The old 1960s slogan "guns and butter" is suddenly everywhere. A feature story in The New York Times was headlined, "Bush Can Have Both Guns and Butter, at Least for Now." A Wall Street Journal column by Holman Jenkins was titled, "An Oldie but Goodie: Guns Plus Butter." Columnist Pat Buchanan writes, "LBJ cut taxes and embraced a guns-and-butter budget. ... Bush is traveling the same road."

With federal spending up by 7.6 percent a year over the past two years, even before the staggeringly expensive Medicare and energy legislation the White House supported, it is hard to quarrel with the idea that President Bush is the biggest spender since LBJ. What I object to is the universal misuse of the economic concept of a guns and butter tradeoff, particularly when used to blame inflation on supposedly inadequate taxes during the Johnson administration.

The TV show "West Wing" once ran an episode called "Guns Not Butter." But the fictional President Bartlett is supposed to be a former economics professor. In economics, the tradeoff between guns and butter refers to the whole economy, not just the federal branch of government. And it has nothing to do with inflation.

Economic textbooks use the choice between guns and butter to illustrate "the production possibility curve." If we assume (pretend) the economy only produces those two goods, that it is at full employment and that productivity gains are impossible, then the only way to produce more guns would be to lure labor and capital out of the butter industry. Just look at North Korea, where the gang of thugs in charge would rather starve everyone than cut back on weapons. Yet notice that balancing the North Korean budget would be entirely irrelevant to their cruel choice of guns over butter. The people would still starve.

Despite these quibbles, I can imagine a potentially instructive way to apply the guns and butter metaphor to federal spending: Just replace butter with federal transfer payments, and guns with federal hiring and purchasing. But before we see what that tells us, we first have to unravel a stubborn historical hoax about guns and butter in the '60s.

The author of that New York Times story on this topic, Niall Ferguson, wrote that, "In the late 1960s ... deficits were partly financed by printing dollars, which ultimately led to higher prices." Economist Gary North likewise wrote, at lewrockwell.com, that Johnson "did not raise taxes until he imposed a mild 10 percent income tax surcharge in 1968. By then, the Fed had pumped in so much money to fund the debt that price inflation was becoming a problem."

Ferguson and North are offering a theory about inflation that makes monetary policy virtually irrelevant, just a passive pawn of the budget. In their view, budget deficits in the '60s supposedly forced a helpless Fed to print money. Whether this explanation is right or wrong, it has nothing to do with "guns and butter." Inflation cannot churn more butter nor manufacture more guns.

As for the endlessly repeated myth that "guns and butter" caused inflation in the '60s, nobody looks at the facts. The deficit in fiscal 1967 was only 1.1 percent of GDP, which cannot begin to explain why the Fed kept the interest rate on fed funds below 4 percent until the end of that year.

Far from being mild, as North describes it, the surtax of mid-1968 put the top tax rate up to 77 percent and also slashed profits. Did that help? On the contrary, inflation did not become a major problem until after the surtax was enacted. Then inflation got much worse in 1969, when the budget was in surplus. Measured from December to December, consumer inflation was 3 percent in 1967, 4.7 percent in 1968 and 6.2 percent in 1969. The bond market was not impressed. The yield on 30-year Treasuries was 5.5 percent before the surtax, but rose above 6.7 percent a year later and to 7.8 percent by the start of 1970. By that time, the recession became so obvious that even President Nixon (who had extended the surtax beyond the original mid-1969 expiration) finally decided to scrap it. The recession ended November 1970, but inflation that year was still 5.6 percent.

Johnson's effort to use fiscal policy to fix a monetary problem failed completely. President Nixon's wage and price controls failed even more spectacularly, leaving inflation at 8.7 percent in 1973 and 12.3 percent in 1974. Continued...