PRICES in this country have precisely doubled in the past eight years. We offer that observation merely as a point of reference, and assistance in everyone's continuing struggle to keep track of things. If you were earning $15,000 a year in early 1974, and are earning $30,000 a year currently, you have just stayed even with inflation. You would be able to buy just as much now as you did then--but no more. Not everything has gone up at the same rate, of course. Gasoline is more expensive than it was then, relative to everything else, but clothes are a lot cheaper.
Prices have tripled in the last 17 years. Your $30,000 buys what $10,000 did in 1965. That year, by coincidence, marks the beginning of the great wave of inflation that has been running ever since. It started that spring, with the first impact of the accelerated spending on the war in Vietnam. Inflation has never again been as low as it was that year.
By the height of the war, the rate was around 6 percent a year. People considered that intolerable, but they generally believed it would pass when the war ended. Instead, in the early 1970s, a succession of strange events pushed it much higher. The United States devalued its dollar, sold its grain reserves to the Russians, and ran into an utterly unexpected oil crisis. The president of the period, Mr. Nixon, meanwhile turned to a recklessly inflationary strategy to win re-election, then fell into a great scandal and lost control of policy altogether. By the time he was forced out of office in 1974, the inflation rate was over 12 percent.
Those experiences had been so peculiar, most people reasoned, that they would never be repeated; inflation would fade away as the country returned to stability. Then some of the events of the early 1970s did indeed repeat themselves--dollar trouble, grain shortages, above all another great oil crisis. In 1979, the inflation rate was over 13 percent.
Now it has dropped again. But Americans have abandoned the previous view that inflation was merely a side effect of unique historical events through which the country was passing. They have come to think that it has a life of its own, and is now so deeply rooted in the economy that it has become permanent. The rate is now down to perhaps 8 percent, but much of that improvement is owed directly to a deep recession. The recession will presently end; will the lull in inflation end at the same time? Having gone through a Vietnam peak, a Nixon peak and a Carter peak, each higher than the last, will it now begin to move upward again in the next economic recovery? Mr. Reagan will have to speak to that question in the next several weeks, in his budget and economic messages. Those annual messages are usually rather dry reading, but this year they are likely to have an unusually attentive audience.