News Release

Stagflation?

AP reports: “Consumer prices rose by a bigger-than-expected amount in January, reflecting big increases in the cost of food and health care, the government reported Wednesday.

“The Labor Department said that its closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and was higher than economists had expected.”

DEAN BAKER
Co-director of the Center for Economic and Policy Research, Baker said today: “The United States faces a serious risk of stagflation under the combined impact of a collapsing housing bubble, which is depressing demand, and a falling dollar, which is pushing up prices. This is likely to be a very painful period in which millions of people lose their jobs, their homes or both. The most unfortunate part of the story is that this disaster was entirely predictable and preventable, but those in policy-making positions chose to pursue short-term gains and hope that the long-term costs would occur after they had moved on.”

In 2005, Baker co-wrote the paper “Will a Bursting Bubble Trouble Bernanke? The Evidence for a Housing Bubble.”
More Information

JOHN MILLER
Professor of economics at Wheaton College in Massachusetts, Miller wrote the piece “Stormier Weather” in the current edition of the magazine Dollars & Sense.

He said today: “Things haven’t looked this bad since the stagflation of the ’70s. We have before us economic stagnation and a worsening housing crisis and a significant up-tick in inflation that compromises the ability of the Fed or anyone else to pull the economy’s fat out of the fire.”

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167