"Guns and Butter" Policy Makes a Comeback
Douglas French from The Mises Institute has written an interesting piece on the resurgence of the "Guns and Butter" policy. He uses an analogy of the popular 1960s go-go boots to explain the concept.
Sabrina Carpenter, a star since her pre-teen years on Disney’s Girl Meets World, is now a record-breaking singer. She recently recorded a cover of Nancy Sinatra's 1965 hit “These Boots Are Made For Walking.” Carpenter has expressed her love for go-go boots, stating that they have helped her through hard times. The boots, a popular fashion statement in the 1960s, are making a comeback.
The "Guns and Butter" Policy
The mention of go-go boots and the year 1965 brings to mind the "Guns and Butter" policy of Lyndon Banes Johnson. Johnson's numerous government programs increased government spending by 42 billion gold standard dollars, or 13%. These programs included Medicare, Medicaid, and Head Start, among others, which are still present today.
Johnson was not known for cutting taxes, but he did reduce income taxes. He lowered the top rate from 91% to 70% and the corporate tax rate from 52% to 48%. The Tax Foundation claims that these cuts stimulated the economy enough to increase government revenue by 33%. The tax revenue increased from $94 billion in 1961 to $153 billion in 1968.
The social programs represented the "butter" and the Vietnam War represented the "guns" in Johnson's policy. The war led to a significant increase in defense budget and American casualties. Johnson, not wanting to lose, decided not to seek re-election.
The Return of "Guns and Butter"
The "Guns and Butter" policy seems to be making a comeback, along with go-go boots. The Biden administration has passed approximately $4.5 trillion in new programs. These include the American Rescue Plan Act, Infrastructure and Jobs Act, CHIPS and Science Act, Inflation Reduction Act, and others. This is in addition to the cost of the Great Society programs.
The U.S. is also providing military support for two wars, in Ukraine and Gaza. In April, Biden signed a military aid package worth $95 billion to arm Ukraine, Israel, and Taiwan. The bill received bipartisan support, with 79 senators voting in favor.
The concept taught in school is that there is an opportunity cost to produce guns versus butter, and vice versa. However, with the cooperation of the Fed and Treasury, both have become not only possible but the norm.
Bottom Line
The "Guns and Butter" policy, much like the go-go boots, seems to never go out of style. It's an interesting reflection on how history often repeats itself, and how economic policies can cycle back around. What are your thoughts on this? Do you think this policy is beneficial or detrimental? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is everyday at 6pm.
"Guns and Butter" Policy Makes a Comeback
Douglas French from The Mises Institute has written an interesting piece on the resurgence of the "Guns and Butter" policy. He uses an analogy of the popular 1960s go-go boots to explain the concept.
Sabrina Carpenter, a star since her pre-teen years on Disney’s Girl Meets World, is now a record-breaking singer. She recently recorded a cover of Nancy Sinatra's 1965 hit “These Boots Are Made For Walking.” Carpenter has expressed her love for go-go boots, stating that they have helped her through hard times. The boots, a popular fashion statement in the 1960s, are making a comeback.
The "Guns and Butter" Policy
The mention of go-go boots and the year 1965 brings to mind the "Guns and Butter" policy of Lyndon Banes Johnson. Johnson's numerous government programs increased government spending by 42 billion gold standard dollars, or 13%. These programs included Medicare, Medicaid, and Head Start, among others, which are still present today.
Johnson was not known for cutting taxes, but he did reduce income taxes. He lowered the top rate from 91% to 70% and the corporate tax rate from 52% to 48%. The Tax Foundation claims that these cuts stimulated the economy enough to increase government revenue by 33%. The tax revenue increased from $94 billion in 1961 to $153 billion in 1968.
The social programs represented the "butter" and the Vietnam War represented the "guns" in Johnson's policy. The war led to a significant increase in defense budget and American casualties. Johnson, not wanting to lose, decided not to seek re-election.
The Return of "Guns and Butter"
The "Guns and Butter" policy seems to be making a comeback, along with go-go boots. The Biden administration has passed approximately $4.5 trillion in new programs. These include the American Rescue Plan Act, Infrastructure and Jobs Act, CHIPS and Science Act, Inflation Reduction Act, and others. This is in addition to the cost of the Great Society programs.
The U.S. is also providing military support for two wars, in Ukraine and Gaza. In April, Biden signed a military aid package worth $95 billion to arm Ukraine, Israel, and Taiwan. The bill received bipartisan support, with 79 senators voting in favor.
The concept taught in school is that there is an opportunity cost to produce guns versus butter, and vice versa. However, with the cooperation of the Fed and Treasury, both have become not only possible but the norm.
Bottom Line
The "Guns and Butter" policy, much like the go-go boots, seems to never go out of style. It's an interesting reflection on how history often repeats itself, and how economic policies can cycle back around. What are your thoughts on this? Do you think this policy is beneficial or detrimental? Share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is everyday at 6pm.
