It will be seen, therefore, that since 1715 national should draw to a termination. He foresaw, therefore, indebtedness had increased more than $1,000,000,000. that it would be impossible to get the popular repreBorrowing had become more general. Yet the debt sentatives at the conclusion of the war to lay on new of Great Britain was more than half the entire taxes, and provide for a sinking-fund to pay off the amount. It had been augmented during the Wars of debt which had been contracted during its continuance. the Succession, and though a long and pacific admin- The only way, therefore, to secure that inestimable istration followed that period, no sensible reduction of object was to have the whole machinery constructed the amount was effected. Then came the checkered and in full activity during the war, so that it might be contest of 1739, and the more triumphant campaigns at once brought forward into full and efficient operaof the Seven Years' War, both of which added to tion upon the conclusion of hostilities, without any the burden. But a far heavier weight was added by legislative act or fresh imposition whatever.' And engaging in the contest with the United States. At although the true nature of the sinking-fund was after its close in 1783 the national burdens were so greatly a time generally understood, yet through this maincreased that both David Hume and Adam Smith be- chinery a large amount of indebtedness was discharged, lieved that they would prove fatal to the nation. At far more probably than would have been if the people that time the interest was no less than $47,258,860. had clearly known how the reduction was effected. In The cost of the struggle with the United States was other words this device blinded them; they did not $487,997,480. know how much they were contributing toward paying the debt; if they had known, they would have set aside the plan at an earlier day. Pitt came into office in 1784. "The interest of the debt, says Alison, “absorbed now more than twothirds of the public revenue. It was impossible to conceal that such a state of things was in the highest degree alarming, not only as affording no reasonable prospect that the existing engagements could ever be liquidated, but as threatening at no distant period to render it impossible for the nation to make those efforts which its honor or independence might require. The situation was deeply pondered by Mr. Pitt. Public attention had been directed by Dr. Price to the prodigious powers of the accumulation of money at compound interest, and he had demonstrated with mathematical certainty that any sum, however small, increasing in that way, would, in a given time, extinguish any debt. Pitt, accepting the views of Dr. Price, proposed to establish a plan for discharging the British debt. "All former sinking-funds had failed of producing great effects because they were directed to the annual discharge of a certain portion of debt, not the formation by compound interest of a fund destined to its future and progressive liquidation; they advanced, therefore, by addition, not multiplication, in an arithmetical, not a geometrical progression. The wonderful powers of compound interest, the vast lever of geometrical progression, so long and sorely felt by debtors, were now to be applied to creditors. Accordingly Pitt proposed that a million pounds should be vested in certain commissioners annually, which should be derived partly from savings effected in various branches of the service and partly from new taxes. The payments were to be made quarterly, and with the sums thus put into the hands of the commissioners they were to purchase stock, the dividends on which were to be invested in like manner. By thus setting apart a million pounds annually, and applying its interest to the purchase of stock, the success of the plan was regarded as a demonstrated certainty. The future accumulations would spring, not from any additional burdens imposed on the people, but from the dividends on the stock thus purchased. The powers of compound interest were thus to shift from the side of the creditor to that of the debtor, from the fundholders to the nation. The bill passed the house without a dissenting vote, and on the 26th of May, 1786, the king gave it the royal assent in person to mark his sense of the importance of the measure. The fact that every dollar of debt discharged must come from the people in the way of taxation was a truth as obvious to Pitt as to Robert Hamilton, whose work on the National debt, first published in 1813, exploded the sinking-fund theory. Of course there was no magical power in the sinking-fund to draw money for paying the debt, but Pitt knew this as well as Hamilton. He knew that what came into the hands of the sinking-fund commissioners must be drawn from the tax-payer. But, as Alison truly says, "Pitt was perfectly aware of the natural impatience of taxation in general, and the especial desire always felt that, when the excitement of war ceased, its expenditure VOL. II.-2 K The It will be noticed in the foregoing table that old debts had increased in amount and new ones had been added. The debt of the United States had been created in contending against Great Britain. debt of Russia consisted of notes issued by the Russian bank, which had been founded by the Empress Catherine in 1768. The finances of Prussia have been managed with great economy ever since the founding of the kingdom in 1700, and more than one king left a goodly treasure to his successor; but in the foregoing statement Prussia was a debtor to a small amount. The most noteworthy change beside the vast increase of the English debt was the diminution of the debt of France. That wonderful country, thrifty beyond comparison, has never done anything toward paying its debts, but on several occasions it has reduced them in a more speedy if less honorable manner. The first reduction while the Duke of Orleans was regent has been already described. It was frequently reduced and expanded during the reign of the two subsequent kings, and suffered a tremendous diminution amid the terrors of the Revolution of 1789. A vast amount of paper money was issued at that time. There were two kinds, the assignats and mandats. (See MONEY.) Of the former kind $6,125,000,000 were issued; of the mandats $480,000,000. The funded debt was also swelled to $480,000,000. This amount was afterward reduced two-thirds, and was consequently called the "Tiers Consolidés." A vast amount of paper money was issued in the time of John Law; for the history of his experiments see BANKING. The next table of debts represents the indebtedness of the nations in 1820: Great Britain...$4,510,000,000 Russia....... France Spain. $250,000,000 100,000,000 40,000,000 21,500,000 United States... 91,015,566 15,000,000 145,000,000 265,000,000 South America. This period shows an enormous increase (above $5,000,000,000), more than two-thirds of which had been incurred by England. She now owed nearly three-fifths of the aggregate national debt of the world. This addition represented part of the expense to subdue Napoleon. The wars of that period mark a momentous epoch in English history. "Their effects and consequences, says Wilson, are felt by us still, and, so far as one can see, will continue to be felt as long as England exists. Compared with what they cost us, all other outlays on our previous wars seem as nothing. Their charges led to the remodeling of our fiscal system, spurred the nation to great exertions, developed its trade, increased the poverty of its poor, and the wealth of its rich. We can form no intelligent conception of our financial position to-day, unless we can grasp some idea of what these wars meant and still mean for England." An eminent statesman declared in the House of Commons in 1815 "that national bankruptcy was inevitable in view of a public debt of £917,000,000.' Notwithstanding Pitt's greatness as a minister, he committed two errors from which his country has severely suffered. The first was in not waging the war against Napoleon with sufficient vigor during its early stages. Money and men enough were raised, but instead of sending the latter to the Continent to act in conjunction with the allies in putting down the common enemy, they were transported to India, where they performed a splendid service in winning an empire for the British crown; this, however, was a work which might have been postponed without much loss, while the delay to crush Napoleon in 1793, when it might have been done had Pitt employed all the resources at his command, entailed on his country a vastly greater burden which is destined to be felt by many succeeding generations. The other mistake consisted in not borrowing more money at 5 instead of 3 per cent. interest. To clearly understand the serious consequences of this shortsighted policy it is only necessary to state that when loans were contracted bearing 3 per cent. interest the nation agreed to give 100 pounds for the 60 pounds which it received, whereas on the loans which bore 5 per cent. interest the nation received 100 pounds—the same sum which it agreed to pay. There was borrowed $3,000,000,000 of stock in the 3 per cents., and consequently the nation must pay $1,200,000,000 more than it ever received from the public creditors. Though the difference in the rate of interest was very considerable, yet on the return of peace the state acquired the power of lowering the rate of interest on its debts to the current rate by threatening to pay off the principal, an operation which was successfully performed by later administrations with the 4 and 5 per cents. By lowering the interest on the 5 per cents. in 1824 to 4, and in 1829 to 3 per cent., no less than $12,000,000 annually was saved to the nation on that stock alone, though it amounted only to $785,000,000. Had the $1,800,000,000 which was actually paid by the public creditors for the $3,000,000,000 in the 3 per cents. been subjected to the same operation, the saving effected without doing injustice to any creditor would have been $27,500,000 a year. Besides, the 3 per cent. paid on the nominal amount of $3,000,000,000 received by the government was equivalent to 5 per cent. on the actual amount of $1,800,000,000. The national burden, therefore, was no lighter during the war by issuing 3 per cents. than it would have been had 5 per cents. been issued, and the greater burden afterward borne in consequence of adopting such a policy is very apparent. It will be noticed that while France was the central figure in all the wars of this period her indebtedness did not increase with anything like the rapidity of that of England. It did not grow much beyond $500,000,000, although the empire was almost constantly engaged in war. Of this sum, too, $260,000,000 were levied for war contributions and the army of occupation after declaring peace. The reason for the small increase was that the French armies were fed, clothed, lodged, and paid very largely by foreign states. The revenues of France, as a good authority has stated, did not furnish more than half the total sum required to maintain the expensive and gigantic military establishment of the emperor, while its inhabitants received almost the whole benefit from its expenditure. This explains why he was constantly attempting to make fresh conquests and why the French people were so attached to his government. It also explains the internal prosperity of the country as well as the hatred with which France came to be regarded by foreign states. Of all the nations of Europe which suffered by this system, Holland suffered most. Invaded and conquered by the French, she lost her commerce, her colonies, and her independence, and was obliged to pay war contributions to the French from 1794 to 1814, which amounted to nearly $500,000,000. Her funded debt also increased $220,000,000. Once a rich and brave people, they were enabled by borrowing to conquer their independence from Spain, to resist the encroachments of France, to carry on naval wars with England, and to rank as a first-rate power in Europe. But after 1715 her contest against the larger states was ended by exhaustion. She lost her commercial pre-eminence and resources through excessive taxation, and was weighed down by debt and competition with less burdened traders. The increase of the debts of other European states during this period was caused mainly by the wars of Napoleon. The debt of the United States had been increased in consequence of engaging in a second war with Great Britain. After the amount of the Revolutionary debt was determined and funded, Congress devised a mode of reducing it; but, during the closing years of the 18th century, so many special and unexpected expenditures occurred that the amount remained about the same as it was when first funded. But in 1800 all untoward events within and without which had occasioned an increase of the army, the building of naval ships, and other preparations for threatened war passed away, and the debt-paying which then began continued without interruption until the opening of the second war with Great Britain. When this was ended in 1815 the debt had grown to $127,334,933; but the work of liquidation was again renewed, and by 1820 the national indebtedness had been reduced to the amount above mentioned. The next table represents the national debts in 1848. For these thirty years the total indebtedness of nations was not very largely augmented, and only Sweden and Norway, Greece, and some British colonies were added to the roll of national debtors. The two most remarkable features in this statement are the reductions made in the English and Dutch debts. The principal reduction in the former was rapidly made after 1815. "If the sinking-fund had been let alone," said an able writer in 1832, "it would, since the year 1813, have paid off above £400,000,000; and even after deducting the immense loans of 1814 and 1815, the national debt would have been upwards of £300,000,000 less than it is now. In the year 1847, supposing no new debt contracted, it would have been entirely extinguished." Turning now to the Netherlands, it may be remarked that when Napoleon took possession of the country he incorporated it with France, and reduced the debt to one-third of the former amount. Order was partly restored toward the end of 1813, after the arrival of the king, and on May 14, 1814, he presented to the States-General a new law for the regulation of the debt, by which the uniform rate of interest on all the stocks was fixed at 24 per cent. Previously they had borne twelve different rates, varying from 14 to 7 per cent. Another provision of the law restored to the creditors the debt which Napoleon attempted to abolish. The nominal amount of the debt, therefore, was preserved, but the rate of interest was in the aggregate youngest and most impecunious. We hardly know considerably reduced. Although new loans became which will surprise the reader most, the inclination necessary, yet by the operation of a sinking-fund, of so many states to borrow, or the willingness of which was established at the time when the debt was lenders to part with their money. The folly of much restored and the rate of interest changed, and by the of this borrowing has long since been realized; but employment of surpluses in the same way, the debt sweeping as national bankruptcy has been, it is feared was reduced at the beginning of 1851 to $512,300,000. that the list may be further enlarged. The sum of $50,000,000 was transferred to Belgium after 1830, but a loan for as much more was negotiated to maintain the Belgian war. Beginning with England, what do the figures show? A small decrease of $100,000,000,-a sum not so large as the United States, in several instances, has paid in a single year. England increased enormously during this period in wealth and population; but, instead of paying the national debt, the nation adopted the policy of remitting taxes and keeping up the interest account. It is true that an additional expense of $175,000,000 was incurred in 1855-56 for the Crimean war, and the expenditures were heavy for the Chinese and Abyssinian wars. Mr. Baxter has prepared the following table, which shows the total amount of capital paid off or expired from 1815 to 1870, not including the expense of the two wars just mentioned, which was paid out of the regular revenues: 1834, Negro Emancipation......... .......... 1855-56, Crimean War............................................................................ $100,000,000 35,000,000 175,000,000 30,000,000 35,000,000 510,000,000 In marked contrast with the action of the Dutch government in undoing the work of Napoleon and restoring the rights of its creditors was the action of the pope with respect to the creditors of the Roman state after the re-establishing of papal rule. When Napoleon invaded the latter state its debt amounted to $148,300,000. By a series of arbitrary orders it was declared to be extinguished. Napoleon realized that it was easier for him to impose new exactions if he could relieve those whom he conquered of their former burdens. When the pope regained power he did not recognize the existence of the old debt. It had become badly tangled, it is true, but the pope could have disentangled it if he had desired. He declared, however, that the debt had been extinguished by the action of the French emperor. Whatever regrets the pope may have had over other orders of Napoleon, there is no reason for believing that he was displeased with the great conqueror for his summary mode of relieving the Roman state of its obligations. It will be noticed that France added $210,000,000. to her debt during the Orleans reign. Of this $150,000,000 were required to meet the deficits of the first four years after the Revolution. The addition to the Austrian debt was occasioned by annual deficits $205,000,000, the value of the annuities existing before "But," says Baxter, "these figures take credit for which have appeared without exception ever since 1815, which were not created as a sinking fund; and 1789. With respect to Spain a commission was ap; they also take credit for the failure to meet the expointed in 1820 to examine into the public debt, and traordinary emergencies during that period. The true make recommendations concerning it. They reported reduction of the debt of 1815, by the efforts of the nathe amount to be $700,000,000. This enormous in- tion during the last fifty-five years, after providing for crease since the time of Charles III. had come from the expenditure of those years, is only the issue of bank and government notes. (See BANKING and MONEY.) Two years afterward the matter was reconsidered, and the amount was declared to be $260,000,000,—a wide departure from the former result. The doubling of the Russian debt was occasioned by war and by annual deficiencies. The increase consisted of paper money. The United States had paid off the debts of two wars, but had begun to accumulate debt in a time of profound peace, with no extraordinary xpenditure, until 1846, when war broke out with Mexico, which gave rise to new loans for a considerable amount. sum Clear reduction........ Being per year.. ... $885,000,000 $16,100,000 $305,000,000 5,500,000 Such has been the progress of the English nation in the task of reducing the nominal capital of the national debt, a rate of progress that would require seven hundred more years to effect the final extinction of the debt existing in 1815." While England reduced her debt somewhat during this period, the Netherlands did far more, comparatively, for she reduced hers $109,100,000. Thus in fifty-four years it has been diminished $320,000,000, a larger reduction than Great Britain effected during that time, although the latter country possessed tenfold more wealth and population. But France added largely to her indebtedness. While the second republic lasted from March 1, 1848, to December 31, 1851, the deficit was $71,874,800, to cover which loans were necessary. The financial situation was not improved by establishing the second empire. The deficits continued. Extensive internal improvements were undertaken. Then there was a series of wars; the Crimean, Italian, Chinese, Anamite, and Mexican. These wars, beside other expenditures, occasioned deficits to the amount of $447,707,900. The total indebtedness of the nation, therefore, ran up to the very high figures above given previous to the outbreak of the Franco-German war. Another marked change is noticeable in the Italian debt. Before annexation took place the debt of the kingdom of Sardinia in 1847 did not exceed $25,000,000. The difficulties of 1848 and the wars with Austria and Russia increased the debt within ten years to $200,000,000. When the kingdom of Italy was formed in 1861, the debt swelled to $420,000,000, including the Neapolitan debt of $125,000,000. But nine years afterwards the debt had reached the enormous sum of annual surpluses, as the finance ministers from time $1,857,300,000. Its increase had been more rapid than that of any other state. Every year after the formation of the Italian kingdom, March 17, 1861, ended with a deficiency until 1875. Perhaps no debt in Europe presses more severely on the people. to time have announced, deficits have been constantly occurring, which were paid from loans contracted to pay for internal improvements. It may be added that the debts created in the Australian quarter of the world were for railroads, water-works, and other useThe United States now appears as the third on the ful improvements, and the people living there have list of borrowers, approaching very nearly to France. much to show for their expenditure. The debt of Great Britain, France, and the United States owed al-Japan was principally incurred in extinguishing the most half the entire amount. The debt of the latter pensions which the nobles and priests drew from the country was created with amazing rapidity; no nation government. Another portion was created to pay for ever spent so much for war purposes in so brief a building a railroad. The debt of China consists of period. This vast mass of indebtedness was accumu- two loans, one contracted in December, 1874, for lated in four years, for when the war broke out the $3,138,375, bearing eight per cent. interest; and the national debt was only about $60,000,000. The money other in July, 1878, for $8,021,380 at the same rate. was borrowed at varying rates of interest from 5 to The increase in the debts of Spain, Turkey, Egypt, 71% per cent. A very large portion of the debt con- and many other states has resulted largely from wholly sisted of legal tender notes and other obligations bear- unjustifiable extravagance and fraud. ing no interest. On investigating the unexampled national borrowing which occurred in these twenty years, we find that the larger portion was spent to carry on wars and prepare for them; no inconsiderable sum was borrowed to pay constantly accruing deficiencies; a much smaller sum was expended for national improvements. A vast amount was spent in a most wasteful manner; and when the money was gone, more than one nation had but little to show for the expenditure. This was especially the case with Turkey, Egypt, Spain, Portugal, and the South American states. Borrowed money usually, as the world knows, is spent more recklessly than any other; this trite truth has been shockingly illustrated in the history of national spending. We now come to the last date for tabulating the history of national borrowing, 1880. England no longer leads the nations; that unenviable distinction has passed to France. So far as reductions are concerned these have been effected in the United States on the grandest scale. If this nation piled up debt with startling rapidity she has excited the admiration of the world by swiftly reduc ing it. On August 31, 1865, the interest-bearing debt was $2,381,530,294.96. In seventeen years this part of the debt has been cut down to $1,437,693,750, a reduction of $943,836,544.96, or 40 per cent. The total debt, less cash in the treasury, was reduced during the same period from $2,812,662,178.92 to $1,658,926, 171.96, a reduction of $1,153,736,006. 96, or 41 per cent. The annual payment of interest on the interest-bearing portion of the debt has been reduced from $150,977,697.87 to $56,446,488.50, a total of $94,531,209.37, or about 63 per cent. In contracting debts it is a very important question whether the money is advanced at home or comes from abroad. One reason why the English and French debts are so cheerfully borne and the burden so lightly felt is because almost the entire amount is held in the country which created the debt. The French debt was distributed on Jan. 1, 1879, among 4,380,933 persons; many of them farmers. This is the reason why a reduction of the rate of interest in that country is so unpopular. Instead of paying five per cent. France could borrow the money at three, but she prefers to pay the higher rate because it is more satisfactory to the people. It requires no lengthy ar gument to show that the operation consists merely in taking money out of one pocket and putting it into another; yet some changes occur, and regarding the subject in all aspects it is deemed the wiser policy to pay the higher rate. In the United States a large portion of the debt was held abroad for several years, but the process of refunding it at lower rates of interest, and the movements of trade in favor of this country, have had the good effect of transferring, as is believed, nearly all the debt once held abroad to America. Less than $200,000,000 are owned probably by foreign creditors. The debt of Holland has also been owned at home. Indeed, in 1778, when the debt of that country was very large, the Dutch still owned more than $300,000,000 of the obligations of France and England. In this last decade the Franco-German and the Turkish wars have occurred, and a very short war between Germany and Austria, but no other costly operations of the kind have taken place in Europe, yet the growth of its national indebtedness has been truly fear- But the case is very different with many nations. ful. Much of the money borrowed has been expended Nearly all the loans of Mexico and the South Ameriin building fortifications, ships, and in other warlike can states, those of Egypt, Turkey, Greece, Spain, preparations. Something has been expended for in- and Portugal have been contracted with foreigners. ternal improvements. Germany can give the most Russia has contracted nineteen foreign loans since satisfactory account of her borrowings. It is said that 1822, aggregating $734,900,000. It will be readily her public property is quite sufficient to reimburse her seen what a constant drain is going on in those coundebt. Her finances have been managed with great tries to discharge the annual interest account. We economy. Notwithstanding the heavy cost of the might add, too, the British loans to India and to many recent war to France she has been borrowing quite English colonies. Of course the payment of so freely since to pay for building railroads and canals. much interest abroad impoverishes a country. It can Her budgets are made up in such a way that it is diffi- have no other effect. If there be a large trade-balance cult to ascertain what are the yearly receipts and ex- due to the interest-paying country, the effect of pay. penditures; what portion of the money borrowed has ing interest abroad may be counteracted; unhappily been spent in paying annual deficits is not publicly the nations which have borrowed the most freely from known. One thing is now certain: instead of having other countries have usually the smallest trade with them. So the account is kept perpetually on the portions of debt into a security the annual payment wrong side for the debtor nations. on which is considerably higher than the rate of inIt is not singular, therefore, that such nations get-terest on the former security, but after a certain numting tired of paying, and knowing that the failure to ber of years the payment ceases and the debt itself is pay will not cause loss at home, finally repudiate their extinguished. As people are willing to discharge the obligations. France was perhaps the first nation to interest on the debt, these conversions are made in do this, but she has had many imitators in modern order to blind the people into paying what they would times. Over and over again Spain has compounded not pay in the ordinary way by direct purchase. with her creditors. Greece has drawn a pretty wide While the policy of the English government in reline between her foreign and home creditors, paying ducing taxes after the close of the Napoleonic wars was the demands of the latter and ignoring those of the a wise one, yet not a few thoughtful persons have conformer. Many of the South American states long ago tended that the reductions were carried too far; that joined the ignoble but somewhat fashionable army England ought to have proceeded more rapidly in cutof repudiators. Portugal belongs to the same cate-ting down her debt. Now the opposition to reducing Where a national debt is owned at home, a the debt is so strong that it is very difficult to accomstrong influence can be exerted to enforce its payment. plish much. Nothing can be truer than that the best Repudiation in that case at once creates a class of time to pay debts is when the people are in the mood sufferers in the nation itself who, of course, will do for paying them. Possibly they might be richer at a their utmost to prevent it. But when the debt is future time, but if the inclination does not then exist, held abroad too often all classes join in relieving them- debt-paying is far more difficult. If any reduction selves from the obligation of paying it. were effected it would be an unwilling one, and would be regarded as a greater burden than the payment of the same or greater sum when the willingness to pay it prevailed. gory. One may ask how have so many nations been able to borrow so easily, especially after showing a disinclination to fulfil their obligations. This is one of the most curious chapters in the history of national borrowing. The brief answer is, many of these loans have been effected through the machinery which cunning bankers have devised. They have been offered large sums to negotiate loans, and the reward to be received in the event of success has been a sufficient stimulant to produce striking results. Hence bankers have almost always been found who were willing, nay, eager, to undertake these operations. A few years ago an investigation of this subject was made by a committee of the British Parliament and a flood of light was turned upon it. In defence of the policy of paying a national debt slowly, it has been often urged with respect to Great Britain and some other nations that they were increasing in wealth and numbers, and consequently the burden grew lighter every year. Tables have been constructed from time to time showing the amount of debt, income, and population, and how the burden was diminishing. One of these, perhaps the most carefully calculated, may be found in that excellent work, Mulhall's Progress of the World. But there is a great deal of delusion in these calculations. In the first place while it is perfectly clear that if the amount of debt is unchanged and the population increases, the average amount which one must pay is diminished, it does not follow that the amount is in any sense diminished for those who must pay. If the addition to the population be paupers or persons who are unable to pay, the burden of the others is not lightened. It remains the same. Now while the population in all countries is increasing, pauperism in some of them is increasing with frightful rapidity, so that an increase of their numbers does not diminish their burden of debt. This however is not true with respect to all nations, as a writer in a recent number of the Contemporary Review has shown. Of course an increase of wealth diminishes the burden. This is true in one sense, though not in another. Two conditions must exist to make debtpaying possible: first, the means; secondly, the inclination. The truth is in countries where the theory of deferring the payment of their national debts is advocated that their citizens may increase in wealth and numbers, the way is solidly paved either for making their debts perpetual or for repudiating them. The desire to pay ceases. No country better illustrates this truth than Great Britain. While a certain class, and among them her ablest and best men, strongly favor a more rapid reduction of the debt, the idea is not popular. Mr. Gladstone has advocated a speedier reduction on many occasions. And, to effect this end, a kind of securities known as terminable annuities have been devised. These are formed by converting Mr. Baxter in his work on National Debts reached sundry conclusions on this subject which are so valuable and weighty that we shall reproduce them. "A national debt is a mortgage of the future income and earnings of a nation, and shifts the burden from the borrowing generation to materially different property and earners. Hence it is only justifiable in case of great emergencies, with which the state is unable otherwise to cope; but it is then able to render great services to the nation. It generally leads to much greater and less economical expenditure, and is raised on onerous terms. It weakens a nation by withdrawing capital from productive employment and improvements, and also by necessitating additional and often injurious taxation. Its bad effect is modified by the growth of the nation, which gradually diminishes its pressure and burden. But great wars from time to time arise, requiring large increases of debt, so that national growth cannot be depended on to wipe out a national debt. In time of peace the industrial competition of nations gives a great advantage in the market of the world to the nation least weighted by debt. The removal of prejudicial taxation, so long as it exists, must be the principal object of exertion. But for war reasons, and also for peace reasons, it is always the true policy of a nation to keep steadily in view, and persevere in efforts for, the reduction of its national debt.' Having considered the national debts of the world, perhaps something ought to be added concerning the debts of the States composing the American Union. During the Revolutionary war they contracted debts to a considerable amount for war purposes. The contributions made by them were very unequal, but the Congress of the Confederation promised that justice should be rendered to all in the end. When the war was over, and the subject of funding the Revolutionary debt was discussed in Congress, there was a very strong opposition to assuming the debts of any States. Hamilton contended that when the debts were contracted the various States expected the Federal government to discharge them. There was another reason why the government should do it. Previous to entering into the permanent union the States on the seaboard collected taxes on imports, but this right was relinquished to the general government when the Constitution was adopted. Since they had parted with their richest sources of revenue the government was clearly bound to take the State burdens at that time existing. To take the taxes, or the right to receive them, and not pay the debts when due, was an unjustifiable proceeding. The motion to assume was carried by only two votes, and even this slim majority was obtained only by a consent on the part of Northern mem |
