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Sunday, September 18, 2005

Guns and Butter (final version)

Guns and Butter


You can taste the bright lights
But you won't get them for free


- Guns and Roses (Welcome to the Jungle)


If you look at inflation and interest rates, you will see they stayed low from World War II until the mid 1960’s.


President Lyndon Johnson increased government spending by pushing the “Great Society” program and the Vietnam War at the same time.    Inflation got out of control and it took decades to recover.


Economists say he was buying “guns and butter” at the same time.   We could not afford to do both.


I thought that government leaders learned the lesson and we would never see high inflation again.  The lesson has apparently been forgotten.


We are fighting a war and will be financing a domestic relief effort at the same time.


It is economic history repeating itself.   Unless we change our course, we will soon be dealing with the same runaway inflation that followed the Johnson administration.


President Bush came into office with a budget surplus.   It insulated him from making hard choices and hard decisions.


It is like starting life with a big inheritance.


Many people have to juggle their finances to make it.  Someone with inherited wealth doesn’t know how to juggle and can’t make the adjustment when they need to.


All of us face the same budgeting decisions at some level.


If I want to buy a new car or a bigger house, I need to earn more money or cut expenses.


 The third option is to run up my credit card and pray I can pay it off someday.


By trying to finance “guns and butter” at the same time, President Bush is putting Americans on a government version of a credit card.    We will run up a big debt and start paying interest on the debt right away.


Government debt does not come with teaser rates or a cash back offer.


The problems will start about the time that President Bush goes back to the ranch in 2009.  Some future President will have to deal with them.


Bush can do what other Americans do.  Tear up the credit card.   He can raise revenues or cut other expenses.  


Bush says he will cut expenses but his two biggest are the relief effort and the war.


The last war the United States actually won was World War II.   America put all of its resources into achieving an unconditional surrender.


We have not done that in Iraq.   There is no draft, no rationing and no special tax to support the war.


Like many Americans, I’m not personally invested in the war.   None of my family is in Iraq and only a few of my friends.   I have not been forced to sacrifice. 


If we are going to stay in Iraq, we need to approach war like we did in World War II.


All able bodied Americans should be eligible for the draft.  Gasoline, food and oil should be rationed and we should add at least 10% to everyone’s taxes.  That money should only be used for troops, equipment and body armor.


If we are going to be at war, we need to back the war completely.  No limited actions or half measures.


Universal sacrifice would give us the resources to win the war quickly or have all Americans invested in the decision to keep fighting.  


With a quick end to the war, the troops can help rebuild the gulf region and the guns segment of “guns and butter” budgeting would be eliminated.


It would keep the long term budget under control.


People say that government debt is dumping the problems on our children and grandchildren.   I’ve never liked that argument as many people don’t have children or don’t really care about the future.


Most people don’t admit they are self-centered on opinion polls.


They will understand if they see that the “guns and butter” strategy will hurt them personally. 


Unless they plan on dying really soon, they will feel the pain of inflation and high interest rates.


Government debt is like watching someone do a night on the town and pay for it by credit card.   


They can taste the bright lights but they won’t get them for free.


Don McNay is President of McNay Settlement Group in Richmond Kentucky where we want people to make good long term decisions.   Don’s a member of  National Society of Newspaper Columnists.   You can write Don at or read other things he has written at



Don McNay