Revisiting the ‘Misery Index’

For some of us who are old enough to remember it, the specter of inflation perhaps raising its ugly head again is frightening.

First, the tax cuts passed by Congress last year and signed into law by the president are projected to create trillion-dollar deficits for at least the next few years — perhaps for the next decade. The countries that finance those deficits for us are going to demand — and receive — higher interest rates for doing so. Probably significantly higher rates.

Second, tariffs promised by the president could raise the prices on everything from canned vegetables to automobiles. They could make huge companies like Boeing completely noncompetitive with foreign rivals.

For the past 35 years or so, the United States has enjoyed a remarkable period of low inflation. Most years the cost of living has gone up in the 1, 2 or 3 percent range.

Back in 1980, we were the not-so-proud owners of a 13 percent mortgage on our house. We remember how Ronald Reagan defeated Jimmy Carter, the sitting president, by promising to lower the “Misery Index.” The Misery Index is a combination of adding the rate of inflation to the unemployment rate.

When Reagan defeated Carter in November 1980, the Misery Index sat in the low 20s. Contrast that with where the U.S. sat at the end of 2017 — a 4.1 percent rate of unemployment and an increase in the cost of living of 2 percent. The “Misery Index” would have measured 6.1.

We’re not certain why our government thought the economy needed stimulation — it was already growing very, very nicely, with jobs being created every month. But couple the cost of paying for tax cuts with tariffs that increase the cost of thousands of products and inflation is just around the corner.

The “Misery Index” may be returning to economic vernacular.

n Editorials reflect the opinion of the publisher.

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