The Problem of Stagflation

We are deep into the era of relatively high measured unemployment rates and high rates of inflation that is described by that inelegant term "stagflation." Growth rates of real output fell in Western Europe and the U.S. just at the time that the growth rates of the labor forces increased. The rate of increase in productivity has fallen, so real incomes have either fallen or risen more slowly than in the sixties. Inflation and progressive tax rates financed further increases in the relative size of the public sector with the result that current and prospective taxes have grown more than incomes.