Biden needs to bring the ‘Misery Index’ back into the campaign conversation
Our economy has rarely been able to simultaneously attain a low unemployment rate and price stability. Back in
1976, Jimmy Carter, the Democratic presidential candidate, made this a very potent political issue against his Republican opponent, President Gerald Ford.
Our economy was in a period of high unemployment and high inflation. Carter was able to sum up just how bad things were with a single number — the sum of the unemployment rate and the rate of inflation. It was called the “Misery Index.” Anything over 10, he said, was unacceptable. In the fall of 1976, the index was 12.7 and Carter won a very close election.
In 1980 the Republican presidential candidate, Ronald Reagan, used Carter’s own measure against him: “Are you better off or worse off than you were four years ago?” The Misery Index was now 19.9. He beat Carter in a landslide.
Let’s fast-forward to more recent times. When President Donald Trump took office in 2017, the Misery Index was 7.3. Our economy did quite well during his first two years in office, and after peaking at 15% during the worst of the COVID pandemic, the index stood at 8.1 by October of 2020. Trump lost a very close election to Joe Biden.
And now, eight months before Election Day, the Misery Index stands at just 7.0. The unemployment rate is 3.9 and rate of inflation is 3.1. Yet, a majority of Americans — and a much larger majority of Republicans believe that inflation is still far too high. Consequently, they consider themselves worse off today than they were four years ago.
Why do so many people believe that inflation is still such a big problem? They are quite correct that the prices of food, gas and other necessities are 50% or even 100% higher than just a few years ago, and that the price rise was, by definition, the product of inflation.
But the rate of inflation itself has been steadily declining since early 2022. Most people are, at best, just vaguely aware of that fact.
If they want to feel mad, they’re certainly entitled. But what’s got them so mad is not current inflation. An annual rate of price increases of just 3.1% is not considered very inflationary — at least not by economists such as myself. What’s gotten folks so angry are the lingering results of the past inflation, which had driven up those prices. What’s got them so mad is that prices are still so damn high. It’s as if their news sources are two- and three-year-old newspapers and TV news broadcasts.
President Biden would do well to bring back the Misery Index to bolster his claim of providing good economic leadership. Although only a small fraction of the electorate would even take notice, it should be noted that this strategy certainly worked for Presidents Carter and Reagan.