Fed chairman warns against steep cuts

WASHINGTON - Steep spending cuts proposed by Republicans in the House of Representatives would slow the nation's economic growth, cost jobs and work against the Federal Reserve's efforts to stimulate the economy, Federal Reserve Chairman Ben Bernanke warned lawmakers Tuesday.

The nation’s prosperity would be better served by Congress and the White House agreeing on credible legislation to reduce the federal deficit and debt over a longer period of five or 10 years, he told the Senate Banking Committee.

On an issue of more immediacy, Bernanke said that recent rising oil and gasoline prices were unlikely to stall the strengthening economic recovery or lead to significantly higher inflation. However, if those prices go considerably higher and stay there, he said, that would reduce consumer spending on other goods and slow the broader economy.

“My sense is that the increases we’ve seen so far do not yet pose a significant risk,” the Fed chairman said.

The current battle in Congress over the federal budget dominated questions at a hearing that ostensibly was about the Fed’s semiannual report on monetary policy.

Bernanke was asked repeatedly about GOP proposals to trim anywhere from $60 billion to $100 billion in government spending during the current fiscal year, which ends Sept. 30. These cuts would do little to bring down long-term budget deficits but would slow the economic recovery, he cautioned.