Misery Index for the Teens - The American Spectator | USA News and Politics
Misery Index for the Teens

And here’s a topic related to my last post: some analysts at Moody’s (according to Economix) have come up for a new “misery index” as we head into the Teens. (We never quite decided what to call this current decade. Was it the aughts? Is the Teens a slam dunk for the next decade?)

As you may recall, the Misery Index usually refers to the sum of the inflation and the unemployment rates. It was created in the ’60s, when stagflation — high inflation coupled with high unemployment — was a pressing worry.

But today there are greater concerns than inflation, namely the federal debt. Note that for some people inflation is actually a threat, but that’s not the mainstream view. As Rep. Paul Ryan’s musings suggest, the upcoming legislative battle will not be over how to cure inflation but over what measures are necessary to balance yawning deficits with necessary countercyclical policy measures like the jobs bill. And accordingly these Moody’s analysts have added the fiscal deficit as a percentage of GDP to the unemployment rate and called it the new Misery Index:

So this Misery Index tells you how bad the situation is relative to what the government can do about it: the higher the number, the more out-of-control the economic conditions are. As you can see, the US is in much better shape than Spain. What would be even more interesting, though, is to see this graph using implied debt to GDP rather than deficits. Although it would be a uglier chart it would better illustrate the constrainst the US will face as the recession plays out completely.

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