans are eager for tax reform, but it is not clear Dems are remotely interested in revenue-neutral tax reform. As a political matter both sides resist dealing solely with corporate tax reform. (Lower rates for big companies and not individuals?!) And since most of the Bush tax cuts were preserved, it is not as if there is a hue and cry from most voters for tax reform. I’m not against trying, but including this in with other, doable items may sink progress on everything else.

In short, Republicans and Democrats would be wise to deal in with three buckets of issues: Gettable budget items, Obamacare and taxes. Even one of three would be a plus. If Republicans keep expectations low and demonstrate a determination to help middle- and lower-class Americans, they will not only be on the side of good policy, but also squeeze out the radical, anti-government voices that would be the downfall of the party.

It sure beats shutting down the government, risking the credit of the United States, sending Republicans’ approval into a tailspin and convincing Americans that giving the GOP a majority in the Senate is tantamount to turning the country over to a bunch of crazy people.