Year: 1877

Tor bond only changes the form of the
debt, greatly to the disadvantage of the gov
ernment, because the latter has then to pay
interest equivalent to 10 or 15 per cent. on
the market value of the debit


NOT CONVERTIBLE BONDS.


He refers to the notes first issued that
were convertible into bonds. The notes Is
sued in 1865 were not so convertible,
being simply receivable for all loans.
negotiated only on such terms the govern
ment chooses to grant this adds but little to
the value of the notes The first notes being
redeemable in bonds their value could not
fall below that OF bonds for which they were
exchangeable. But how was the value OF the
5-2O bonds hxed2 By the terms of the legal
tender act the government could redeem the
bonds at ary time after five years in legal
tender notes. The value of the $40 bonds
was therefore fixed by the value of the fu-
ture legal tender notes, which might be less
than that of the present ones. There was no
promise, expressed or implied, that the
money with which the principal of the go
bonds should be discharged should have any
intrinsic value whatever" The above is from
pagee7. On page 81 he says: Herein lies
the sole economical advantage of public
debt 1t enables that portion of the COM
munity which is in the greatest want of cap
ltal TO keep possession of what they have,
or to add to it by paying the government
would actually owe to it should the gov
ernment levy a war tax instead of borrow
ing money to support and equip troops
etc" Having asserted this, he gives an in
stance: when a special war tax is assessed,
it may happen that the. workmen who are
not frugal, can not pay their entire assess
ment during the year, and can not enter the
government service with serious incon-
venience to their families 1t may also hap
pen that the business man IS employing his
capital so proitably, or all that he has is so
necessary to his business that his profits will
be materially curtailed by the loss of what
he would pay as war tax. Or farmer
who would be assessed 800 war tax
might need all the money he could raise to
buy implements and to pay his laborers. IL
he vert permitted to apply his assessment
this way he could raise $40 worth additional
of wheat. He may then apply to the capi-
talist, who can not only pay his own war tax
but the farmers also, to loan him the money
at six per cent. interest, and thus make a
bargain, as could the workman or merch-
ant, also, that would be mutually advan-
tageous. But the capitalist may not be will
ling to trust the farmer, or workman,
or merchant. Here the government steps
in and borrows the 500 from the capital
ist, trusting to gradually obtain the princi-
pal and interest of the sum borrowed from
hAC AdAlhCi III Vic lOiAn VI ldACo. 1hC no-
tional debt thus incurred is beneficial to
the farmer and others, who can lay out his
500 assessment on his farm, on condi-
ton or paying the government the
annual interest on that sum. So
| long as the government can borrow
on such favorable terms that it would be
to the advantage of taxpayers generally to
borrow on the same terms, so long is the
public debt a public advantage and no
longer. The great political question now is:
| Does our government borrow money on such
| terms? Let us see:


| "a five per cent. bond interest payable in
gold, can now (lS65) be sold in the market
for par in currency; but one dollar of this
/ currency is worth little more than 40 cents
in gold, so that we are really paying II per
cent interest on the actual amount we bor-
| row. Is this to our advantage? The tax
| payers will think so. Then the government
should not incur any further debt, for in
doing so it is as the agent of the taxpayers
| borrowing for them on exorbitant terms"
| And OH page "a he says: The in
crease of the public debt by selling bonds
for 40 cents on the dollar produces an une-
quail distribution of the burdens of the war.
II the principal and interest of the debt is
ever paid in gold, then the bondholders will
4 be profted at the expense of the taxpayers.
who will have to pay just double their right
share. If they are paid in paper it will make
u


His conclusion is: Every consideration
of sound policy demands stop to the fur
ther increase of our debt aud the levy of a
war tax sufficient to meet all the further ex.
| penses of the war" Then he makes this per-
tinent query on the same page 1857: "Ought
the public debt to be subject to taxationr'
The answer is: There is no reason why the
| owner of government bond should not pay
the same tax on il as on other property
of the same kind The man who lends
| money to the government does not
thereby resign either the real owner
ship or the benefits of the money, for it is all
to be returned to him; he ought therefore
have paid If be had kept it for his own use
If he lent his entire property to the govern
| ment when the debt was discharged he
would get il all back again without having
paid any tax at all, unless his bond wa:
taxed.


|, When the government sells bonds with 9
pledge that they shall rot be taxed, in order
| to get more for them, it amounts to selling
out in advance all the taxes to which the
bonds might, in common with all other per
sonal property, become subject. This farm


ing out of taxes to be collected-for that il
what the contract amounts tO-is the wors


possible way of borrowing money" The re-


suit will be, he fully demonstrates that the
bonded debt will leave those sections where
agricultural, manufacturing and mining
capital is scarce, and accumulate in those sec


tions where it is plenty. The debt held in the


west will flow east in exchange for agricul


tural implements, machinery, and the pro.
ducts of looms and anvils Or, which
amounts to the same thing, it will come


east in exchange for manufactured articles
on which the western man will subsisi


while they are erecting barns, houses, mills
and factories, or digging mines, improving


farms, constructing roads, which are to bt


the future sources of their wealth. In the


east, where all the mills, factories ETC., are


already built and engaged in active compe


tition with each other; where, therefore, the


rate of interest and profit on capital is lower


the bonds win be relatively more valuable


for the same reason that three per cent con