The U.S. Consumer Price Index (CPI), which is the official government measure to track inflation, is up 2.1 percent from last year. Essentially, prices are rising while Americans’ ability to pay remains limited.

The CPI statistics detailing commodities such as food and energy, which are the largest purchases for many individuals are even worse. Food prices are up 2.3 percent from last year and gas prices have surged 11 percent since February 2010.

This comes as unemployment remains stubbornly high, and home prices continue to decline, making the threat of stagflation (a lethal combination of high unemployment and inflation) possible again. “The latest increases in oil prices—and the related increases in other commodity prices, especially food—imply several unfortunate consequences (even leaving aside the risk of severe civil unrest).” economist Nouriel Roubini recently said in a Slate magazine article.

Instead of artificially stimulating the economy through financial tricks such as the Federal Reserve’s quantitative easing (QE2) program, we must address America’s fundamental Achilles’ heel; its trade deficit. As long as it is not profitable to make and sell goods in this nation, businesses and employers will continue to outsource and offshore, taking jobs and wealth with them.

To combat high unemployment and spark meaningful economic recovery, major reform must be taken to protect American business and encourage investment and hiring. Our trade deficit must be brought into balance for consumer spending to promote jobs domestically. Doing so will also help combat budget deficits, as a stronger economy inevitably leads to higher tax inflows for the government.

If nothing is done, and current trends hold, further economic stagflation and suffering are sure to continue for an indefinite period of time, threatening the economic stability of this nation and the world. We must work to avoid the mistakes of the past in order to avoid the economic pain felt in the 1970s when stagflation was first invented.

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