Value of $100 in 1935, adjusted to 1981

What happened to prices between 1935 and 1981

Between 1935 and 1981, the Consumer Price Index went from 13.7 to 90.9. Cumulatively, prices increased 563.5%, which works out to an average of 4.20% per year. Put differently, a dollar in 1935 bought what $0.15 buys in 1981.

Consumer prices rose 2.2% in 1935, a second straight annual increase after 1934’s turnaround, though the CPI still sat well below its 1929 peak and the recovery remained uneven and incomplete. The year’s biggest legislative achievements aimed at making that unevenness less punishing. Roosevelt signed the Social Security Act on August 14, creating federal old-age pensions and unemployment insurance funded by a new payroll tax, the first federal safety net of its kind in U.S. history. That spring, the Works Progress Administration had already begun putting millions of unemployed Americans to work on public construction, arts, and infrastructure projects, becoming the largest jobs program of the New Deal. Congress added labor protections to the mix that July with the National Labor Relations Act, guaranteeing most private-sector workers the right to organize and bargain collectively. The human cost of the Dust Bowl was still mounting on the Plains: the storm known as Black Sunday hit on April 14, one of the worst of the decade, and continued drought kept driving farm families off land that could no longer support them. Consumer prices ended the year 38.4% above their 1913 level. First-class postage held at 3 cents.

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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.

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