Republican plans to cut $60 billion from the federal budget would cost roughly 200,000 American jobs, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee today.
The remarks follow comments Bernanke made before the Senate Banking Committee on Tuesday in which he characterized estimates of higher job losses from two private forecasters as too severe.
Democrats and Republicans alike have cited the Fed chairman's statements on the effects of deficit reduction as negotiations continued on a longer-term budget. Democrats have pointed out Bernanke believes cuts are sure to have a contractionary effect that would take away from a still fragile labor market recovery. Republicans note that his estimates are more conservative than others from economists at Goldman Sachs and Moody's Analytics. Those called, respectively, for a reduction of 2 percentage points in GDP growth during the spring and summer quarters and for a loss of 700,000 jobs.
Bernanke was repeatedly asked about the other estimates at the hearings but defended the Fed's numbers, saying he wasn't sure why the private forecasters got such a high number.
"I frankly don't understand where -- 2 percent is an enormous effect," he said on Tuesday. "Two percent of the GDP is 300 billion right there. So assuming a multiplier of one, you know, 60 [billion dollars] to a hundred billion is not sufficient to get to that level."
This article appears in the March 2, 2011, edition of National Journal Daily PM Update.