Readers of this blog know that for many, many months I’ve been very skeptical about the feel-good economic news that seemed to be all the rage last Fall and earlier this year. Back in October, for example, I pointed out (not for the first time) how growth in the Gross Domestic Product (GDP) can be quite misleading as a measure of economic well-being. Throw in the attack on pensions and executive greed, the record-breaking personal debt faced by so many people…all this while the rich are getting richer.

Now, pundits and policymakers are starting to wring their hands, mainly because inflation has risen more than the bond market likes. Well, the truth is that the real economic stress facing regular people is nothing new. The mountain of debt people are carrying (which will seem even higher as the housing bubble deflates and people find there is no more money to be pulled out of their homes), health care costs continuing to rise, good-paying jobs evaporating for millions of Americans and inflation-adjusted wages down even though productivity has been at record levels (meaning people are working harder than ever for less money)–all that adds up to a pretty grim picture for average people.

The big threat in the hype about rising inflation–a rise which, from my point of view, is not that big a deal–is that the overall atmosphere to keep inflation “in check” (most prominently promoted by the Federal Reserve Board) will infect the debate over wages and justify keeping wage increases low.

That would be a crime since workers are already trying to catch up from years of stagnant wage growth, coupled with rising prices for basic needs (health care and gas prices come to mind). But, I predict that, if the Fed gets its way and embarks on some inflation-killing crusade, within the next year (predictions are dangerous) the fundamental standard of living of most workers will worsen dramatically–and become a significant issue in the 2008 elections.