President Jimmy Carter signs emergency natural gas legislation in the Oval Office of the White House in Washington, DC on February 2, 1977. An oil crisis contributed to a period of double-digit inflation in the 1970s .

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President Jimmy Carter signs emergency natural gas legislation in the Oval Office of the White House in Washington, DC on February 2, 1977. An oil crisis contributed to a period of double-digit inflation in the 1970s .

AP

The 1970s are starting to change – for all the wrong reasons.

Today, prices of everything from gasoline to groceries are climbing as the economy recovers from the pandemic recession. And it is raising concerns in some quarters as to whether the United States is heading for the dire economic days of the 1970s, when the country struggled with double-digit inflation that required painful action from the Federal Reserve.

The Biden administration insists that these concerns are far from true and that the days of Americans sporting campaign-style “Whip Inflation Now” buttons on their wide lapels are long gone.

“I came of age and studied economics in the 1970s and I remember what that terrible time was like,” Treasury Secretary Janet Yellen told a House subcommittee Thursday. “Nobody wants this to happen again.”

Yellen and others in the administration argue that the current price spike is a temporary phenomenon, triggered by pandemic supply shocks and pent-up consumer demand – not the start of a persistent, upward spiral like the one that spawned ‘stagflation’ in the 1970s and haunted presidents from Richard Nixon to Jimmy Carter.

To understand the differences between the two eras, it is useful to go back in time.

The 1970s were reserved by the oil shocks which led to a surge in gasoline prices. Meat prices have also skyrocketed. On the popular sitcom All in the family, Archie Bunker was reduced to eating spaghetti without meat.

In this file photo from Dec. 23, 1973, cars line up in two directions at a gas station in New York City. The 1970s were a time defined by devastating double-digit inflation, requiring drastic action by the Federal Reserve.

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In this file photo from Dec. 23, 1973, cars line up in two directions at a gas station in New York City. The 1970s were a time defined by devastating double-digit inflation, requiring drastic action by the Federal Reserve.

Marty Lederhandler / AP

In fact, prices started to climb in the mid-1960s, when the federal government was spending huge amounts on both the Vietnam War and mainstream society. Nixon temporarily froze prices in the early 1970s, but that only delayed the pain. When its controls were lifted, prices rebounded even more.

Gerald Ford has called inflation “public enemy number one”. Carter called it the most pressing domestic problem in the country.

Despite the White House’s harsh words, prices continued to climb.

Princeton economist Alan Blinder says psychology was partly to blame. In the 1970s, Americans came to believe that high inflation was here to stay. And that expectation has become a sort of self-fulfilling prophecy.

“If you are a business and you expect the inflation rate to be 5%, you will probably be pricing for next year [to] increase by 5%, ”said Blinder, who was vice chairman of the Federal Reserve in the 1990s.

“On the other hand, if you think inflation is going to be 1%, you are more likely to rise by 1%,” he added.

In the end, it took a crackdown from cigar-biting Fed Chairman Paul Volcker to break the cycle of rising prices and wages. Volcker broke the brakes on the economy by raising interest rates to 20% – a difficult remedy to prove he really wanted to bring inflation under control.

“At some point this dam is going to break and the psychology is going to change,” Volcker told the MacNeil / Lehrer NewsHour.

Paul Volcker, then Under Secretary of the Treasury for Monetary Affairs, is pictured during a press conference in Washington, DC. February 10, 1972. As chairman of the Federal Reserve, Volcker sharply increased prices to reduce double-digit inflation.

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Paul Volcker, then Under Secretary of the Treasury for Monetary Affairs, is pictured during a press conference in Washington, DC. February 10, 1972. As chairman of the Federal Reserve, Volcker sharply increased prices to reduce double-digit inflation.

Harvey Georges / AP

It worked. By 1983, inflation had fallen to just over 3%.

It was a painful correction. Almost 4 million people lost their jobs in consecutive recessions in the early 1980s. But over the past four decades, inflation has not been a serious problem in the United States.

But now some are sounding the alarm. The Ministry of Labor’s consumer price index climbed to 4.2% in April – the highest since September 2008.

There are some important differences from the 1970s, however, including a change in expectations.

“If people think the prices will be stable enough, then they will be – because they won’t ask for really big pay increases and the people who sell things won’t ask for big price increases,” the president said. the Fed, Jerome Powell. Morning edition. “Once psychology sets in, it tends to perpetuate itself.”

Blinder agrees that the decades of stable prices since the 1970s should help prevent a further inflationary spiral in the future.

“I think the generation that was adults in this time of high inflation will always remember it,” Blinder said. “But there are a lot of Americans who have never lived with inflation at all. So naturally, they don’t expect it.”

The White House and the central bank are on the lookout for any signs that expectations are changing – and they say a return to soaring inflation is as unlikely as a return of mood rings and bell-bottomed jeans .