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Super committee cuts, if successful, will span 10 years

Marketplace Staff Sep 16, 2011
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Super committee cuts, if successful, will span 10 years

Marketplace Staff Sep 16, 2011
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Steve Chiotakis: The members of Congress who are charged with cutting the budget deficit continue their meetings next week. The so-called “super committee” has until Nov. 23 to come up with a plan. If they don’t, there’ll be automatic, across-the-board budget cuts.

Jim Lucier’s been watching the super committee progress from his offices in Washington. He’s managing director at Capital Alpha Partners and he’s with us now. Good morning sir.

Jim Lucier: Good morning.

Chiotakis: Jim, how are these super committee meetings going?

Lucier: The super committee meetings have just started, but so far, I think they’re proceeding well. You can tell they’re proceeding well because the members are really making positive statements about getting to a solution. And there really hasn’t been anywhere near the level of discord that we saw in the debt ceiling talks.

Chiotakis: What about getting these lawmakers to come up some debt-reduction plan by the deadline? Because we know that if it doesn’t hit the deadline, then automatic cuts takeover, right?

Lucier: That is true. They have to reach a minimum target of $1.2 trillion in reductions. They have $1.5 trillion as their high end goal. But I think we already know where a lot of these spending cuts are going to come from. They’ll come from small, cumulative changes in the baseline over ten years —

Chiotakis: Explain to us — you said cumulative baseline — what is that?

Lucier: Well, in Washington, we talk about trillions of dollars as if they’re pocket change, but the reality is that we’re talking about ten years worth of spending at once. And over that period of time, the government will be spending nearly $50 trillion. So to find $1.2 trillion dollars in reductions over ten years, we’re really looking for about 3 percent cuts across the board. And that 3 percent number, when you think about it this way — 3 percent over ten years — is not as scary as $1.5 trillion all at once. It will definitely not be $1.5 trillion effective tomorrow.

Chiotakis: Jim Lucier, managing director over at Capital Alpha Partners. Jim, thanks.

Lucier: Thank you.

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