JEREMY HOBSON: It's going to be a busy weekend for the Congressional super committee. Lawmakers have just five days left to find $1.2 trillion in cuts to the deficit over the next ten years. And it looks like there are at least three possible outcomes: a really impressive deal that gets the job done; a deal full of accounting tricks and rosy scenarios; or no deal at all -- which would trigger automatic spending cuts.
For more, let's bring in Mark Zandi, who is chief economist with Moody's Analytics and he joins us live. Good morning.
MARK ZANDI: Good morning.
HOBSON: So Mark, which of those three possibilities looks most likely to you at this point?
ZANDI: Well, Jeremy, I'll take a fourth option and that is I think the super committee will come up with something substantive, not $1.2 trillion -- but let's say half that. I think there's enough agreement on the committee to come up with about $600 billion in deficit reduction, and of course if they can do that they'll avoid some of the more draconian automatic spending cuts that would occur in 2013.
HOBSON: And is that kind of half-solution enough to satisfy the markets, and avoid -- for instance -- another downgrade of U.S. debt?
ZANDI: Yes, I think that would be sufficient. I think if they did something counter-productive -- the gimmicks as you said -- that would be a problem, that would be the fodder for a downgrade, and that would be a problem for financial markets. If they came up with something really big and got it all together, that would be great, we'd be off and running. But I think they're going to come up with something that will just appease financial markets and we'll go on to the next step here.
HOBSON: And the next step I assume is putting things off until after the next election. Is there any sense that lawmakers are going to be in any better mood to make big difficult decisions, whether it be budget cuts or tax increases, after the election of 2012 than they are now?
ZANDI: No, but to some degree they have no choice because under current law if they do nothing tax rates for everybody will go up on January 1st, 2013 -- those are the expiration for the so-called Bush Tax cuts. So we're going to see a piece of tax legislation after the election. They may not want to do it, but they'll have not choice.
HOBSON: And you don't think the Bush Tax cut extension -- or letting them expire -- is going be a part of this deal?
ZANDI: Well, it's hard to handicap all this. It's possible, but I doubt it. I think that's too big a bite for them to chew, so I think they'll have to wait until after the election to address it, and at that point, they'll have no choice. They'll have to do something.
HOBSON: Finally, the big question, Mark: what is at stake for ordinary Americans as we near this deal next week?
ZANDI: There's a lot at stake. If the super committee does something counter-productive, then we're going to have a problem. The economy's already fragile and this could push it into a recession. If they do something big, this would be really great and send us off to the races. Hopefully they get it together well enough that they do no damage.
HOBSON: Mark Zandi, chief economist at Moody's Analytics, thanks so much.
ZANDI: Thank you.