Paul Ryan Budget Plan Not Realistic: Bush Official

The process in Washington to reach a federal budget compromise has not been based in reality, said Jim Nussle, former director of the Office of Management and Budget under George W. Bush.

Case in point, Nussle said, were comments this past weekend from House Budget Committee Chairman Paul Ryan on the president's health-care law.

"Chairman Ryan coming out saying one of the marquee issues in the budget is going to be the repeal of Obamacare. I think we fought that battle," Nussle said in a "Squawk Box" interview on CNBC Monday. "I think it's over and it's been over for some time. Good luck with that one. That doesn't make it any more realistic."

(Read More: Boehner Wants Budget Deals 'Out in the Open')

Ryan, the former GOP vice presidential nominee in 2012, is expected to release his budget blueprint on Tuesday.

Nussle was also critical of President Barack Obama. "The president was supposed to have introduced his budget a month ago and still hasn't done so," he said. "At this point in time, most of this process has unfortunately gone down to really a lack of any kind of realistic nature on either side."

The president will continue to make budget overtures to Capitol Hill this week, following last week's dinner with Senate Republicans, including Pennsylvania conservative Pat Toomey. Obama also had lunch with a bipartisan group on the House side, including Ryan.

(Read More: In Search of Debt Deal, Obama Walks Narrow Path)

That sort of approach might work in the long-term, but won't yield immediate results, Nussle predicted.

"If there is an opportunity to mend some fences, it's going to take a little bit longer than one or two dinners out with the boys," he said. "They're going to have to do a little more outreach when it comes to specific issues. I don't think the budget is prime real estate for common ground these days."

Nussle, a former Republican congressman from Iowa, suggested the president and Republican leaders strive for small deals "one or two step(s) forward," instead of trying for a so-called Grand Bargain.

"In entitlement reform, there are some obvious [common issues]. Chained-CPI may be one ... some others might be out there that you could reach for that could be part of a smaller reconciliation deal under a budget act," he said.

By CNBC's Matthew J. Belvedere; Follow him on Twitter @Matt_SquawkCNBC