US spending cut plan would result in 200,000 lost jobs, says Bernanke

Ben Bernanke said this week that spending cut plan promoted by Republicans would not significantly hurt US economic growth but may cost around 200,000 jobs over two years. The figure differs from 700,000 cited by Democrats but still it is opposite forecasts of job gains Republicans have pointed to.

Bernanke said that a $60 billion cut along the lines being pursued by Republicans 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.

Asked on how such job losses would affect the recovery, Bernanke said that in spite of concerns about the longer-term budget deficit, the Fed's focus is on reducing unemployment.

"I would like to see job creation," he said. "What I have been trying to focus on is, we have got to keep our eye on deficit reduction, but we need to think about it in a long-term framework."

Earlier the House of Representatives dominated by the Republicans 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.