Fed's Bernanke: GOP Budget Cuts Could Trim 200,000 Jobs

WASHINGTON (By Mark Felsenthal) - Federal Reserve Chairman Ben Bernanke said on Wednesday a Republican spending cut plan would not cause a big dent to U.S. economic growth, but could cost around 200,000 jobs.

Bernanke said that a $60 billion cut along the lines being pursued by Republican in the House of Representatives would likely trim growth by around two-tenths of a percentage point in the first year and one-tenth in the next year.

"That would translate into a couple of hundred thousand jobs. So it's not trivial," he said in response to questions from members of the House Financial Services Committee.

The Republican-run House has passed a budget bill for the current fiscal year that includes $61 billion in spending cuts, but majority Democrats in the Senate say the reductions would endanger the economic recovery.

Any spending legislation must be approved by both chambers of Congress before it can become law.

Members of Congress are locked in a bitter fight over the budget, with Republicans, spurred on by Tea Party fiscal conservatives, having made deep spending cuts and immediate deficit reduction a top priority.

The Senate on Tuesday approved a House-passed bill to extend government funding for two more weeks, a move that averts an imminent shutdown of the federal government, but that does nothing to resolve the ongoing budget tussle.

The bill, which now goes to President Barack Obama for his signature, contains $4 billion in relatively noncontroversial cuts, a sum House Republicans see as just a downpayment on their larger goal.

Goldman Sachs economist Jan Hatzius estimated that the larger spending cut bill would trim 1.5 to 2 percentage points off of the annualized economic growth rate in the second and third quarters of this year.

Some of that pullback was already built into Goldman's GDP forecast for 4 percent annualized growth in the second quarter.

"Federal government spending enters directly into the Commerce Department's GDP estimates, so unless there is a full offset from other components of GDP a reduction in federal government spending must reduce GDP on impact," Hatzius wrote in a note to clients.

(Additional reporting by Pedro Nicolaci da Costa, David Lawder, Lucia Mutikani and Emily Kaiser; Editing by Gary Crosse)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[guveqzero]

01:18 PM on 03/06/2011

As long as it does not cut GOP jobs, they are good with it.

[irochfpst]

05:43 PM on 03/05/2011

wow! bernake experiences a lucid moment. too bad this doesn't matter to republicans.

[Its-All-Good]

04:15 PM on 03/05/2011

Only in America(on MSM) is 192,000 jobs created in one MONTH while the unemployment filings for a WEEK is 392,000 considered optimistic good news.. while 5.5 million unemployed 199'rs have fallen off the tally sheets..

Somebody wants us to go spend what little cash we have left, me thinks

[alnicov]

08:44 AM on 03/05/2011

Some of those losing their jobs will be the Congressmen that pushed this bill through. They obviously don't give a damn about the economic recovery. They are acting in their own interests and don't deserve to serve the people of this country.

[romus]

07:47 PM on 03/04/2011

Bernanke's Failed CNBC Predictions

http://dailybail.com/home/a-movement-by-the-people-to-prevent-the-reappointment-of-the.html

[jefftitle46]

02:43 PM on 03/04/2011

Jobs need to be real, not contrived, and not buttressed by the government dole. Only then can we say a job is real, and is sustainable. A job must be one where another person is willing to pay for one's services or products. And it goes the same for Bernacke, who would do well to get a real job. One which is actually contributing to the productivity of the economy. Selling pencils on wall street would be an improvement for the "central banker," who heretofore has been digging the economic hole even deeper here in America.

[Its-All-Good]

11:24 AM on 03/04/2011

Losing 400,000 a week will have the unemployment rate down to 4.5 percent come "recovery summer".. Gooooo loooong stocks.. STAT!

[jeanrenoir]

09:38 AM on 03/04/2011

Remember, folks, Bernanke, who's a good man, was appointed by BUSH not Obama. So LISTEN to him. The Republicans are deliberately trying to cause a double-dip recession with their far too steep cuts. They want to ruin the economy again, so Fox and Rush and the Tea Party can blame Obama for their own dirty deeds. Wake up, America, and notice their con game for once, will you?

[americaforme]

10:42 PM on 03/03/2011

Bernanke should be listened too, would be my take on the news that 60 billion in cuts, will cause 200,000 layoffs. Bernanke has all the appearance of a man with little or no sleep, and if he cares about his country, we would do well to heed his instructions. Repugs, havent got it right in a long time, and I dont see their victorious leaders with bags under their eyes. The fearless leaders look perky,relaxed,and all knowing, in our land of decreasing stability.

[Wealth-to-Freedom]

07:58 PM on 03/03/2011

The Fed and Ben Bernanke have to keep telling the same story. They know that economy only grows when people are creating debt. Without out Debt the entire financial system stops to function as we know it today. There are 7 steps to money. Know and understand them and you will know that Ben Bernanke is lying every time he talks.

[jc323]

03:06 AM on 03/04/2011

Indeed! I see you have been doing your research the Fed is a fraud. Ben is not the average persons friend. Who he represents is the big banks and the major stockholders of these banks, loyality to this country has nothing to do with his policies.

[Larry Davids]

10:34 AM on 03/06/2011

I wish everyone could understand this, you and i know that will never happen..

[travlindr]

01:58 PM on 03/03/2011

Just as we are creeping into a recovery, Republicans try more of their "trickle down" voodoo economics, and the Dems are too weak to stand up to them. All this does is make the money avalanche up to the wealthy few who could not possibly pay more taxes. Wake up people! They are staging war on the average American (I will not even say middle class because there is not enough of it left to say that). Remember that both Boehner and Kantor have replied "so be it" when told their cuts will eliminate jobs. The gubernatorial kooks in WI and OH are busy trying to finish off unions. They Republican program -- no health care for anybody who cannot pay the exorbitant prices out of pocket, no pensions either. They want to destroy social security AND and other union bargained pension funds, ignoring the fact that federal and state governments have borrowed heavily from both. Here we are, THIRD WORLD AMERICA, thanks to the Republican Party and the uninformed people who vote for them. And the best part is they will probably blame Obama for destroying the jobs. If we need to make cuts, what about the billions we give to highly profitable oil companies?

[Cabo600]

12:36 PM on 03/03/2011

Considering the assault on Unions by the Republicans, the GOP will be costing America far more than 200,000 jobs.

[citygirl1832]

12:13 PM on 03/03/2011

As John Boehner would say..."So be it."

[StuffMoreStuff]

11:41 AM on 03/03/2011

http://www.usdebtclock.org/
this isn't trivial either uncle Ben. What is insane is that people are this reluctant just to get back to taking in what goes out or to stop using the red ink when it comes to to each individual's year's budget deficit. What is is ridiculous is that is only step one. We need surpluses to pay off the debt. And I don't mean the small 2yrs of surpluses under Clinton, I mean years of large surpluses!

[Its-All-Good]

11:04 AM on 03/03/2011

oh... and when the stimulus runs dry in about 2 months also.. he left that out.. add: 800,000 to his tally