New-York tribune., 1881-09-08
SURPLUS REVENUE-HOW TO USE IT

uSCu' II tuC puSSiiOu WcIt Ouly dS UO Jne
surplus of this year, there would be little
to say. AS we remarked Saturday last,
many assume that he will probably call in re-
Gently extended bonds first, because surplus
this year comes from his consent to extend more
tives than at first invited and second,
because in one sense he can save more
money by paying these extended bonds than by
buying four or four and half per cents.
But the Treasury will have to deal with sur
plus arising every year.
BY calling extended bonds, 3l2 per cent in
terest can be extingushed. BY buying bonds,
the Secretary extinguish 4l2 per cent in
terest for ten years, per cent interest
for twenty-six years The difference, 10 per
cent on one class of bonds, and 13 per cent on
the other, is little less than the premiums
now demanded for them Possibly, also, the
price might be advanced by Government pur-
chases. Hence, in one sense, the Treasury
would save money by calling rather than by
buying. But wise financial management looks
to distant results. Very serious and costly
difficulties hereafter may be prevented, it is
probable by beginning at once to buy four per
cents, if offered at reasonable terms
We are paying debt at the rate of 500, 600, 900
year. AT that rate all but $7S, 900, 100 of
the recently extended bonds could be paid by
1891, when the four and u half per cents fall DUE
BY paying part of these and extending the rest
all of them could be paid by 1896, and the rest
of the three and half per cents in 1897. Then
there would be left nothing but S73S, 7O3, 900
oi the four per cents, due in 1907. None of
these bonds can be paid until that date. For
ten years nothing could he done to reduce the
debt, or to get rid of n surplus, except to buy
the four per cents. But these bonds would then
command fabulous price AS the last
resort of trust funds moneys held under
orders of court and funds used for investment
purely, these bonds would then be in greater
demand because the funds of that sort would
by that time have vastly increased The
Government could not buy without great
sacrifice 1t could not hoard its surplus
revenue for ten years without causing
tremendous financial disaster. 1t could
not cut down it's revenue so closely as to
avoid large surplus in good times without
exposing itself to a ruinous deficit in bad
years. A single season of monetary stringency
would force the Government to put out its sur
plus at heavy loss, with bankruptcy close at
hand. In short, the debt would be in the worst
possible shape for the Government-uncontroll-
able for ten years, irreducible during that time
without great loss and absolutely due in 1907
with no possibility of accumulating an ade-
quate sum to meet it,.
The National banks now hold S32. 500. 600
of the four and a half per cents, $97, 800, 900
of the four per cents, and $241 900, 900 of
the three and half per cents. What are they
To do, If the three and half per cents are To
be eXtingulshed III ten years Circulation
based on four or four and q half per cents
at higher than present prices, would be un-
profitable. If required to buy these bonds in
place of three and half per cents retired,
four-fiftha of tbp hanl,p 70
render circulation They now hold over 40
per cent. of the extended bonds, so that n call
for 5O,000,000 would disturb $40, 900, 900
of circulation, and cause much of ii to be sur
rendered. We saw last February what violent
disturbance was produced by causing a sur
render of only $l6,00O,O0O; would it not
| cause Il similar disaster every year to apply n
| surplus of $4,000, 900 to the retirement of
| three and half per cents In times of mon
| etary stringency, just when release of Treas
| ury reserves would be most necessary 10 re-
| heve excessive pressure, would it be safe to
| cause sudden contraction of the currency
| In years To come, exceedingly costly disasters
| to the Government and to the business COM
| munity might be caused by such a policy.
Unless the national banking system is to be
practically forced out of existence within ten
years, some other mode of employing the sur
plus revenue must be sought.
| This country is not absolutely safe from
war Great industrial and financial reycrses
| may come within ten years, or at most, with
| In twenty-six years. 1t may he impossible to
| borrow $3.50, 900, 900 in 1891, or $73s, 900. 600
IN 1907, without paying per cent or more
| for long time The Government runs n risk
| of immense loss or bankruptcy if it fails To
| cut down, while it has the power that part of
| the debt which falls due at IL fixed date. The
| three and half per cents can never cause
| any trouble, for the Government is under no
obligation to pay them until it gets ready.
| The longer these bonds run the better holders
are pleased They may stand for a thousand
years, IL the Government wishes, without harm
to its credit. No business man would use re-
sources to pay such debt, if he could Use tbe
| money to eXtinguish other debts due at n f;xod
| date.
| In fact, the "Wndom bondsn ought TO Inc
| the very last of the United States securities to
| DE paid. For this Government never can hone
| to issue, and no other Government ever has
| issued, securities more advantageous to itself
| British cOnsos cannot be redeemed wbenevar
| Government peases; these can. If the United
| States has no surplus not dollar can be de-
| manded by the holders of the extended bonds
| ii 1T should have "A surplus Of $500, ,OOO. 600
| III year, it has the right to use the whole in
| extinguishing their claims. This option IA to
| payment is worth many millions to the United
States. 1t should not be lightly relinquisbed.
because some temporary expense is necessary
| III order to retain it, The possible s&ritice NV
( the purchase of fixed -1ote houde 10 e,,on