Fed chairman Ben Bernanke told Congress today that Republican budget cuts probably would have a modest negative effect on the economy:
Bernanke  threw some cold water on recent studies by two leading economic forecasting groups that suggested Republicans' proposed $60 billion budget cut would be a major drain on the economy over the coming year....Responding to questions from Sen. Jack Reed (D-R.I.), Bernanke said that the Fed's analysis suggests smaller economic losses from the spending cuts, reducing GDP by several tenths' of a percent and the number of jobs by "certainly much less than 700,000."
Wait a second. According to Dana Milbank, Scott Lilly of the Center for American Progress estimates that the Republican plan would lead to the direct loss of 650,000 government jobs. If that's the case, surely total job losses can't be "much less" than 700,000?
In any case, it hardly matters. Maybe it's a million jobs, maybe it's half a million jobs. Maybe it will cost a point of GDP, maybe it will cost half a point of GDP. But considering that the economy is still sluggish and unemployment is extremely high, why are we considering budget cuts that will have any negative effect on jobs and growth? Especially cuts in the only part of the budget that isn't a long-term problem?
That's the big news from Bernanke's testimony: not that he thinks other estimates of job losses are too high, but the fact that he agrees the Republican budget plan will cost jobs and slow growth. That's coming from a Republican Fed chair! How much more evidence do we need that our current budget cutting mania is insane?