INFLATION in this country has been rolling along at an annual rate of 10 percent or so for two years now. It was in January 1979 that the Consumer Price Index moved sharply and clearly into that range -- there to remind ever since. The CPI rose 12.4 percent last year. While the CPI overstates the case a bit, it also veils the steady, acceleration, over the past five years, of the inflationary trend.
After two years if it, people seem to be adapting to inflation at least in the management of their money. The sky hasn't fallen. The business world is adjusting. All of the methods to curtail inflation would mean pain for somebody. Why not succumb to temptation, and just let inflation keep rolling indefinitely?
Some of the arguments are already audible. Just think of the families that have brought houses at inflated prices with 14 percent mortgates, counting on future inflation to carry that burden. They'd be in an excruciating squeeze if inflation, and its promise of infinitely rising incomes, were stopped cold. Think of the companies flating long-term bonds at 15 percent, and the bankruptcies if they actually had to pay off those bonds in 1981 dollars. Think of the failures and unemployment likely to follow any sudden curtailment of inflationary demand.
The answer to that insidious logic is that inflation concerns more than money alone. Money is part of the web that holds society together, and depreciation of money suggests a loss of control at a deep and frightening level. It suggests that the country, collectively, is losing the ability to keep its promises.
Even if the country decided, wrongly, to accept the present inflation indefinitely, there's nothing magical about a rate of 10 percent a year. At that rate, the numbers have begun to slide around rapidly and, because everyone is building elaborate cushions against the rising uncertainty, the economy is getting less efficient. It's much harder to stabilize the inflation rate at 10 percent than at zero. At zero, the country is manifestly in control of its affairs. At 10 percent, with other kinds of promises rapidly eroding, the promise to restrain still higher inflation hardly seems reliable. Of all possibilities, the least likely is an inflation rate that stays steadily and dependably at the present level for the next two years.
It's always satisfying to blame some remote and impersonal villain for inflation -- perhaps the budget deficit, or too loose a money supply, or the rising price of oil. But those are as much effects as causes. The rest of it is that Americans, like most of other people, cherish the idea that their incomes and styles of life should improve from year to year. That seems natural and proper. Unfortunately, that improvement has gone along a good deal more rapidly than the rise in economic productivity to pay for it. The cure requires a drop in some Americans' standard of living. It need not be a large drop -- but until the country can decide who is to absorb the loss and how, inflation will continue. For most people, adjusting to it will only mean borrowning at very high interest. The further this kind of adjustment goes, the more costly the eventual return to stability will inevitably become.