“Guns or Butter” Has Become “Guns and Butter”

Ron SurzAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Macroeconomics teaches that tax revenues can be spent on guns or butter (military or non-military goods) and apportioned between the two. The US is running a $2 trillion deficit, resulting in a debt of over $33 trillion, which is 130% of GDP. Instead of apportioning taxes (budgeting), we’re increasing debt so we can have both guns and butter. Interest on the debt is 2% and heading towards 5%, which will crowd out other expenditures and escalate deficit spending.

“Butter" represents nonmilitary goods that increase social welfare, such as schools, hospitals, parks, and roads. "Guns" refer to military goods such as personnel – both troops and civilian support staff – as well as military equipment like weapons, ships, or tanks.

But with conflicts in Ukraine and Israel, we are being told that $150 billion in military aid and other support is no problem for the mighty U.S. – that we need not worry where this money is coming from, certainly not from butter. It’s coming from increased deficit spending, so the sacrifice is not our butter – it’s our kids’ kids’ kids’ Butter. They will pay.