Thoughts about Monetary and Fiscal Policy in a Postinflation World

Alice Rivlin

Business Economics, 2015, vol. 50, issue 2, 56 pages

Abstract: There is a cultural lag in economic policy, particularly when it comes to inflation. Should inflation continue to be a concern, or is the new “normal” one in which inflation is low on the list of threats? In particular, central banks should focus on their original mission of ensuring financial stability and recognize that monetary accommodation is likely to continue to be appropriate. Budget policy, too, must play a role in promoting economic health—but expenditures should be shifted toward investment that increases productivity rather than consumption. Also, the federal tax codes and entitlements should be restructured so that they promote rather than impede growth. Finally, it is important to guard against institutions and individuals that have enormous financial power using that power to gain short-run advantage for themselves at the expense of long-term stability and prosperity for all.

Date: 2015
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