During the 1976 presidential campaign, Jimmy Carter added up the nation's unemployment rate and inflation level, called it a "misery index" and used it as an effective rhetorical weapon against Gerald Ford. Unfortunately for Carter, by the time he left office, the level of "misery" was higher than when he took over. The annual inflation rate — the change in the price of various consumer goods — went from 5 percent in 1970 to 14.5 percent in 1980. The price of gasoline went from about 40 cents a gallon to more than 70 cents. Part of the reason for both higher inflation and high oil prices was America's increasing dependence on foreign oil. Simply put, the country was using more oil — from running cars to making textiles — than it was producing.

In the early 1970s, Arab oil-producing countries cut off supplies to the U.S. and other Western nations as a way of pressuring Israel to give back Arab territory it had taken during a 1967 war. When the embargo was lifted in 1974, the Western countries' oil reserves had dried up and the oil-producing countries could charge pretty much whatever they wanted for their product.

Higher oil prices helped fuel inflation, and inflation helped trigger higher interest rates. Companies couldn't afford to borrow money to expand and so unemployment rose. President Carter tried various ways to combat the problems, including voluntary wage and price controls, but it didn't help much. Things got so bad that Carter went on national television to acknowledge that a "crisis of confidence" had struck the nation. The address became knows as "the malaise speech," and to many people it made Carter appear to be a self-pitying crybaby.