* Ryan, Murray pledge to explore all avenues for budget deal
* Negotiators say no savings target identified yet
By David Lawder
WASHINGTON, Oct 17 (Reuters) - Hours after Congress voted to avert a disastrous U.S. debt default and reopen government agencies, budget negotiators kicked off a new round of talks on Thursday, pledging to bridge the vast gulf between Republican and Democratic fiscal priorities.
Meeting for breakfast, Republican House Budget Committee Chairman Paul Ryan and his Democratic counterpart in the Senate, Patty Murray, said they would explore every avenue to reach a longer-term deal to reduce deficits and replace automatic "sequester" spending cuts.
"Our job over the next eight weeks is to find out what we can agree on, and we have agreed that we are going to look at everything in front of us. It's going to be a challenge," said Murray, who chairs the Senate Budget Committee.
Both Murray and Ryan said they do not have a specific savings target in mind yet for the panel, which was explicitly set up in Wednesday's deal to end the shutdown and lift the debt limit. The panel has a Dec. 13 deadline to make recommendations.
While there are no direct consequences if the committee fails to meet this deadline, Congress has only approved government funding through Jan. 15, so another shutdown threat looms if there is no fiscal agreement.
Past deficit commissions and negotiating panels have a dismal track record, most notably the failure of a 2011 "supercommittee" to find $1.5 trillion in budget savings.
Rather than an elusive "grand bargain" on taxes and spending, Ryan has spoken more recently of a more modest "downpayment" toward reducing the $16.7 trillion federal debt.
The Congressional Budget Office says an additional $2 trillion in 10-year savings is needed to stabilize the federal debt as a percentage of U.S. economic output over the long term.
"We want to have smart deficit reduction, we want to grow the economy," said Ryan, who is considered a contender for the 2016 Republican presidential nomination and was the party's vice-presidential candidate last year.
"I want to have to have a budget that gets this debt and deficit under control, that does right by future generations and helps us grow the economy," he said. We're going to figure out if we can find a way to do that."
RYAN CUTS, MURRAY TAXES
The two sides are coming from vastly different places, which is partly what led to the government shutdown and damaging standoff over raising the U.S. debt ceiling.
The House budget authored by Ryan proposes to reach a surplus within 10 years by making deep cuts to federal benefits and social services, while keeping in place about $1 trillion in government spending cuts over the next decade.
It also proposes to sharply reduce tax rates, which Democrats argue will require the middle class to give up some cherished tax breaks such as those for mortgage interest payments or employer-provided health benefits.
Murray's budget, passed by the Senate, relies heavily on $975 billion in new revenue from eliminating tax breaks for the wealthy and large corporations. It offers some modest cuts to benefit programs such as Medicare and Social Security, but would not change their structure.
Much of Murray's claimed spending cuts actually come in the form of replacing the automatic sequester cuts.
Republicans argue that these cuts, a byproduct of the last major budget deal in 2011, should not be reversed.
Representative Chris Van Hollen, another negotiator and the senior Democrat on the House Budget Committee, said it is progress that at least the two sides are talking. Republicans had rebuffed Democratic efforts to start haggling over the two budgets before the debt-limit deadline, arguing that it had little chance of success.
"What I would say is not talking guarantees failure," said Van Hollen. "Talking doesn't guarantee success but if you don't get together obviously you can't move forward."
The first day of talks involving Ryan, Murray, Van Hollen and Senator Jeff Sessions, the top Republican on the Senate Budget Committee, had a little levity at the start, over take-out coffee, bagels and pastries.
When Ryan walked into the meeting room in the Capitol, he saw a square table and joked: "I thought I had asked for a round table," drawing laughter from congressional staffers.
The Senate negotiators will include all members of the budget committee, including 10 Democrats, two independents and 10 Republicans. The House side will have seven negotiators, with four Republicans and three Democrats. Both the House and Senate sides will have some of Congress' most conservative and liberal members, as well as some centrists.
Murray said she knows neither side will be able to force its will on the other.
"Chairman Ryan knows that I'm not going to vote for his budget; I know he's not going to vote for mine," Murray said. We're going to try to find the common ground between our two budgets that we can vote on and that's our goal."