To: willcousa who wrote (181040 ) 5/10/2005 8:26:06 PM From: Lizzie Tudor Read Replies (1) | Respond to maybe, but just so you know this isn't about Paul Krugman, there are thousands of articles just like this if you google stagflation news now. The markets sure aren't acting like this is a healthy economy. Another bear year.Is It Back to the '70s? Even the worst-case scenario is likely a far less severe dose of stagflation than the original. Economists blame the shrinking economy and rising prices of the '70s on low productivity growth and bad policies, in particular President Lyndon Johnson's decision to finance the Vietnam war without raising taxes, followed by Nixon-era wage and price controls. Today some economists see a reminder of LBJ's "guns and butter" spending habits in the Bush administration's "deficits don't matter" approach.The threat that deficits pose to growth has helped inspire a revival of the infamous "misery index," invented by Chicago economist Robert Barro. Tallying unemployment and inflation, the index became a barometer of '70s gloom, with its gas lines and rationing, and President Gerald Ford's failed campaign to "Whip Inflation Now."Today the misery index stands at 8.3 percent, way below the high mark of 21.7 set in the second quarter of 1980, but up from the low point of 5.9 percent recorded in 1998. What this captures is not misery, but another phenomenon America has not seen in this way before: high anxiety despite a generally strong economy. If inflation and growth were at the same levels but trending in opposite directions, we wouldn't be talking about stagflation. msnbc.msn.com
