Fed Chair: Economic Impact Of GOP Cuts Will Be Less Painful Than Reports State

Federal Reserve Chair Ben Bernanke told Congress Tuesday that recent reports that warn economic recovery will be significantly stalled if proposed cuts by the GOP go through are overstated.

Last week, a report from Goldman Sachs claimed that the cuts would cut growth by 2 percent and another released this week by Moody’s Analytics warned that 700,000 jobs could ultimately be eliminated by the Republican attempt to rein in spending.

“We get smaller impact than that,” Bernanke told the Senate Banking Committee of the Fed’s in-house analysis.

However, the White House is still opposed to the $100 billion in cuts proposed by the Republican controlled House. President Barack Obama has indicated he will veto a spending bill that includes such deep cuts and OMB Director Jack Lew said that the reductions would be a mistake and ultimately not make much of an impact on the nation’s debt.

The 111^th Congress was unable to pass a budget for fiscal year 2011, instead opting to let 2010 spending levels carry over into the next Congress. However, federal spending is scheduled to run out this Friday without Congressional action. Currently, both chambers are considering a measure to extend funding, sans $4 billion, for two weeks while they craft a more enduring budget proprosal.