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Opinion: Recession in the ’70s brought us Hamburger Helper. What can we expect now?

Massive government overspending makes it hard for the Federal Reserve to raise interest rates without harming the government’s ability to pay interest on its debt.

SHARE Opinion: Recession in the ’70s brought us Hamburger Helper. What can we expect now?
President Ford holds a White House Rose Garden news conference Oct. 9, 1974.

President Gerald Ford holds a White House Rose Garden news conference Oct. 9, 1974, the day after disclosing his anti-inflation program. The chief executive is wearing one of his WIN — Whip Inflation Now —buttons on his lapel.

Associated Press

Inflation isn’t all bad. As other columnists, such as Paul Krugman of The New York Times, have noted, the last time we had persistent, stubborn inflation, the marketplace gave us Hamburger Helper.

If you haven’t made that connection, you need to watch an ad from those days on Youtube. The product’s nine flavors were called, “Nine delicious ways to fight inflation.”

But don’t get too excited. Meat enhancers are not much of a legacy for those dark economic days, even if they did keep me fed through much of college.

These days, inflation, 2022-style, isn’t invoking any warm, fuzzy nostalgia for the inflation of a half-century ago. We aren’t donning bell bottoms or getting shag haircuts. We are, however, feeling anxious and dealing with a growing sense of political anger.

Back in the ’70s, Washington tried to make beating inflation a patriotic duty. President Gerald Ford issued WIN buttons, which stood for “whip inflation now.” The idea was to get Americans to rally behind better spending and saving habits in order to help Washington with its own feeble efforts. It sounded as if the president was trying to blame the people for what was going on.

By 1978, at least, Americans knew who really deserved the blame. I found an NBC poll from that year on newspapers.com. It gave respondents a list of possible reasons for inflation. The largest percentage, about a third, blamed Washington’s overspending, and they weren’t too keen on the new president, Jimmy Carter, and his plans for voluntary price and wage guidelines. 

Let’s put that overspending into some perspective. In 1978, the national debt stood at $772 billion, and the annual budget deficit was $59 billion, according tothebalance.com. Today, the debt has passed $30 trillion, and the deficit was $2.8 trillion last year. 

Sure, that’s not a fair comparison because a dollar is worth much less today, but that’s also the point.

As in 1978, today’s Americans are beginning to catch on. Business is booming. Companies everywhere are hiring and they can’t seem to find enough workers. And yet, with prices rising at an annual clip of 7.9% (about 9% in the Mountain States), wages aren’t keeping up. 

A new poll by the Deseret News and the Hinckley Institute of Politics found 62% of Utahns saying their income didn’t rise at all in the last year, with 75% saying their household income is not keeping pace with inflation. 

People aren’t stupid. They know when they smell trouble ahead.

A new national poll by CNBC + Acorns Invest in You found 81% of Americans believing the nation will see a recession in 2022. Business Insider reports spikes in Google searches for the phrases “recession,” “yield curve” and “is recession coming 2022.”

And regular people aren’t the only ones concerned. Plenty of economists and others in the financial industry are expressing similar worries.

Deutsche Bank this week warned that a U.S. recession may be looming, because the Federal Reserve’s only weapon against inflation seems to be further hikes in interest rates, which would slow economic growth.

Just as people instinctively knew in 1978, the problem today is massive federal overspending. As Nobel Prize winning economist Milton Friedman wrote in 1980, slow growth and high interest rates are the natural symptoms of the only way to cure dilemmas like the one we’re in. 

Except that our problem may be much worse than anything Friedman, who died in 2006, had to face. 

Gerald P. Dwyer, a professor at Clemson University, laid out the problem well in a recent essay for the American Institute for Economic Research. With interest rates on the massive national debt at only 1.8% per year, Washington is paying 12.7% of its annual revenue on interest payments. And yet investors in that debt are losing ground against inflation.

Raise the interest rate to 5% and suddenly Washington has to pay 35% of its revenue on debt payments. Raise it 7% and the interest payment jumps to 50% of all government revenues.

“Sooner or later, absent substantially lowering government spending or raising taxes, interest payments will overwhelm the government’s budget,” Dwyer wrote. “The situation might even be termed a sovereign debt crisis because all the spending, revenue, deficit and inflation choices are unpalatable.”

Perhaps the government’s only resort then would be to inflate the dollar even more, making the debt seem smaller, while chasing away investors and ruining the economy.

If that happens, Hamburger Helper may become a menu staple, only without the meat.