GOP Gets Tax Help from Unlikely Source

Republican lawmakers got a little help on their argument in favor of extending all of the Bush tax cuts regardless of income.

And it came from an unlikely source who tries to stay out of politics -- Federal Reserve Chairman Ben Bernanke -- who voiced concerns this weekend about the recovery. He told "60 Minutes" that the economy is much too fragile for any sudden changes.

"We are recovering now. And we don't want to take actions this year that will affect this year's spending and this year's taxes in a way that will hurt the recovery. That's important."

The Fed watches the economy closely since it is the only independent body with the power to influence the pace of economic growth.

Bernanke discounts the idea of a double-dip recession, in part because key elements of the economy such as housing are already so weak they can't get much worse.

But he does worry about jobs, because the economy is barely growing. "It takes about 2.5 percent growth just to keep unemployment stable," Bernanke says. And that's about what we're getting. "We're not very far from the level where the economy is not self-sustaining."

And he says high unemployment erodes confidence as well as spending power. "I think that's the primary source of risk that we might have another slowdown in the economy."

In hopes of avoiding that, and in an effort to keep interest rates low for the purchase of cars and homes and the like, Bernanke and other Fed governors decided recently to pump another 600 billion dollars into the economy.

"What we're doing is lowering interest rates by buying Treasury securities," Bernanke says. "And by lowering interest rates, we hope to stimulate the economy to grow faster."

Peter Morici, an economist at the University of Maryland, criticizes the administration for not acting more energetically to increase jobs but gives Bernanke credit. "It was basically the only tool Ben Bernanke has at his disposal to ward off what could be a second recession."

Some feared a new round of easing would unleash inflation, but with slow growth and 9.8 percent unemployment, Morici sees inflation as the least of our worries: "I'd love to have that problem. I'd love to see Ben cope with that problem."

Bernanke himself calls the fear of inflation overstated. "We've looked at it very, very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing."And he makes clear that if inflation were to come back, the Fed would act swiftly and decisively. "We could raise interest rates in 15 minutes if we have to," he says. Of course, that would be an effort to slow the economy-- clearly a worry for another day.

There may be a time when inflation is a problem, but Bernanke says "that time is not now."