Bernanke: House GOP spending plan would have minimal effect on economic growth
Federal Reserve Chairman Ben Bernanke said Tuesday that the House Republican plan to cut $61 billion across federal agencies through the end of September would have only a slightly negative impact on the country's economic growth, lowering gross domestic product by one- to two-tenths of a percentage point this year.
Bernanke's statement, made during testimony at a Senate Banking Committee hearing on Tuesday, contrasted with a projection by a Goldman Sachs analyst that the House Republican plan could reduce GDP growth by as much as two percentage points in the second and third quarters of the year.
"It would have a negative impact," Bernanke said of the House Republican plan. "But, again, I think the 2 percent -- I'd like to see their analysis. It just seems like a somewhat big number, relative to the size of the cut."
Bernanke also disputed a report released by Moody's Analytics chief economist Mark Zandi on Monday projecting that the GOP plan could result in the creation of 700,000 fewer jobs by the end of next year.
"I don't have that number, but it would be certainly much less than 700,000," Bernanke said in response to a question from Sen. Jack Reed (D-R.I.) on how many jobs he estimates might be lost if the GOP plan were to be enacted.
House Republicans welcomed Bernanke's statement Tuesday. "Senate Democrats should find new talking points if they're going to continue to stand in the way of House Republican efforts to eliminate barriers to job creation through much needed spending reductions," said a release from House Majority Whip Kevin McCarthy's (R-Calif.) office touting Bernanke's testimony.
House Minority Whip Steny Hoyer (D-Md.) told reporters at his weekly roundtable that if lawmakers are serious about reining in spending, they must do more than cut from non-security discretionary spending, which comprises only about 15 percent of the budget.
"We all agree that we need serious reductions in spending over the coming decade," Hoyer said. "Some of us believe that doing deep cuts in the short term will have an adverse effect on the economy. I share that view; you've heard me say that before in terms of long-term versus short-term addressing of the deficit that confronts us."
| March 1, 2011; 1:46 PM ET
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