“History doesn’t repeat itself, but it often rhymes” is a quote attributed to Mark Twain. In the political and economic world, this maxim is proving true, as we are witnessing today.
The misery index is one such bit of history, dating back to the Carter presidency in the late 1970s. Calculated by adding the unemployment and inflation rates together, the misery index “measures the degree of economic distress felt by everyday people.”
It is currently just over 12 percent, and that’s being generous given how the government calculates inflation. The misery index reached 15 percent just after COVID hit and the country locked down, closing myriad businesses. During the Carter era it topped 20 percent.
Another golden oldie, stagflation, is a term first used in the 1960s in the United Kingdom, describing a period of a stagnating economy along with rampant inflation, hence the coined term. It is simply a period of both inflation and a decline in the gross domestic product (GDP).
Stagflation may be the anchor hanging on Democrat necks ahead of the November midterm elections. Real GDP contracted in the first quarter of this year by 1.4 percent, negative growth. The last such contraction was during the first half of 2020 when COVID shut down businesses, travel, restaurants, and life in general.
Now America is post-COVID and the economy should be booming. One more quarter of negative GDP puts us officially into a recession, something the Democrats won’t be eager to showcase as they ask American voters to leave them in charge of the nation’s affairs come November.
Inflation is calculated based on many assumptions of the costs of various goods and services, all plugged into complex formulas that would make your head spin. It is the change in cost of this basket of goods that determines the rate of inflation. Like any other formula, the maxim “garbage in garbage out” applies.
For example, energy is only 7 percent in relative importance in this basket of goods. Is energy important? Ask anyone filling their car or truck with gasoline every week, spending over $100 when a few years ago they paid half that amount.
While the official government figure for inflation is at 8.5 percent, compared to only 4.2 percent a year ago, the true inflation figure is north of 15 percent. Why does the government downplay inflation? Two reasons.
One is politics. President Biden already has “I did that” stickers peppering gas pumps around the country, with gas prices hitting a record high at the time of this writing. High inflation numbers don’t help the political party currently in charge and largely responsible for the rampant inflation.
Second is government itself. Benefit programs, from welfare to Medicare, are linked to the consumer price index. As it rises, so should these benefits, but that will cost the government more money, dollars they prefer to spend on tampon dispensers in school boys’ rooms or in Ukraine to secure their border, while leaving ours wide open.
It’s not clear if the Republican party offers a good alternative to Democrat policy nonsense but expect the term “stagflation” to become a campaign issue as it should given the current trajectory of the economy and America.