“Inflation” used to be one of the most fearsome beasts stalking the political landscape. The promise to “Whip Inflation Now” became a major component of President Gerald Ford’s re-election strategy. It didn’t work, so in 1976 America got Jimmy Carter, and found out what inflation plus high unemployment can really do, when combined into rich buttery malaise.
Inflation was still a big topic well into the Reagan years, but it slowly dropped out of everyday public discussion, and became a subject of concern primarily to economists. Partially this was because inflation was brought under control, and became less urgent to the average man on the street… but another contributing factor was the government’s decision to re-define inflation out of existence, in much the same way “unemployment” has been “adjusted” until the commonly cited statistics are less than half of the true unemployment rate.
To be sure, calculating inflation is a complex endeavor, and it’s not easy to determine exactly which consumer prices should be included. I suspect most people would laugh at the notion of excluding the prices of food and gas… but that is exactly how “core inflation” is computed. The Labor Department publishes numerous indexes, including many different prices, weighted in a variety of ways. All of them are topics of considerable and reasoned debate.
For example, should housing prices be included in the calculation of inflation? They’re a very big deal for those who happen to be in the process of buying, or selling, a home, but they have very little direct effect on the consumer experience of existing homeowners. Fluctuations in real estate value affect property taxes and the ability to access home equity for lines of credit, but how does that compare to the daily impact of rising gas prices on the average consumer?
Back when he was launching his “Whip Inflation Now” campaign, President Ford identified ten areas for “joint action” to “put our own economic house in order”: food, fuel, price-fixing practices, investment capital, unemployment, housing, consumer and business credit, international trade, federal taxes, and federal spending.
You can read Ford’s full speech here. You’ll wince at some of his proposed solutions, although he does go out of his way to emphasize he’s proposing a bipartisan program, with input from both parties. Thus, a “millionaire surtax” sits side-by-side with tough federal spending caps ($300 billion in 1975 dollars!)
“It is my judgment that fiscal discipline is a necessary weapon in any fight against inflation,” Ford explained. “While this spending target is a small step, it is a step in the right direction, and we need to get on that course without any further delay. I do not think that any of us in this Chamber today can ask the American people to tighten their belts if Uncle Sam is unwilling to tighten his belt first.”
Message from the future to Gerald Ford: Oh, yes they can. That’s the entire campaign platform of the “Yes We Can” president, who asks Americans to make do with less, while he doubles the national debt, and uses compulsive force to “transform” the population. And as for “price fixing,” well, that’s almost the full-time occupation of Big Government these days, particularly in the realm of energy and health care.
At any rate, Ford’s ideas for the causes of problematic inflation present an interesting contrast with the way the topic is generally discussed today. The American Institute for Economic Research promotes a metric it calls the “Everyday Price Index,” which “includes only the prices of goods and services that the average consumer purchases at least once a month,” such as “food and beverages, household energy products and services, other utilities, motor fuel, prescription drugs, child care fees, phone services, and personal care products.” It’s more volatile, and over the past decade much higher, than the official Consumer Price Index. In fact, the difference between the CPI and Everyday Price Index has been growing fairly steadily.
The EPI is much closer to the way inflation was viewed when Gerald Ford wanted to whip it, and under the Everyday Price Index formula, inflation was 7.2 percent in 2011. It peaked at 8.9 percent in May 2011, slid back down quite a bit, and is now on the rise once again. Depending on what the Federal Reserve does to the money supply, and how much certain consumer prices stabilize, it could get a lot worse. The rising cost of food at grocery stores and restaurants has become impossible to ignore.
How much worse? Reporting on the topic of inflation for Reuters on Thursday, Linda Stern offers advice such as “stockpile the items you care about most,” “economize by eating out less or buying fewer treats,” and “economize on big things” – such as driving less, and getting the kind of health savings account that ObamaCare is busily killing off.
The killer question of politics, asked by Ronald Reagan when he ran against Jimmy Carter, was “Are you better off than you were four years ago?” Everything is worse today than it was four years ago. It’s increasingly difficult for Barack Obama to hide the damage from people who are being told to stock up on toothpaste, and eat beans instead of meat to offset rising gas prices.