Guns, Butter and Taxes

Apparently, history is repeating itself in more ways than one. Think guns and butter.

Under the cover of darkness, otherwise known as the 24-7 media obsession over war tactics and instant analysis of complex issues -- we won't get a true picture of for years to come -- pre-emptive strikes against future generations of America are being carried out.

Get your night vision goggles, citizen soldier, and journey back in time to the LBJ administration. Embroiled in a revolutionary war halfway around the globe, the Joint Chiefs of Staff tried to convince the president to raise taxes.

The reasons given didn't have anything to do with economics but stemmed from a desire to get the country behind the war effort.

For different reasons, LBJ's economic team agreed with the Joint Chiefs. Gardner Ackley, a Michigan professor who was the top dog on Johnson's Council of Economic Advisers, told the president that unless taxes were raised it would be impossible to have inflation-free war and domestic spending initiatives.

Historian William Manchester's acclaimed book "The Glory and the Dream" recounts LBJ's response.

"'I don't know much about economics,' he said to those around him, a confession that some of them later thought should be engraved on his tomb, 'but I do know Congress.'"

Manchester tells us that it was at this point that Johnson made the "ultimate blunder: He fooled himself. Everything would come out all right, he reckoned, if victory could be bought cheap."

Ackley and his team of economists were adamant though, advising a 3 to 4 percent tax hike. Instead of following their advice, LBJ invited several key Congressman and business leaders to the White House to get their opinion.

They asked about the cost of the war. Johnson provided phony figures and they rejected the idea of a tax increase. Edwin Dale Jr., economic correspondent for the New York Times called Johnson's financial shell game "the single most irresponsible presidential act in his fifteen years covering Washington."

Manchester adds: "Johnson's decision against a tax raise, made in early 1966, was a stupendous blow to fiscal sanity. Johnson's legerdemain had brought the beginnings of runaway inflation."

Even more sobering analysis was offered by the Swedish observer of American social problems, Gunnar Myrdal, in his 1970 book, "The Challenge of World Poverty."

"Private and public consumption -- in the case of the United States, the huge expenditures for armaments and for the Vietnam War, moon flights, etc. are permitted to rise, without the nation undertaking corresponding increases in taxation. The result is inflation."

Myrdal goes on to note that the failures of U.S. military adventurism in Vietnam, and particularly Latin America, left Americans with essentially two options.

"There will be those who will choose some sort of withdrawal into a Fortress America. But there will also be those who will see that what caused the disasters was the (U.S.) insolent claim to the right to police the world on its own terms -- by virtue of might. This is what the Greeks called hubris, and they held that when it was not stopped it always led to self-destruction."

"America has now joined the world and is tremendously dependent upon the support and good will of other countries." Myrdal refuted the foolish notion "that financial and military power could be a substitute for the moral power of earning the good will of all decent people in the world. Without followers, the leader is no longer a leader, but only an isolated aberrant."

Here's where history repeating itself takes a turn for the worse. The U.S. Senate has cleared the first hurdle for a huge tax cut just as Congress authorized an $80 billion installment for the "war on terror."

With mindless jingoism in the air, on the very day that the U.S. invasion of Iraq began, Sen. Jon Kyl, R-Ariz., submitted an amendment to federal budget legislation to accelerate the repeal of the estate tax -- a provision that would benefit less than 2 percent of the wealthiest taxpayers. It passed 51 to 48 on March 20.

"A tax cut for the rich during a time of war is unprecedented," Chuck Collins of United for a Fair Economy told me last week.

"This goes against the belief that everyone should share in the sacrifice," he said, lamenting the disconnect between the financial crunch on state budgets and federal economic policy. "No federal aid to the states but a tax cut for the rich? It's astounding!"

In a forgetful nation, history repeats. And then some.


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