Flashback to the 80s, the last time US inflation stood at 8.5% (2022)

Inflation in the US has reached the highest level since 1981, prompting flashbacks to an era in which President Ronald Reagan had just taken office on a campaign vow to rein in soaring prices.

The Labor Department said on Tuesday that the consumer price index increased 8.5 percent in March from a year ago, the highest inflation level since December 1981.

At the end of 1981, the annual inflation rate of 8.9 percent actually represented good news for consumers -- at that time, it was the lowest inflation figure since 1977, following increases of 13.3 percent and 12.4 percent in 1979 and 1980.

Still, consumers in 1981 had to cope with painful cost of living increases, including groceries rising 4.3 percent on the year, residential rent jumping 8.5 percent, and energy rising 11.9 percent.

In comparison, modern Americans saw their grocery bill jump 10 percent in March from a year ago, while rent rose 4.4 percent and energy soared 32 percent.

And when it comes to gasoline prices, the modern consumer is surely worse off, after gas jumped 49 percent in March from a year ago, hitting an all-time high of $4.33 on March 11. Back in 1981, gas rose just 10 percent on the year, to $1.31 per gallon.

Reagan took office in 1981 with a plan to tackle inflation. The controversial plan spurred a brief but serious recession, but ultimately worked and the economy bounced back

The 'Great Inflation' period from 1965 to 1982 was marked by soaring inflation that topped 14 percent by 1980 and began to decline the following year

The consumer price index increased 8.5% in March from a year ago, a 41-year high

Then vs now: How the economy of 1981 stacks up against today's

December 1981

Annual inflation: 8.9%

Unemployment rate: 8.5%

Labor force participation: 63.6%

Real GDP growth: 1.3%

Federal debt to GDP: 31.4%

Federal funds rate: 13.13%

March 2022

Annual inflation: 8.5%

Unemployment rate: 3.6%

Labor force participation: 62.4%

Real GDP growth: 5.5%

Federal debt to GDP: 123.4%

Federal funds rate: 0.33%

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In many ways, the economic situation unfolding now is the opposite of the one the country faced in 1981, a year that saw the first space shuttle launch and the beginning of the AIDS epidemic.

Back then, inflation was quickly declining from double-digit levels that had plagued the country throughout the 1970s, a period known as the 'Great Inflation', and the economy was in recession as the Federal Reservejacked up interest rates as high as 20 percent.

The benchmark federal funds rate, which is the target rate for banks to borrow and lend their excess funds among each other, was at 13.3 percent in December 1981.

In contrast, inflation is now ticking higher with each new monthly report, while the unemployment rate remains low at 3.6 percent and the Fed keeps interest rates near historic lows at less than 1 percent.

For Reagan, an unemployment rate approaching 10 percent was the price worth paying to reel in soaring inflation.

'Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man,' Reagan famously said on the campaign trail in the 1980 election, and he devoted the first years of his presidency to tackling the issue.

Reagan's controversial economic policy had four key pillars: reducing government spending, slashing taxes, reducing regulations, and tightening the monetary supply through higher interest rates.

The harsh prescription spurred a brief but significant recessionfrom July 1981 to November 1982, which was at the timewas the worst economic downturn in the United States since the Great Depression.

Unemployment grew from 7.4 percent at the start of the recession to nearly 10 percent a year later, according to a Fed historical analysis.

As the recession worsened, Fed Chair Paul Volcker faced demands from Congress to reduce interest rates, but he insisted that failing to rein in inflation would result in 'more serious economic circumstances over a much longer period of time.'

In the end, the plan worked.By October 1982, inflation had fallen to 5 percent and the Fed allowed the benchmark interest rate to drop back to 9 percent.

Unemployment declined quickly, from a peak of nearly 11 percent at the end to 1982 to 8 percent a year later.

On January 20, the same day as Reagan's inauguration, the Iran hostage crisis came to an end after 444 days

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On March 30, 1981, just months after he took office, Reagan was the target of an assassination attempt by deranged gunman John Hinkley Jr

Historically, 1981 was a year of several notable milestones. On January 20, the same day as Reagan's inauguration, the Iran hostage crisis came to an end after 444 days.

Minutes after Reagan was sworn in, the 52 Americans who had been held captive in Tehran for more than a year were released to US personnel in Algeria.

On March 30, 1981, just months after he took office, Reagan was the target of an assassination attempt by deranged gunman John Hinkley Jr.

Reagan survived a gunshot wound that left him close to death, and Press Secretary James Brady was left permanently disabled by the shooting.

Hinkley, who believed killing the president would impress actress Jodie Foster, was released from psychiatric care in 2016 and currently maintains a YouTube channel to showcase his music.

On April 12, 1981, the space shuttle Columbia launched from NASA's Kennedy Space Center, becoming the first reusable craft to reach space.

The Columbia remained in service for 22 years, until its final mission ended in disaster when the shuttle broke up on reentry in 2003. The tragedy led to the eventual retirement of the shuttle program in 2011.

On April 12, 1981, the space shuttle Columbia launched from NASA's Kennedy Space Center, becoming the first reusable craft to reach space

In June of 1981, the first cases of AIDS were identified in the US, by a team of clinicians who reported a cluster of rare pneumonia cases in gay men

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On July 29, 1981, the world was enchanted by the wedding of Prince Charles and Lady Diana Spencer, which was watched byan estimated 750 million people

In June of 1981, the first cases of AIDS were identified in the US, by a team of clinicians who reported a cluster of rare pneumonia cases in gay men living in Los Angeles.

It was not until three years later that HIV was identified as the cause of AIDS, which exploded into an epidemic that killed millions in the decades that followed.

HIV patients can now be treated with powerful medications that mean they can live a near-normal lifespan, a marked contrast to the early days of the disease, when diagnosis meant an almost inevitable death.

On July 29, 1981, the world was enchanted by the wedding of Prince Charles and Lady Diana Spencer.

Widely billed as the 'wedding of the century,' it was watched by an estimated 750 million people around the world.

The couple separated in 1992, and divorced in 1996 after fifteen years of marriage. Diana died in 1997.

On August 1, 1981, MTV first launched at 12.01am with the words 'Ladies and gentlemen, rock and roll.'

On August 1, 1981, MTV launched with the words 'Ladies and gentlemen, rock and roll'

Olivia Newton-John's single 'Physical' hit No. 1 on November 21, 1981 and remained at the top of the charts for 10 weeks

The first music video to air on the channel was the Buggles' 'Video Killed The Radio Star'.

In another cultural touchstone,Olivia Newton-John's single 'Physical' hit No. 1 on November 21, and remained at the top of the charts for 10 weeks.

The Billboard Year-End Hot 100 listed Kim Carnes' 'Bette Davis Eyes' as the top single of 1981, and the song won top honors at the Grammys.

At the54th Academy Awards, honoring movies released in 1981, 'Chariots of Fire' won four awards, including Best Picture.

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Other winners included 'Raiders of the Lost Ark' with four awards, and 'On Golden Pond' and 'Reds' with three apiece.

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