Bernanke repeats "fiscal cliff" warning to House panel, says Fed is working to foster job creation Federal Reserve Chairman Ben S. Bernanke on Wednesday reprised his warning to lawmakers that they must take steps to avoid the end-of-year "fiscal cliff" that could send the country back into recession, as he repeated his bleak assessments of U.S. economic growth and the labor market. Bernanke told the House Financial Services Committee that the Fed is doing what it can to reduce unemployment, even as he declined to offer any hint of new action to stimulate the economy. Bernanke gave the same message to the Senate Banking Committee on Tuesday. "The way the current law is set up, we are going to have a very, very sharp contraction in the fiscal situation, increased taxes and cuts [in] spending that are very dramatic and that occur almost simultaneously on January 1 of 2013," Bernanke said. If that all happens that will no doubt do serious damage to the recovery and probably would cost a significant number of jobs. Bernanke told senators Tuesday, "Do no harm." It has become increasingly clear that the greatest concern for the economy is shifting from what's happening abroad to what's happening at home. For much of the year, economists worried about the impact of the slowdown in Europe on the U.S. economy. Now, analysts say anxiety about the impact of the fast-approaching fiscal cliff - the series of federal spending cuts and tax hikes set to take effect at the beginning of 2013 if Congress and the Obama administration do not act - is displacing Europe as the primary threat to the nation's sputtering economy. Morgan Stanley said this week that fears about the fiscal cliff are reaching new heights across a wide range of industries. It is already seeing reductions in business orders and hiring, among other areas. The potential economic impact could smother the flickering recovery and further stifle job creation, analysts warn. A new report commissioned by the aerospace industry says federal budget cuts set to take effect in January could cost the country's economy more than 2 million jobs and raise the national unemployment rate by 1.5 percentage points over the next year. "The results are bleak but clear-cut," said Stephen S. Fuller, the George Mason University professor who wrote the report. The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds. The report echoes warnings from economists and policymakers who are urging lawmakers to find a way to put the nation on a sustainable fiscal path without derailing short-term growth. Along with Bernanke, this week other top economic forecasters to reduced their expectations for U.S. economic growth, in large part because of the uncertainty about the fiscal cliff. Economists say the automatic actions slated to take place at the end of the year - an increase in payroll taxes and in income tax rates, as well as large cuts in domestic and defense spending - would tip the country back into recession.