If Policy Won't Succeed, Does That Mean Policy Can't Succeed?

THE cryptic phrase "fiscal cliff" is creeping into news reports and economic analyses (including our own). Alongside "grexit" and "hard landing" it lurks as a mysterious and malevolent force waiting to wreak havoc on the global economy. The fiscal cliff is an American afflication. At the end of this year several major budget items are scheduled to expire, including an extension of the Bush tax cuts, an extension of the stimulus payroll tax cut, and an extension of emergency unemployment benefits.

My NYT column today is about why we can't move to a three percent inflation target (which I favor, at least for some number of years) and how we might make the leap.  Excerpt:

Here is my latest column, on the monetary proposals of Scott Sumner.  You probably know Sumner from his blog TheMoneyIllusion and in my view he has become possibly the most astute commentator on monetary policy at this time.  Excerpt:

Today I have an opinion piece on CNN.com which doesn’t say anything you haven’t heard me say here before (over and over again!), but it was awfully nice of CNN to invite me to publish it where it will certainly get more eyeballs.  Here’s the opening:

If elections are dependent on the economy, then the obvious question is what, if anything, can Democrats in Congress actually do to improve the economy between here and November? And the answer, even if they had the votes, is probably not that much. But that's not to say nothing.

The Cato Institute is hosting a discussion this month of the extent to which monetary policy may have contributed to our current economic problems. In the lead essay that appeared on Monday, Professor Scott Sumner of Bentley University suggested that the Fed erred in allowing nominal GDP to grow as slowly as it did. My response appeared this morning.

FOR politicians, power is usually its own reward. But doing the right thing sometimes comes at the expense of power, which means they need other incentives, too. This seems to be the thinking behind the "FI$CY", awarded to policymakers who lead "on confronting our fiscal challenges."

Prophesies of doom: