Inside Report (1)

The AFL-CIO believes the US can have both guns and butter.

The labor federation historically has spoken out for strong national defense. Its president, Lane Kirkland, says that if the Defense Department guesses wrong and spends too much, ''we have only wasted money. If we guess wrong in the other -direction, we might . . . lose everything.''

The federation is less worried about the amount budgeted than with where the money will come from. By financing defense with billions of dollars transferred from social programs, the administration has chosen ''guns'' instead of ''butter ,'' the labor group contends. The AFL-CIO argues a healthy, growing economy would support both.