Fed Chairman: GOP Spending Cuts Could Cost Jobs

By Rachel Christiansen

Federal Reserve Chairman Ben Bernanke was in the hot seat Wednesday as he testified before the House Committee on Financial Services to give the bank’s take on the current economic outlook and monetary policy. 

Bernanke came under fire from Republican members of the Committee including Rep. Ron Paul (R-Texas), who has been a long time critic of the Fed. 

“The real cause of price inflation, which is a deadly threat to us right now, is the Federal Reserve system and our monetary policy,” Paul said. 

When Paul asked what Bernanke’s definition of the dollar is, Bernanke simply replied “It’s what the consumers can buy food and clothes and gasoline with.”

Bernanke also said that while the Republican spending cut plan may not cause a “big dent” in economic growth, it may cost around 200,000 jobs, which “isn’t trivial.”

The Federal Reserves Semiannual monetary policy report predicts that the rate of economic growth will remain moderate, therefore indicating several years to come before the unemployment rate returns to a more “normal level.”

The report shows the unemployment rate continuing to be around seven and a half to eight percent by the end of 2012. 

“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Bernanke said.