New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-03-29
EX-SECRETARY WCULLOCHS OPINION
OF The SINKING FUND.

tractors VIII UnalIy GeU tUelT price.
EX-SECRETARY MCULLOCHS OPINION
Of The SINKING FUND.
The more closely the nature and operations
of Sinking Funds are looked into, the more
useless and pernciOus such cOntriyances will
appear. In Mr.. McCuloch's annual report on
the operations of the Treasury for the year
1865, we find the following paragraph about
the Sinking Fund, which strikes us as sound
throughout:
The necessities OF the Treasury have been such that
compliance with the requirements OF the act OF Feb rs,
1892 for the creation Of Sinking Fund has been mprac-
cable. Az long is necessary for the Government
To borrow money and to put Its obligations on the mar
ket for SALE the purchase of these obligations for the
purpose OF creating Sinking Fand would hardly BIO
udcious After the expiration OF the present year the
Of the Government will exceed its expenses. and
1t will then be practicable to carry into effect the pro-
visions of the law. The Secretary u.s. hoerr pine opin
ion that he safe and simple ray Of sinking The National
Debt is 10 apply direcHy 10 lis payment The Of re-
ceipts orer expenditures He therefore respectfully recon-
nends that much Of me act OF Feb 25 1862 requires
application Of coin to ne purchase or payment Of one
per cent Of the entire deb Of the United States, 10 be set
apart as Sinking Fund, DO repeaied(Finance Report,
1865, page 81.
it will not require much space to show that
q compliance with the law of 1862 is morally,
if not physically, impossible. The Sinking
Fund, by the terms of the existing law.
increases at compound interest. The amount
of coin interest annually to be set aside and
employed in the purchase or redemption of
bonds must accordingly double every twelve
years, until the entire Public Debt is extin-
guished. Before the end of the century the
Sinking Fund will call for over hundred
million dollars each year. Ex-Secretary
Richardson, in his valuable compilation OF
the laws relating to the Public Debt
and National banks, tells us that the
Sinking Fund will cxtinguish the Debt on
or about the year 1892 One dollar, invested
at compound interest at six per cent, will more
than quadruplc in twenty-five years, and an
annuity of one dollar, improved at compound
interest at six per cent, will increase in
twenty-five years to S5i SO, at the end of
which period the annual contribution will
have increased from one dollar to 81 90.
Without going further into the theory of com
pound interest, we think there are
few persons credulous enough to believe
either that the Public Debt will be
exting,lished in twenty years, or that the
yearly rate of actual payment will go on
increasing at compound interest. Unless the
Debt really does decrease by the nominal
sum annually contributed to the Sinking Fund,
unless, in other words, the income of the
Government does actually exceed its expend-
lures by that amount, Sinking Fund is a
transparent juggle. In the last ten years the
indebtedness of this city has frightfully in
creased, but during all this time Sinking
Fund has been in operation. Of what earthly
use has that Sinking Fund been to the city ?
If it has been productive of any effects what
ever, beyond confusing the accounts, it has
probably encouraged our citizens to look with
too much cOmplaccncy on the unlimited crea-
ton of fresh indebtedness, by deluding them
with the false hope that in some way or other
the bonds would finally be paid out OF the
Sinking Fund, without any increase of tax
alton.
Within q fortnight Secretary Bristow has
called in for redemption thirty million dollars
of United States bonds, without surplus of
receipts over expenditures at all approaching
that sum, and without any reasonable pros
pect of such surplus. What will be the
consequences Most probably embarrassment
to the Treasury, with the alternative offered
to the Secretary of issuing fresh bonds and
borrowing back his gold, or dispensing his
coin balance and indefinitely postponing specie
payments Within twelve months another
thirty and some odd millions of bonds must
be called in for the Sinking Fund, and then,
unless the revenues improve and the expend-
lures diminish, the Treasury must either Dor
row or go to protest. The estimated surplus
revenue for the current year Is less than ten
millions, and it is obviously impossible to pay
thirty millions of debt with only ten millions
of net income.
Neither Mr. McCulloch nor ourselves can be
Justly charged with any lack of zeal for the
speedy payment of the Public Debt, but expe-
rience is conclusive as to the fact that Sink
ing Fund is completely powerless to pay any
thing without something substantial to pay
with For nearly two years our Treasury has
had nothing but its moderate coin balance
out of which to redeem bonds Ex-Secre-
tary Richardson succeeded in transforming
about twenty-five millions of Indebtedness
from the shape of bonds to that of greenbacks,
but in reality the National Government is as
deeply in debt to-day as it was in September,
1873 There are excellent precedents for the
repeal of the Sinking Fund provisions. Great
Britain has abolished three or four
Sinking Funds, and only seventeen
years ago repealed a Sinking Fund Act.
In 1855 loan of ssO,OOOOOO was contracted on
account of the Russian war, and it was On.
acted that until an equivalent amount of the
funded debt had been paid of, 100000
should be annually advanced to the Sinking
Fund Commissioners and investeda at compound
interest. The plain effect of this provision
was that if Great Britain should find herself
involved in a contest with any great power,