"Guns and Butter" Is Back
By Douglas French, Mises Institute | October 04, 2024
Sabrina Carpenter has been a star since she was 12, staring on Disney’s Girl Meets World. Now she’s a singer and, I’ve heard, she has broken records set by the Beatles. She’s recorded a catchy cover of Nancy Sinatra‘s 1965 hit “These Boots Are Made For Walking.”
”I want to feel as confident as humanly possible so I can be up there and not worry about what I’m doing,” Carpenter says. “It helps me perform better.” She ended up donning custom Swarovski-crystal minidresses by the Ukrainian brand Frolov, a favorite of Beyoncé for her own shows. She paired the dresses with her signature white go-go boots. “The go-go boots have been there for me in hard times,” she says. The 1960’s footwear fashion statement are suddenly popular again.
To any economics student, go-go boots and the year 1965 mean Lyndon Banes Johnson’s “Guns and Butter” policy. LBJ’s blizzard of government programs increased government spending by 42 billion gold standard dollars, or 13%. Medicare, Medicaid, and Head Start only scratch the surface of LBJ’s Great Society programs that are still with us today.
Not known as a tax-cutter, Johnson reduced income taxes, lowering the top rate from an astronomical 91% to a still absurd 70%. He reduced the corporate tax rate from 52% to 48%. According to the Tax Foundation, the cuts spurred the economy enough to benefit government by an increase of 33%. The tax take increased from $94 billion in 1961 to $153 billion in 1968.
The social programs were the butter, the Vietnam War was the guns. America watched on televison as U.S. troops and Vietnamese were maimed. The same year Ms. Sinatra hit the charts with “Boots,” LBJ sent 100,000 troops to Vietnam. By 1968, his defense budget soared to support 500,000 troops. American casualties grew as the North Vietnamese appeared to be winning. Johnson didn’t like to lose and so he did not seek re-election.
Just as go-go boots have come back in style, and the President not running for re-election, so has guns and butter economic policy. Joe Biden is no LBJ but his administration has passed roughly $4.5 trillion in new programs, starting with $1.9 trillion American Rescue Plan Act, Infrastructure and Jobs Act, CHIPS and Science Act, Inflation Reduction Act, and so on. This spending on top of the trillions of dollars the Great Society programs cost.
In addition to that butter, the U.S. is providing guns for two wars, in Ukraine, and Gaza. In April, Biden signed a military aid package worth $95 billion that will arm Ukraine, Israel and Taiwan. The bill had bipartisan support with 79 senators voting yes.
They taught us in school there is an opportunity cost to produce guns versus butter and vice versa. But a complicit Fed and Treasury make both not only possible, but the norm. These boots never go out of style.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Douglas French is President Emeritus of the Mises Institute, author of Early Speculative Bubbles & Increases in the Money Supply, and author of Walk Away: The Rise and Fall of the Home-Ownership Myth.
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