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Part 4: Party Performance and Inflation
When I tell my children about my early college days, they remind me that I started
college in the dark ages. It was really 1971 when I took my first college course as
an early admission student, but to our children my experience might as well have
happened in a whole lost civilization. My son who I am apt to nag about finishing
his last few classes for his MS from The George Washington University and my
eldest daughter who recently started graduate school at Brown University laugh
when I brag about my $120 tuition wavier and how my father grumbled about
paying the $30 fee payment. Somehow, they tell me, some things have changed,
especially in the tuition department.
Somehow inflation happened. Although not as popular of a parlor topic as it once
was in the seventies and eighties when inflation had muscles and hung out in dark
alleys on the bad side of town, our politicians still love to tell scary stories of
inflation gone awry to scare the social security set into voting in their direction.
Like their medieval counterparts, they argue with the conviction of philosophers
arguing over how many angels can dance on the point of a needle.
Could it be that one party is better at whipping the old inflation bug than the
other? Or could it be that the Federal Reserve Bank has developed better
techniques over the last two decades to control inflation by more closely
monitoring the money supply and velocity? Clearly since 1992 the Consumer Price
Index (CPI) has remained below a 3.5 annualized rate; very close to an economic
optimum. Is it even worth arguing over at this point?
Once more I compared annual data from 1950 to the most recent available (thanks
to the Bureau of Labor Statistics via www.fedstats.gov) by presidential party. The
results of my comparison of the change in the CPI for those years found that the
average rate of inflation was almost identical regardless of party. Republican
presidents averaged 3.9 percent inflation in the CPI while their Democratic
counterparts came up with 3.8 percent. My statistical program tells me that there
is a 90 percent probability of coming up with this result by random chance alone.
In plain English, this one is too close to call.
Sorry folks. For those if you who would like to use inflation to make a big political
statement, I hate to disappoint you. It is not in the numbers. In fact the only
claim that these numbers appear to back up is that the Federal Reserve may
actually be doing what it was designed to do; control the money supply (which has
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