It was three years ago this week that Federal Reserve Chairman Ben Bernanke became the first US central banker to sit down for a vanity interview with “60 Minutes,” an interview in which he heralded the “green shoots” that he was seeing in the economy.
Hence, it is no surprise that in the spring of this election year the “green shoots” brigade is out in force again, aided by an enthusiastic mainstream media that tells us day after day that the economy is getting better. Indeed, the employment picture in America has brightened a bit, with an average of 245,000 new jobs added over the past three months as the unemployment rate fell to 8.3 percent. “Great news for the president” is the conventional wisdom.
Yes, 8.3 percent unemployment is far better than the 10.2 percent we saw back in October 2009. Still, when voters “vote their pocketbook” come November, unemployment is just one — although the main — component of their economic well-being. The other is inflation, and on that front Team Obama has a lot to be worried about.
Remember the Misery Index? Veteran Democrats do, and so do the president’s re-election operatives in Chicago. The Misery Index is the sum of the unemployment and inflation rates, and it’s what did in Jimmy Carter in 1980 as runaway inflation compounded an already bleak economic picture.
On the face of it, the government measure of consumer prices, the CPI, is just mildly alarming — with the government estimating prices to be rising at a 3.1 percent annual rate.
But as anyone who pays the bills or does the household grocery shopping knows, a government-reported 3.1 percent inflation rate is laughably low. Bought cereal or mac and cheese for the kids lately? If so, you’re aware of the near double-digit increase in prices in the supermarket aisles.
So what is the true inflation rate?
Fortunately, the folks at the American Institute of Economic Research have resurrected the idea. Their Everyday Price Index (EPI) strips away the cost of big-ticket items, like homes and cars, and looks at the cost of things that consumers encounter on a daily or monthly basis, such as groceries, prescription medicine, and telephone and cable bills. By that measure, the Everyday Price Index shows inflation galloping ahead at an 8.1 percent annual rate, a reading that would put the current Misery Index at a Carter-like 16.4 percent — not a good recipe for re-election.
Averaging the CPI and the EPI gives us a rate of 5.6 percent, a number most New Yorkers, and probably most Americans, would consider on the mark.
By that estimate, the Obama Misery Index comes in at 13.9 percent, higher than that of any president up for re-election since Carter in 1980, but not too far above the 12.4 percent misery reading when Ronald Reagan ran in 1984.