GOP Leader Sees Budget Compromise on Horizon : Legislation: Sen. Trent Lott predicts Clinton and Congress will ‘split the difference’ on Medicare.

The second-ranking Republican in the Senate predicted on Wednesday that Republicans in Congress and President Clinton will “split the difference” on Medicare spending and resolve the federal budget deadlock relatively soon.

Sen. Trent Lott (R-Miss.), who as majority whip serves as deputy to Senate Majority Leader Bob Dole (R-Kan.), told a Biloxi Chamber of Commerce breakfast that the $145-billion gap between the White House and the GOP in Congress on Medicare spending could be bridged by compromise, clearing the way for passage of a balanced budget and putting furloughed federal employees back to work.

“It can be done, and it will be done,” Lott predicted.

Congressional Republicans want to slow the growth of projected Medicare spending over the next seven years by $270 billion. The White House is willing to accept reductions of about $125 billion.

Meanwhile, mid-level staff members from Congress and the White House met Wednesday afternoon in Washington to discuss the mechanics of bringing top government leaders back to the bargaining table today and Friday.

“It was very much of a process kind of a meeting, figuring out a way to make progress throughout this week,” said a White House official. “There was no progress on substance.”

The president is scheduled to meet Friday with congressional leaders, including Dole and House Speaker Newt Gingrich (R-Ga.), to find a solution to the budget impasse and to reopen government agencies and facilities whose closure has idled 280,000 workers and left 760,000 receiving only partial pay.

Lott’s optimistic comments are significant because he is politically aligned with conservative lawmakers in the Senate and House who are wary of compromise with the White House on entitlement spending and tax reductions.

His endorsement of a potential deal with Clinton is likely to carry substantial weight with conservative freshman Republicans in the House, who have been willing to give no quarter in their quest to balance the budget and rein in federal spending. Leaders of the freshman “revolution” have said that they would prefer to shut the government down for a year rather than cut a business-as-usual deal with the White House.

Lott’s sentiments are also expected to carry weight with his more conservative Senate colleagues, who earlier this year elected him their No. 2 officer in part to counteract a perception that Dole is too inclined to compromise to move legislation.

The Senate conservatives’ position was expressed Wednesday by Sen. Phil Gramm (R-Texas), who was campaigning for the GOP presidential nomination in Iowa.

Gramm called on his Senate colleagues to “stand their ground” in budget talks with the White House.

The senators’ remarks came as stalled budget negotiations in Washington slowly came back to life after a four-day Christmas hiatus. Clinton and Alice Rivlin, director of the White House Office of Management and Budget, met in the Oval Office Wednesday morning to review the two sides’ positions on key differences, including federal health care spending, tax policy and appropriations for domestic agencies, a White House aide said.

Staff discussions are expected to continue today to prepare for anticipated meetings Friday morning that will include White House Chief of Staff Leon E. Panetta, Rivlin and Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Budget Committee, and his House counterpart, Rep. John R. Kasich (R-Ohio). Clinton plans to meet with Dole and Gingrich later that day.

White House Press Secretary Mike McCurry said that the glacial pace of budget negotiations is the result of profound policy disputes between the parties. No one wants to see federal workers furloughed indefinitely, he said.

“It is an urgent situation, but the differences that exist between the two sides are very deep, very fundamental,” McCurry said Wednesday. “People who have not followed this . . . think it’s all theatrics, but it’s not.”

Meanwhile, 46 House Democrats challenged more than 90 corporate executives to make personal and company sacrifices to help balance the federal budget.

In a letter drafted by Rep. George Miller (D-Martinez) and signed by Majority Leader Richard A. Gephardt (D-Mo.), among others, the lawmakers responded to newspaper ads taken out last week by the executives, who demanded that budget negotiators put “everything on the table, including long-term entitlement programs as well as the size and shape of any tax cuts.”

The Democrats told the executives, in effect, to put up or shut up. “While it appears you are willing to offer up substantial sacrifice on the part of the nation’s poor and elderly, it is not clear what you are willing to put on the table,” Miller and the others wrote.

Times staff writer John M. Broder in Washington contributed to this story.