"We see it as uncomfortably low," says Scott Anderson, senior economist at Wells Fargo, who sees a double dip in housing and a significant slowdown in consumer spending, two forces with the potential to drive down prices. "There isn't the fuel you need to really get inflation going."

Resler notes that over the past year a third of the 29 components in the CPI have declined in any given month. By contrast, during the 90s, when inflation was higher than today but moderate by historical standards, the ratio was a third. During the high inflation periods of the 1970s and 1980s, no more than one or two of those components would fall in a month. Sometimes, not one of them declined.

Some of the declines in the recent period were categories such as apparel and lodging.

"Those are things that reflect consumer discretionary spending," says Resler.

A month ago, Resler's team warned there's a 25-percent chance that core inflation—which excludes food and energy—will be flat in 2010.

"If we had an unchanged core [now at just under 1.0 percent] for several months, the year-over-year change would be pushed down to 0.4 percent," estimates Resler, which would easily beat the record low of 0.7 percent set in 1961.

The behavior of the CPI in 2009-2010 has more in common with the period eight years ago right before the Fed shared its concerns about deflationary risks and in doing so cut rates to 1.00 percent in mid 2003.

Economists say the risks are greater today than in 2003, even if the Fed has said less about it.

The auto, banking, consumer and housing sectors are all clearly weaker. Mortgage debt is higher while lending is much lower.

"The debt over-hang is still "a real issue," says Anderson. "That's why in many ways this is more insidious."

"You need pristine credit to get a loan," says Anthony Sanders, a professor at George Mason University and the Mercatus Center. "And that's what causes deflation. You need risk-taking."

The Obama administration's stimulus plan and other initiatives, the scourge of inflation hawks, is also a contrinbuting factor, according to the deflation camp.

"This rampant government spending is making deflation a greater possibility," says Sanders. "It's crowding out the private sector, which would be spending money on projects that it sees as profitable and also has a higher profit margin."

Right now, the deflation debate is more about possibility and probability, rather than reality, with disinflation—rare itself—the actual case.

"I can understand people who have concerns about deflation looming," says FAO Economics chief economist Robert Brusca, who is not among the believers. "But you should be careful in assuming there is something special going on."

Brusca says history shows the CPI usually hits a low point around one year into the recovery period and that one big difference this time is that the inflation rate was historically low before the recession even began in late 2008.

Another big difference, says economists, is that the Fed has more counter-deflation policies in place, which has already helped.

That also helps explain the central bank's decision thus far to leave monetary policy alone. never mind remove any of its emergency measures, positions it is expected maintain at its June 22-23 meeting.

"It's certainly one reason why the Fed will be on hold until mid 2011," says Anderson. "Fear is growing at the Fed about an adverse trend in inflation. Instead of talking about an exit strategy, it becomes a question of perhaps even restarting assets purchases."

Or, as Baker, suggests "taking quantitative easing to another level."

Going forward, the deflation dynamic is likely to get even more complicated, thanks to a spate of new negative forces, including a spike in the value of the dollar, a slump in oil prices, a double-dip in housing and the sovereign debt crisis in Europe, which simultaneously promises government austerity measures and more cheap-money borrowing.

There's also future Obama administration policy moves to contend with, notably a hike in income tax rates for the highest earners in 2011.

"We're relying on the top five percent to keep spending and we're planning on taxing them more," quips Sanders, who also cites the government's relentless support of the big banks as a major mistake. "We're taking the Hoover-Roosevelt playback and following it page by page."

Slideshow: States With The Highest Jobless Rates