Fed Chief Bernanke Knows When to Hold 'Em

Let's give a little credit where it's due: To our (relatively) new Federal Reserve Chairman Ben S. Bernanke.

Now I generally don't like the Fed. There just seems to be something terribly elitist and un-American about a handful of economists directly affecting the direction of our $12.4 trillion economy! But like it or not, that's the power we've bestowed on the Fed. When the Fed raises interest rates, the market falls, and vice versa. You can pretty much bank on it.

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So if you've got a Fed chairman who can't read the economic tea leaves well, that means he's going to raise rates too much, or not enough, or he's going to send them in exactly the wrong direction. But this guy seems to know what's coming.

Bernanke testified before Congress in July and said he expected the housing market would cool, economic growth would decelerate and unemployment would edge up, taking pressure off prices. Now, three months later, it turns out he was almost completely right. Friday's economic report on the third quarter shows a slowdown in all the ways just mentioned. The only exception appears to be the unemployment figure, which remains at the historically low rate of 4.6 percent.

Of course, Fed chairmen like to speak in complicated gibberish, but steal yourself for a moment to listen to what Ben Bernanke actually said last summer:

''A sustainable, noninflationary expansion is likely to involve a modest reduction in the growth of economic activity from the rapid pace of the last three years to a pace more consistent with the rate of increase in the nation's underlying productive capacity," he said. ''The anticipated moderation in economic growth now seems to be under way.''

In other words, a slowdown's not a bad thing for a hot economy, as long as it doesn't turn into a recession. And as long as the economy is slowing down a little, maybe the Fed won't have to raise rates when next they meet.

So this is all pretty good news, right? Well, for the most part. It's great that the head of the Fed correctly sees which way the economy's heading. It's also great that the economy's continuing to expand, albeit at a slower rate. And it's great that the tax rate cuts have led to more businesses investing in growth and selling more things to consumers, which has led to a doubling of revenue coming into the tax coffers. As long as tax receipts are flowing into the national treasury, all this ridiculous government spending won't cause too many problems.

The big concern, though, is that the tax rate cuts that led to economic growth and increased revenue will not be renewed, and that could lead to businesses slowing growth, consumers spending less, fewer tax receipts and, eventually, a recession. If the tax rate cuts are not extended before they expire in 2008 and 2010, we're screwed. And whoever becomes president in 2008 is going to preside over a recession. Even the forward thinking Ben Bernanke won't be able to change that.

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David Asman is the host of "Forbes on FOX" which airs on the FOX News Channel, Saturdays at 11 a.m. ET.