Year: 1870

Touchius tho National Debt.


Nothing is more important just now than
that the Executive and Congress should arrive
at clear ideas upon the subject oftbe discharge
OF the public debt. 1t is scarcely too much to
say that, protracted as has been the discussion
on this subject, 1t has scarcely yet received
what may properly be called scientific treat
ment, and that for reason in the highest de-
gree creditable to the patriotism OF American
citizens. The civil war was great surprise,
and vast national debt, as consequence of
it, was another surprise. At all events, it was
one OF those incidents Of Old World calamity
and presumabIe maladministration Of affairs
for which neither the fathers Of the republic
nor their immediate descendants were pre-
pared. Nothing, therefore, could be more
natural and proper than the impulse Of the
people to sweep away SO offensive sign Of
our great public troubles as soon as possible.
Another incentive to this action was the natu-
raj exasperation of conspicuously honest and
high-feeling public at reputation doctrines,
and the insolence with which certain parties
outside the republic have, from time to time,
greeted their promulgaiion as evidences OF
what they would fain believe in-the failure oi
our institutions to preserve public credit with
as much energy as monarchical or aristocratic
States. Add to all these causes generous
desire to spare posterity unnecessary burdens,
and we can easily understand the policy Of
payment which has been so ga llantly pur-
sued.


But it's time to consider this question on
strictly financial grounds. The republic has
given magnificent proof of its willingness to
bear public burdens, and shown conclusvely
that the Ignorant impatience of taxation" with
which European fnauciers have occasionally
reproached their citizens has no existence here.
There is now no reason whatever why the
problem of the wisdom Of paying off our debt
before maturity should not now be discussed
without fear or prejudice N'es-


And the broad question which we desire to
raise is this Whether in paying off six per
cent debt before maturity out of the proceeds
of taxation this country is really paying of
debt; or whether, as there is much reason to
fear the process, when closely and sclentifi-





debt. Let us see how this is.


To understand the point Alright we must bear
in mind what it is that taxation takes from the
pockets of the people of a country. Iii por-
ton of their profits of that fund which they
make over and above their expenditures Of
every kind-of that fund which, in point Of
fact, they are able TO carry over to subsequent
account as capital. In this point of view, sup
posing a correct balance sheet were kept be.
tween a government and country, the yearly
taxation would always constitute an item in
the ''capital account" between the government
and the country. 1t is beyond the power Of
ingenuity to controvert this. The money taken
from the people is, in strict, sound finance,
always capital taken from them. Their re-
turn for this is that they get government, pub
lie order, administration of the law and the
rest Of it. But this does not apply to the
portion that is taken to pay debt. This por-
ton constitutes capital charge taken to
diminish another capital charge. And if the
capital taken is more valuable than the capital
sum discharged there is no evading the con-
clusion that the transaction is aIosing one to
the community which engages in the opera
tion resulting in an increase, not decrease, Of
capital burden.


Now apply this to our country. It consti-
tutes vast partnership Of forty million peo-
pie, who have borrowed for their business-the
great business, that is, of keeping up the great
firm Of the Union as going concern-so much
money, which has to be paid off many years
hence with interest at six per cent. Instead OF
waiting for the debt to mature the managers of
the firm take out of yearly profits certain
sum to pay off the debt before its time, instead
of investing it in the regular business Of its
| members. Dropping the metaphor we have
this simple truth-the money taken from the
people to pay the unmatured debt is worth to
| them at least ten per cent per annum, and il
is taken prematurely to pay of debt bearing
only six per cent. 1t is impossible to imagine
any answer to this, which shows as clearly as
possible that in reality this process dimin-


the public debt-nomnaly reduces it only,
while virtually adding to its real effective
! burden.


| 1t will be observed that in this argument we
are not suggesting the least in the world tho
advisability of retaining the public debt as a
permanent burden. We are suggesting only
that in paying it off before maturity we dimin-
ish instead of increase public wealth. And
why should we do this? Merely to enable
certain administrations to glorify their record
That is very insufficient reason; or, if it be a
sufficient one, it has operated long enough. In
strict justice it must be admitted that at the
close of President Johnsons administration il
Union to the world as a power which placed
| nnlitical above financial considerations The