Guns or Butter
Guns or Butter
Republicans Pressing the Issue
By: Tom Wicker
Date: August 15, 1965
Source: New York Times
About the Author: Tom Wicker (1926–) is a well regarded American political commentator and author. Wicker's opinion-editorial column "In the Nation" appeared in the New York Times for over thirty years. Wicker wrote a number of books concerning contemporary American politics, notably JFK and LBJ: The Influence of Personality upon Politics, published in 1968, and his 2004 work, George Herbert Walker Bush.
In August 1965, two issues dominated the media coverage of American politics, the Vietnam war and the performance of the U.S. economy. As the level of American military involvement in Southeast Asia had increased since 1964 and appeared poised to increase even further, commentators examined the projected costs of the Johnson administration's social agenda. The initiatives to forge a "Great Society"—legislative programs that included the introduction of Medicare, civil rights initiatives, and various measures designed to eradicate poverty—all appeared to carry significant price tags. The issue was articulated in different ways, but with one central theme. Could an increase in military spending be coupled with the cost of Johnson's social programs without a negative impact upon the American economy?
The expression "guns or butter" has been used by a number of commentators to characterize the traditional conflict between military spending and social welfare projects. The most famous invocation of the guns or butter comparison was made by German Reich Marshall Hermann Goering (1893–1946), who defended German spending on its military build-up through the 1930s with the observation, "Would you rather have butter or guns?…preparedness makes us powerful. Butter merely makes us fat."
In 1965, the debate as captured in the Wicker article was not whether the expanded role to be played by the United States in Vietnam was appropriate; there is an unstated presumption among all of the political leaders quoted by Wicker that America should be involved in the war effort in Vietnam. The words of House Republican Leader Gerald Ford, the future American President (who was President when the United States left Vietnam), convey a blunt desire for less social spending and more resources for the military.
Wicker employs the phrase the "new economy" throughout his commentary. The economists who took charge of the administration of the nation's finances under President Lyndon Johnson were generally extending the principles of economic management first advanced by the British economist John Maynard Keynes (1883–1946), some aspects of which had been applied in the Roosevelt New Deal legislation in the 1930s. John Kenneth Galbraith (1908–2006) was an advisor to the U.S. government through the introduction of the new economy. Galbraith and others advocated spending on both the military and the social initiatives to create taxable economic activity of the sort that would help the economy grow at a rate greater than the increase in government spending. Inherent in all of the economic approaches adopted by the Johnson administration was the belief that the entire national economy (the macro economy) was capable of being managed by the application of government policy.
Republicans have shifted to the "guns or butter" issue in their creeping barrage against president Johnson's conduct of the war in Vietnam. They picked up important support this week from the influential Georgia Democrat, Richard Russell, who warned in the Senate that there now were "even great dangers" of inflation than at the time of the Korean War.
But Representative Gerald R. Ford of Michigan, the House Republican leader, put the question most directly when he said: "I urge that (the President) take the lead in cutting back new domestic programs to marshal the nation's strength for the military effort."
Representative Melvin Laird pointed to the $8 billion still unappropriated for the education, poverty and other Great Society programs. These, the Wisconsin Republican said, provided "plenty of flexibility…for some serious re-evaluation."
Talking not of increased spending for Vietnam, Mrs. Mary Brooks, assistant chairman of the republican National Committee, asked in a speech at Cooperstown, N.Y.: "Is this the time to appropriate $1.9 billion for an expanded poverty program…is this the time to be undertaking a $935 million housing and urban development program…which will cost $7 billion over the next four years?"
War abroad and the Great Society at home, Senator Thruston Morton, Republican of Kentucky, said, could only be financed by deficit spending "and the Siamese twin of huge deficit financing is inflation."
This could be a cutting political issue in the months ahead, since it is based solidly on conventional economic wisdom, since inflation is one of the great scare-words of politics and since the Republican arguments have a ringing patriotic theme. But the real Republican challenge is not merely to Mr. Johnson's Vietnamese policy.
It is rather a challenge to the theory and practice of the "new economics" that Presidents Kennedy and Johnson have made official Government policy.
It is also a challenge to the willingness of the American people, if the issue is squarely put in an election campaign, to endorse the "new economics."
That is because the "new economists" in the Administration believe that, the nation not onlycanbut oughtto have both guns and butter in the coming months. They believe it is not merely possible but positively useful to spend money simultaneously for the Vietnamese war and the Great Society. And the President is going along with them.
The main question, therefore, is whether the new economics will work as the Administration expects. Defense spending was $46.2 billion in the fiscal year ended June 30. Spending for the fiscal year now in progress has been estimated at $47.9 billion, but informed sources say additional spending for Vietnam will drive the total to $50–51 billion.
If all Great Society programs also are financed as planned, Federal spending in the current year would reach $102 and perhaps $104 billion. But this leaves out of account the revenue side of the balance sheet.
The theory of the new economics is that more Federal spending or lower taxes, initially increasing the deficit, stimulates more taxable economic activity and hence more Federal revenue. That effect is created only when there is unemployment and idle capacity—and in the American economy, 3.6 million people are without jobs and the industrial plant is running at only 88 to 89 per cent of its potential. If the economy were at full capacity, even the new economists would favor either a tax increase or a cut in spending.
But the economy is not operating at full capacity and therefore the solid expectation of the new economists is that increased spending on war abroad and the Great Society at home will further increase this year's revenue growth. This growth will offset some of the increased spending.
The deficit, now estimated at $4.3 billion, probably will be increased by some degree, but that will not displease the new economists, many of whom all along have wanted more spending for stimulative purposes. Vietnamese outlays, for instance, will help to offset the deflationary effect of a $5 billion increase in payroll taxes for Social Security, effective Jan. 1.
Walter Heller, a herald of the new economics, reminded the recent Governors' conference that since the tax cut of 1964, employment had gone up by 2.3 million, industrial production by 10 per cent, and corporate after-tax profits by 20 per cent. At present tax rates, and at a 4 per cent rate of annual economic growth, he said, Federal revenues would increase by $7 billion each year for the rest of the decade. Additional outlays for Vietnam might well increase this bonanza this year or next.
That is the theory the Republicans are challenging, and the question is whether the country has accepted it as the Administration has. After all, only four years ago, with unemployment running at 6 per cent, even President Kennedy came within an eyelash of asking a tax increase to pay for the $3 billion military buildup in the Berlin crisis.
The Wicker article is a remarkable encapsulation of the guns or butter debate as it was advanced by the Republican Party on one side and the Johnson Democrats on the other in 1965. The tone adopted by Wicker is measured and dispassionate, in contrast to most analyses of a similarly politically charged issue in the modern American media. Wicker uses budgetary data to illustrate how both sides of the guns or butter issue advance their arguments, as opposed to employing statistics as his centerpiece.
In his State of the Union Address in January 1964, President Johnson made his famous declaration of war on poverty throughout the United States. Then, in August 1964, Johnson sought and obtained approval from the U.S. Congress to take whatever military steps he deemed necessary to pursue American objectives in Southeast Asia. The government had, in essence, declared that it would pursue a more expensive military build-up in Vietnam as well as increase social program spending.
The guns or butter debate takes place against the backdrop of one of the most prosperous periods in American history. The American economic prosperity in 1965 that is inherent in Wicker's review of the guns or butter issue is reflected by the hard economic data from the period. Between 1945 and 1965, the American Consumer Price Index (CPI) rose by a total of seventy-one percent. Between 1965 and 1980, a period characterized by the Vietnam War and the Arab oil crisis of the mid–1970s, the CPI rose 176 percent. The national unemployment rate in the United States remained on average under four percent until 1969; it has been at least six percent in the following years.
Implicit in the Republican position is concern over the size of the budget deficit in 1965. By modern standards, the 4.3 billion dollars is a fraction of the 2006 deficit, estimated at over 400 billion dollars. An even more graphic contrast between the national financial structure of the United States in 1965 and in the present day is the accumulated deficit, currently estimated to be in excess of $8 trillion.
The American government has pursued a guns and butter policy in this modern period of increased budgetary deficits. Military interventions in Iraq, Afghanistan, and increased spending on homeland security have occurred alongside the billions of dollars spent to address social issues such as the Hurricane Katrina relief effort that began in 2005.
It is apparent that in the more than forty years since Wicker commented on the new economy of 1965 in America, huge numbers, such as the accumulated American national debt, do not have a significant impact on the average citizen. Wicker's descriptions of a $4.3 billion deficit and a total federal budget of $102 billion were large numbers that conveyed the immediacy of the financial picture to his readers. The modern American citizen has become so accustomed to media descriptions of ever increasing government expenditures and obligations that they cease to have any real meaning.
Galbraith, John Kenneth. The Affluent Society. 40th anniversary edition. New York; Houghton Mifflin, 1998.
Perry, George L., and James Tobin, ed. Economic Events, Ideas, and Policies: The 1960s and After. Washington, D.C.: Brookings Institute Press, 2000.
Ludwig Von Mises Institute. "The New Economists and the Great Depression of the 1970s." May 7, 2004. <http://www.mises.org/story/1507> (accessed June 1, 2006).
National Public Radio. "Lyndon Johnson's War on Poverty." April 2005. <http://www.npr.org/templates/story/story. php?storyId=1589660> (accessed June 1, 2006).