Rising Cost of Living

Report Outline
Debate Over Inflationary Pressures
Living Cost Trends Over 150 Years
Means of Controlling Living Costs
Special Focus

Debate Over Inflationary Pressures

Living costs in the United States rose faster in 1965 than they had in any year since 1958. The primary force behind the price advances on a wide range of consumer products and services was the war in Viet Nam, which placed heavy demands on the nation's financial and business structure. If the costs of that conflict mount in 1966 to the degree that seems likely, inflationary tendencies will become more pronounced and the value of the dollar may be further eroded. Economists of many different persuasions are already urging stronger counter-inflationary action, starting with an increase in federal personal and corporate taxes.

President Johnson has promised to act quickly in the field of taxation if the war-fueled boom threatens to get out of control. When he signed, March 15, a bill to increase revenues by $6 billion to help meet costs of the war in Viet Nam, the President said he could make “no prediction …on the need for additional taxes later this year,” but he added that the administration was “ready to act when action is needed.” Whatever the eventual decision on fiscal measures, the problem of living costs for consumers promises to figure strongly in the mid-term election campaign next autumn. Public opinion polls seem to confirm the belief of Republican leaders that the American people now view the prospect of inflation as the country's foremost domestic issue.

Recent Upward Movement of Price Indexes

Consumer prices rose at an average annual rate of only 1.2 per cent from 1960 to 1964 but at a rate of 2.0 per cent in 1965. In December 1965 alone, the Consumer Price Index jumped by four-tenths of one per cent —the largest December increase in 15 years. The one-month rise reflected higher prices for nearly all major goods and services, but food costs accounted for more than one-half of the total increase. With the Consumer Price Index standing at 111.0 (1957–59=100), it was costing the consumer $11.10 to buy the same “market basket” of goods and services that cost $10 in 1957–59.