Matthew Yglesias » The Return of Stagflation

Aug 17th, 2008 at 10:34 am

The Return of Stagflation

No, we’re not back to late-1970s or early-1980s levels yet, but the so-called “misery index” (unemployment plus inflation) has reached a seventeen-year high. One can’t help but think that if the money spent on Iraq had gone to hundreds of billions of dollars worth of private- and public-sector investment, we might not be having these problems. Energy supply shocks are always tough, but with less Balad Air Base and more SUPERTRAIN and they might not be nearly as tough.

Comments
25

25 Responses to “The Return of Stagflation”

Neil the Ethical Werewolf Says:
August 17th, 2008 at 11:04 am
This is shameless blogwhoring, but if you want to see a bunch of other neat stuff we could’ve done with the Iraq War money (buying a Prius for every American household, covering New Hampshire and Vermont entirely in gold leaf, fueling a motorbike to go 45 light years), I’m posting a new idea every day at War or Car.
Marshall Says:
August 17th, 2008 at 11:28 am
The “misery index” is a crock of shit because inflation is not miserable for many people, particularly debtors (though less so if they were taken in by low, variable-rate offers). There are better ways of measuring misery, and by those measures, we’re even more miserable than this would imply.
Walker Says:
August 17th, 2008 at 11:41 am
Considering that inflation in the early 90s is not defined the same way as it is now, these numbers are meaningless. And comparing us to the 1980s or 1970s is even more meaningless.

But that does not stop the mathematically illiterate from making graphs like this.
hoi polloi Says:
August 17th, 2008 at 11:42 am
Marshall: can you indicate what these better measures might be? kthxbye

I post in the hopes that things go better than they did at Th’Atlantic.
Quiddity Says:
August 17th, 2008 at 11:47 am
Walker is right. Since the Boskin Commission, inflation has been underreported. And unemployment may be too, what with the increase of “discouraged workers” who aren’t counted.
Marshall Says:
August 17th, 2008 at 12:05 pm
I’m not referring to anything off the beaten track: namely time series of median income, the poverty rate, or even better a modified measure of poverty that takes account of relative poverty, namely inequality.
tom.a Says:
August 17th, 2008 at 12:19 pm
One can’t help but think that if the money spent on Iraq had gone to hundreds of billions of dollars worth of private- and public-sector investment

Or we all could have received a $3,000 tax rebate because the economy would still be in the crapper.
laborlibert Says:
August 17th, 2008 at 1:14 pm
Matt:

Are you referencing the “Supertrain” from the early 90’s period classic “Singles”?

That Supertrain guy was a dork (”we’re gonna give them good coffee, good music,…”). He came even though Xavier Macdaniel told him not to. “Citizen Dick” was cool though. The cameos from Pearl Jam and Chris Cornell were great.
Reality Man Says:
August 17th, 2008 at 1:27 pm
The “misery index” is a crock of shit because inflation is not miserable for many people, particularly debtors (though less so if they were taken in by low, variable-rate offers). There are better ways of measuring misery, and by those measures, we’re even more miserable than this would imply.

The name should probably be changed, but it is useful in that there is supposed to be a tradeoff between inflation and unemployment, meaning that in general when unemployment goes down inflation goes off and vice versa. When they both go up during stagflation, things suck. However, if people are going to compare such a measure to previous years, a common definition of unemployment should be used and it’s not clear the numbers in this graph reflect that.
James Gary Says:
August 17th, 2008 at 1:36 pm
Are you referencing the “Supertrain” from the early 90’s period classic “Singles”?

I’m pretty sure, that Matt, in contrasting the present high level of military spending to the higher level of public sector investment during the 70s, is referencing the short-lived 1970s TV show called “Supertrain,” to which–although I’ve never seen “Singles”–the character therein was undoubtedly also referring on some level or another.

It would work better if there was a present-day TV show called “Balad Air Base,” which as far as I know, there isn’t.
laborlibert Says:
August 17th, 2008 at 3:03 pm
James Gary:

Thanks for the education. I did not exist in the 70’s and had never heard of the Supertrain show before.

That being said, neither was Matt, so I guess we can’t be entirely sure of what he was referencing, but you are probably correct.
Brian Will Says:
August 17th, 2008 at 4:29 pm
Matt “SUPERTRAIN” Yglesias
JonF Says:
August 17th, 2008 at 5:09 pm
Re: One can’t help but think that if the money spent on Iraq had gone to hundreds of billions of dollars worth of private- and public-sector investment, we might not be having these problems

I disagree. Unless you– maybe — amend that “if” to “if Al Gore had been president…”. The Bush administration would not have spent one dime more sensibly had there been no 9-11 and hence no Iraq War. Instead they would have gone for even deeper tax cuts and found more ways to hand out goodies to their cronies. The mortgage meltdown would have happened just the same. Some run-up in energy costs would have occurred regardless (even with a President Gore). About the only thing we can say is that maybe the federal budget deficit wouldn’t be as big—but that alone would not guarantee a good economy.

Re: The “misery index” is a crock of shit because inflation is not miserable for many people, particularly debtors

In the short term inflation is miserable for just about everyone, because prices go up first and it takes a while for wages to catch up. Even people with a COLA automatically bumping up their income usually have to a wait until the next year for the increase to take effect.
scythia Says:
August 17th, 2008 at 5:52 pm
SUPERTRAIN!
BruceMcF Says:
August 17th, 2008 at 7:20 pm
At 10.3%, the seasonally adjusted U6 rate is 0.1% from the peak unemployment that followed the 2001 recession.

With the gap between headline and broad unemployment widening since the 1970’s, there is a part of the difference in the “misery index” that is due to a shift from open lay-off unemployment to underemployment and hidden unemployment.
Glaivester Says:
August 17th, 2008 at 9:01 pm
The Bush administration would not have spent one dime more sensibly had there been no 9-11 and hence no Iraq War. Instead they would have gone for even deeper tax cuts

Yes, tax cuts are just as unproductive as blowing people up is.
Richard Steven Hack Says:
August 17th, 2008 at 11:15 pm
As usual, my misery is higher than most people’s – but these days it’s lower than it’s been in most of my life. Well, a bit lower, anyway.

However, we must always remember the classic line: “Cheer up, things could be worse – so I cheered up, and sure enough, things got worse.”
Reality Man Says:
August 18th, 2008 at 3:53 am
Unless you– maybe — amend that “if” to “if Al Gore had been president…”. The Bush administration would not have spent one dime more sensibly had there been no 9-11 and hence no Iraq War. Instead they would have gone for even deeper tax cuts and found more ways to hand out goodies to their cronies.

Good point. Anything liberals would want would have been called “too expensive,” “socialism,” etc. by the Bush administration.
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Matt Yglesias

The Return of Stagflation

25 Responses to “The Return of Stagflation”

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