Defunding Obamacare in Budget Right Thing to Do: Paul Ryan

House Budget Chairman Paul Ryan, R-Wis., insisted on Tuesday that his plan to balance the budget, in part, by defunding Obamacare is the right thing to do.

By including the provision, it appears the proposal will be dead on arrival for the White House and Senate Democrats.

When asked by CNBC's Larry Kudlow if it the plan was good policy but bad politics, Ryan responded, "Do you think we should give up our principles just because we're submitting a budget? We believe this is a terrible law that will collapse under its own weight."

(Read More: Latest GOP Budget Is Ambitious, Unlikely to Pass)

He further explained that a big part of his saving plan focuses on stopping the billions in Medicare now scheduled to be shifted out of the program and into the new health care reform system.

But Ryan later signaled that he may be willing to compromise on health care and many other parts of his plan.

"Do you start with your best offer when you start a negotiation? This is just the beginning," Ryan told "The Kudlow Report."

But getting to a balanced budget anytime soon relies heavily on Republicans winning the battle on repealing large parts of the health-care law.

(Read More: Budget Battle Could Jolt US Economy: Democrat)

That's because the biggest savings in the Ryan plan comes from cancelling the massive Obamacare expansion of Medicaid. Ryan says that part alone accounts for about $815 billion in savings in the almost $5 trillion in total cuts inside his proposal.

Entitlement reform is also a major focus of the Republican budget proposal. Ryan believes the same kinds of welfare reforms that succeeded in the late 1990s can be seen again, especially in the ever-expanding food stamp program.

"We see food stamp reform as part of welfare reform. We want to send it back to the states, and give them more flexibility," Ryan said.

Ryan also talked about his plans for broad based tax reform, repeating the Kudlow mantra that lowering the rates and broadening the base is the best way to grow the economy and increase revenues.

(Read More: 11 Historic Fights Worse Than the Sequester)

Ryan admitted that he doesn't expect to get all he wants in any negotiations with the White House. He conceded that he probably won't be able to get the full $5 trillion in cuts he seeks, but he would accept a "down payment on that."

Finally, Ryan expressed cautious optimism about the chances of ever making a deal with the Obama team and he was positive, but realistic, about the administration's new outreach efforts to Republicans.

"Trust but verify," said Ryan about the way he sees the so-called charm offensive coming from the president in recent days.

(Read More: Paul Ryan: US Budget Compromise With Obama Possible)

—By CNBC's Jake Novak

Tune in:

Watch Larry Kudlow's interview with Paul Ryan Tuesday night at 7 p.m. ET on "The Kudlow Report."