Value of $100 in 1965, adjusted to 2020

What happened to prices between 1965 and 2020

Between 1965 and 2020, the Consumer Price Index went from 31.5 to 258.811. Cumulatively, prices increased 721.6%, which works out to an average of 3.90% per year. Put differently, a dollar in 1965 bought what $0.12 buys in 2020.

Consumer prices rose 1.6% in 1965, up from 1964’s 1.3% in a pickup that economists later mark as the start of the Great Inflation, a run of accelerating price increases driven by rising Vietnam War spending layered on top of new Great Society programs. The war itself escalated on the ground that March, when about 3,500 Marines came ashore at Da Nang, the first American combat troops committed to Vietnam; troop levels would climb toward 200,000 by year’s end. Domestic policy expanded just as fast: Medicare and Medicaid became law that July 30, creating federal health insurance for older and low-income Americans, and the Voting Rights Act, signed that August 6, banned literacy tests and other devices used to disenfranchise Black voters. The civil rights movement’s gains coexisted with urban unrest that same August, when a highway patrol traffic stop in the Watts neighborhood of Los Angeles set off six days of rioting that left 34 people dead. Consumer prices finished 1965 218.2% above their 1913 level. First-class postage held at 5 cents, and the minimum wage stayed at $1.25 an hour.

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The destination year: 2020

2020 was the year the pandemic rewired the price data without triggering the inflation spike that followed it. Consumer prices rose just 1.2% for the year, the mildest pace since 2015, as COVID-19 lockdowns emptied roads, closed airports, and crushed energy demand. Oil told the starkest story: on April 20, U.S. crude futures fell to about negative $37 a barrel, the first negative settlement in the market’s history, as storage capacity ran out and no one wanted the physical barrels. Gasoline followed it down, falling to about $1.80 a gallon nationally that month before recovering to average $2.17 for the year. Grocery prices moved the other way: pantry stocking and meatpacking-plant disruptions pushed food-at-home costs up faster than usual, a rare case of food and energy pulling the index in opposite directions. Washington answered with the $2.2 trillion CARES Act, signed March 27, which sent $1,200 payments to most adults and added $600 a week to unemployment benefits as states ordered widespread business closures. The Federal Reserve cut its policy rate to near zero in two emergency moves that same month and pledged to buy Treasury and mortgage bonds “in the amounts needed” to keep credit markets working, an open-ended commitment beyond even its 2008 response. None of it showed up in the CPI yet: the stimulus, the supply shocks, and the reopening whiplash that followed would build into the fastest inflation in four decades over the next two years.

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