Will the next president be the second coming of Jimmy Carter? Given last week’s economic headlines, full of dire warnings about the return of 1970s-style stagflation, you might think so.

Realistically, though, the parallels between the problems facing the US economy now and those of the late 1970s aren’t that strong. That’s the good news.

The bad news is that the economy probably will look similar to, but worse than, the economy that undid the first President George Bush. And it’s all too easy to see how the next president could suffer a political fate resembling that of both the elder Bush and Carter. Let’s talk first about the Carter-era economy.

Jimmy Carter’s overall economic record was much better than most people realise — the average economic growth rate under his administration was 3.4 per cent per year, slightly higher than the growth rate under Ronald Reagan and far better than growth under either Bush.

Reagan famously asked Americans whether they were better off than they had been four years ago; the answer, actually, was yes — most families had higher real income in 1980 than they did in 1976.

But the good economic news came in the Carter administration’s early years, while its final year was marked by rising unemployment and soaring inflation, largely caused by a surge in oil prices.

And once again the Americans have a weakening economy coupled with rising inflation, again thanks in large part to a surge in oil prices.

That said, I don’t believe the Americans are really facing anything comparable to 1970s stagflation. For one thing, they are less dependent on oil: America has more than twice the real GDP it had in 1979, but consumes only slightly more oil. For another, there’s no sign of the wage-price spiral that once drove inflation into double digits.

What’s much more likely is that the Americans will have an economy like that of the early 1990s, only worse. The first President Bush presided over the 1990-91 recession. But his real problem came during the alleged recovery, which was hobbled by financial problems at many banks, which had been badly damaged by the collapse of the late-1980s real estate bubble, and by sluggish consumer spending, held down by high levels of household debt.

As a result, the unemployment rate just kept rising, not reaching its peak of 7.8 per cent until June 1992. If all this sounds familiar, it should. Many economists have pointed out the parallels between the current situation and the early 1990s: another real estate bubble, subprime playing more or less the same role formerly played by bad loans by savings and loan institutions, financial trouble all around.

The New York Times