Between 1917 and 1981, the Consumer Price Index went from 12.8 to 90.9.
Cumulatively, prices increased 610.2%, which works out to an average of
3.11% per year. Put differently, a dollar in 1917 bought what
$0.14 buys in 1981.
1917 is when World War I inflation stopped being a background trend and
became the dominant fact of American economic life. Consumer prices rose
17.4% for the year, more than double the previous year’s already sharp
increase, as the country’s April 6 entry into the war layered federal war
spending on top of an economy already strained by military demand and
worker shortages. Congress paid for the war with the War Revenue Act that
October, which sharply raised income taxes, created a new tax on wartime
business profits, and, in a small but very visible change for ordinary
households, raised the cost of a first-class stamp from 2 cents to 3 cents
that November, the rate’s first move since 1885. Herbert Hoover took over
the new Food Administration in August and asked Americans to conserve food
voluntarily rather than face formal rationing, a campaign that became
famous enough that “Hooverize” entered the language as a verb for cutting
back. None of it slowed prices much: the 17.4% increase would be topped
again the very next year, in 1918.
The headline number is an average. Individual categories moved very differently over this
period. Here is what $100 of 1917 spending costs in 1981, by category:
Category
Avg. yearly inflation
$100 in 1917 →
All items (CPI-U)
3.11%
$710
Food
2.96%
$646
Apparel
2.45%
$472
Not shown because the BLS began these indexes after 1917: core (all items less food & energy) (1957–), energy (1957–), housing (1967–), medical care (1935–), transportation (1935–), recreation (1993–), education & communication (1993–).
Long periods are sampled every 5 years; the calculator above covers any pair of years.
The destination year: 1981
1981 was the year the inflation fever finally broke, at an extraordinary price.
Consumer prices rose 10.3%, the second year of back-to-back double-digit
inflation and the last time the U.S. would see one. To end it, Paul Volcker’s
Federal Reserve drove its policy rate above 19% and let borrowing costs go
where they may: a 30-year mortgage cost more than 18% by autumn, car loans and
business credit froze, and homebuilders mailed the Fed two-by-fours in protest.
The squeeze tipped the economy into recession in July, the deep 1981–82
downturn that would push unemployment past 10%. But it worked. Inflation fell
by nearly half within a year and to under 4% by 1983, the disinflation that
defined the following two decades. Even the price of mailing a letter told the
year’s story: postage went up twice in eight months.
MLA: “Inflation from 1917 to 1981: $100 is worth $710 today.” InflationCalculator.com, U.S. Bureau of Labor Statistics CPI-U data, https://inflationcalculator.com/inflation/1917-to-1981/
APA: InflationCalculator.com. Inflation from 1917 to 1981. Based on U.S. Bureau of Labor Statistics CPI-U data. Retrieved from https://inflationcalculator.com/inflation/1917-to-1981/