People who grew up in the 1970s may be unable to see straight when it comes to the threat of increasing prices. But keep in mind that you weren’t there.
Inflation is more than a theoretical concept for Americans under the age of 50. The inflation of the 1970s, on the other hand, was a formative experience for those of us born in the late 1950s and 1960s. Inflation, like Covid, was a part of our childhood.
It was always there, lurking in the shadows. It would go away for a while, only to return worse than before. Inflation was a disquieting and occasionally terrifying reality of life.
Everyone remembers gas prices skyrocketing, accompanied by shortages, rationing, and long lines at the pump at the time. Inflation, on the other hand, is never about a single product or industry. It is a phenomenon that affects the entire economy. Gas prices went up and up and up, but other prices didn’t go down and down and down as much.
Tom Noonan, then around 20 years old, worked in a Winn-Dixie supermarket in Louisville, Kentucky, in the late 1970s. His job involved changing price tags once or twice a week. With a box cutter and a pricing gun, he’d go around the store, slicing off the old price stickers and replacing them with new, higher ones. When I asked my Facebook friends about their experiences in the 1970s, they all recalled it.
Not every store was as meticulous as this one. The new costs were simply put on top of the old ones by many.
I half remember peeling off price labels to get a lower price (maybe on a book?), not even realizing that what I was doing was wrong or illegitimate, confesses Mike Schiffer, a law school IT manager born in 1968, in the Facebook thread. I don’t think I really understood how prices were set or changed at that point.
In the early 1970s, I remember going grocery shopping with my mother as the price of ground beef continued to rise, from 89 cents a pound to 99 cents to $1.09 and even $1.19. We joined a week-long meat boycott in April 1973. (Like many other participants, my mother cheated by relying on meat purchased the week before for a few meals.)
The boycott was a half-baked combination of economic theory, political drama, and housewife cri de coeur. On the front page of the New York Times, a protest poster said, “Devalue Pot Roast Not Dollars!” As a result, President Richard Nixon imposed meat price limits. A longer-lasting remedy was Betty Crocker’s meat-stretching Hamburger Helper, which became a nationwide hit in 1971.
Bill Meagher was a 10-year-old Philadelphia consumer with a gripe about a local delicacy when I was a middle-schooler tracking meat prices and sewing my own clothes.
The cost of his favorite TastyKake snack continued to rise. He complained to the company’s president in a letter. Meagher recalls receiving a reply “explaining inflation to me in very simple words,” which surprised him.
Mary Hodder, a 5-year-old from Turlock, California, learned that her weekly allowance of five cents was no longer enough to buy a candy bar. They were now worth ten cents each. In a text message, she stated, “My 5y old brain was like WHOT how could this happen?” “And then my father explained inflation to me.” “Why doesn’t everyone just stop it?” my 5-year-old brain wondered. Her plan was similar to President Gerald Ford’s Whip Inflation Now, but without the iconic buttons.
The fact that none of the adults in power knew what to do about inflation was especially disconcerting. We could sense our parents’ frustration because they were powerless.
Even cost-of-living increases were ineffective since prices went up with labor costs. Everyone learned to build an inflation into their plans, from employers and employees to lenders and borrowers. And as a result of such expectations, inflation became increasingly difficult to control – raise your prices, strike for greater pay, or risk falling behind.
The problem was exacerbated by “bracket creep.” A cost-of-living increase required a higher tax bracket, which meant falling further behind inflation with a steeply progressive income tax. In response, unions bargained for more generous health-insurance and pension benefits that wouldn’t face the tax hit — arrangements that were emulated for many non-union jobs and that redound in legacy costs to this day.
Unfortunately, ordinary Americans weren’t the only ones who felt helpless. TastyKake’s president was just as powerless as our parents. So was the president of the United States.
It’s really scary, a senior Carter administration official told Time in 1980, when inflation hit 13.5% after four years of increases. This inflation thing is frightening because we do not know what causes it, or what to do about it. The economists go to their computers, plug in the data, and out comes information that says that nothing like this should be happening. It’s very, very scary stuff.
Inflation has permeated popular culture by that time. Mary Tyler Moore tossed a package of meat into her shopping cart with a resigned distaste in the opening titles of “The Mary Tyler Moore Show.” Her pain was palpable. “King George” feared losing his (dry-cleaning) empire to the Dark Knight Inflation in a fantasy sequence on “The Jeffersons.” A bank loan — most likely with double-digit interest — saved him.
Dan Aykroyd’s President Jimmy Carter gave a fireside chat on “Saturday Night Live” in 1978, advising Americans to fight inflation by burning 8% of their money. In his most memorable role as Carter, Aykroyd advised everyone to keep a positive attitude.
Inflation is our friend, he said. Wouldn’t you like to own a $4,000 suit, and smoke a $75 cigar, drive a $600,000 car? I know I would! Grin. In the inflated world of the future, he promised, most Americans will be millionaires. Everyone will feel like a big shot.
Thankfully, we do not live in that inflated world. Under Paul Volcker’s leadership, the Federal Reserve was able to squelch inflation at the cost of double-digit interest rates and the greatest unemployment rate since the Great Depression. When asked decades later what he thought the most important legacy of the Great Inflation was, he said:
Don’t let inflation get ingrained. Once that happens, there’s too much agony in stopping the momentum.
It took nearly a decade of low inflation rates to convince the public that inflation wouldn’t come roaring back.
Long-term interest rates have continued to incorporate a substantial inflation premium. I got a 9% cost-of-living raise at my first job out of college, at the now-defunct Philadelphia bureau of the Wall Street Journal. Even though inflation had reduced to 3.1% by 1983, the union contract from the bad old days remained in place. Only a few years ago, 9% would have put us behind, especially after taxes.
The indexing of tax brackets to inflation was the most important provision of the 1981 tax reduction. Although tax rates change, indexing remains in place, avoiding bracket creep even if inflation returns, as it has this year.
That older people are worried about things that younger people are not, because they have lived through them, is of course every generation’s story, writes Los Angeles Times television critic Robert Lloyd in a review of the new HBO series Station Eleven.
You might assume us oldsters are excessively concerned about a rise of inflation. However, you were not there.