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France, 1863. $2,541,274,806 $132,360,000 $62.12
Austria, 1864. 1,263,400,000 75,100,000 36.00
Russia, 1864... 1,116,800,000 27,100,000 19.64
Great Britain, 1863.. 4,006,942,117 127,564,548 129.33
United States.... 3,000,000,0001 165,000,000 86.72


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These debts Mr. Wilkeson calls permanent; so they are permanent, inasmuch as it is found difficult, or impossible, to pay them ; but not one of the governments of Europe would

2 wish to retain its debt as a source of wealth or any benefit to the nation. Perhaps there is not a single cabinet, one of whose members does not regard the national debt as our author does ; but in no cabinet would a majority be found entertaining the same opinion. This, we think, is as it ought to be, and we will give our reasons for that impression before we close. In the meantime, we will briefly examine some of the secondary statements of Mr. Wilkeson. The first is : “We can easily pay our debt.” “

If the word easily” were omitted, we think this would be correct enough, especially as it is not meant that the present generation should pay all. . “Our ability,” he says, “ to pay our war debt has been demonstrated by an exhibit of the resources of the nation."

That these resources are immense none can question ; it is no vain glory or exaggeration to say that they are greater than those of any other country; but, boundless as they are, we hold that it would be impossible to demonstrate, by any process whatever, that they could be easily” made pay three

" thousand millions ; that is a much larger sum than Mr. Wilkeson seems to have calculated with any degree of accuracy. But, if he be correct, it would be better not to


it if we had it in our power; our doing so would be not a blessing, but a misfortune, for the simple reason that “ debt is just as much capital added to our wealth.

The funded debt of the United States is, he says, in effect the addition of three thousand millions of dollars to the previously realized wealth of the nation. It is three thousand millions. added to its available active capital. To pay this debt would be to extinguish this capital and to lose this wealth. To extinguish this capital and lose this wealth would be an inconceivably great national misfortune."

This conclusion he arrives at by taking England as an example; but except in a few instances, and under certain


conditions, English statesmen have always regarded the subject in a very different light ; as have the statesmen of every country in Europe. No other subject has occupied the attention of political economists so much as to devise some project by which the national debt could be paid off in the shortest possible time. All the books that have been written upon it, even within the present century, would make quite a large library by themselves. At least a hundred different plans have been proposed by as many writers, including cabinet ministers, jurists, college professors, divines, &c. Even the project of paying the national debt by contribution was by no means new when proposed in this country some months ago by one of our leading journals. Substantially the same proposition had been made on the same grounds half a century previously, by no less a personage than the Bishop of Landaff, who wrote a pamphlet on the subject, maintaining that, if all could not be paid by subscription just then, the nation ought, “ at least, pay that part which has been added to it by the Seven Years' War, by the American war, by the last war, and by this.” The Edinburgh Review of the time, in commenting on this project, remarks: “ Bishop Watson proposes that we should take the present opportunity to pay off the whole of the national debt. He urges, on behalf of this bold scheme, a good number of declamatory reasons, such as the terror with which so grand an operation would strike our enemies, and the advantage of lessening the great imposthume growing on the body politic before its bursting proves fatal.*"

It is needless to observe that all propositions for the payment of the debt have been made on the ground that it was a burden which it was at least inconvenient to carry ; nay, was it not for this reason that the sinking fund was established ? Is it not for the same reason that every government in Europe, whose financial affairs are judiciously managed, is at this moment doing all it conveniently can to discharge its debt?

But Mr. Wilkeson tells us that “the interest of the debt only becomes the measure of its burden. Great Britain," · he says, “ does owe to Great Britain confessedly four thou

sand millions. But, practically, and by consent and harmonious arrangement, Great Britain owes to Great Britain only one


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hundred and twenty-seven millions of dollars a year; and that is a very small debt for the proprietors and workmen of the workshop of the world' to owe to each other.” (p. 4.) This is exceedingly loose sort of logic. It requires little argument'to prove that no debt can be said to be paid unless the creditor receive the principal as well as the interest; it is equally evident that, if the money is to be paid, it must come out of the pocket either of the debtor or his successors ; and this is the principle on which the English funding system, which our author takes as a model, is founded.

The benefit of compound interest, which accrues to a nation in its transactions with the public creditor, is what England depends upon chiefly for the payment of her debt. She borrows the money at simple interest, and gets compound interest for it; she appropriates certain portions of the public revenue to the half-yearly payment of the interest, and also to defray the expenses of management. The sinking fund is thus caused to increase at such a ratio—the surplus of taxation being added to it—that, if no new debt is contracted, millions can be paid from it annually towards diminishing the public burden. Those acquainted with the principle of compound interest will readily understand this ; its wonderful power of increase is well illustrated by Mr. Price. penny," says that gentleman, “so improved from our Saviour's birth as to double itself every fourteen years, or, which is nearly the same, put out to five per cent. . interest at our Saviour's birth, would by this time bave increased to more money than would be contained in one hundred and fifty millions of globes, each equal to the earth in magnitude, and all solid gold.

This seems extravagant; but it is very near the truth. Yet, if we examine the facts, we shall see what slow progress it makes even in times of profound peace. As Mr. Wilkeson bases all his statements on the debt of England, we will draw our data, for the present, from the same source. From a cursory glance, we find that in 1722 the national debt of England amounted only to fifty-five millions. For seventeen years afterwards she enjoyed profound peace. During the whole of this period the funding system was in operation, yet the debt was diminished only eight millions. Thus, when the Spanish war commenced in 1739, the debt amounted to

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* See preface to Price's Observations on Reversionary Payments. Third edition, London, 1845.


forty-seven millions; at the close of that war, in 1743, it had increased to £78,293,312. From this we see that a comparatively insignificant war of nine years added about four times as much to the national debt as a continued peace of seventeen years had taken from it.

When the war against the American colonies commenced in 1776, the national debt of the mother country amounted to £135,943,051 ; at the close of the war, in 1783, it had increased to £238,484,870—that is, the seven years' war against her colonies cost her £102,541,819. This was followed by ten years of peace; but at the end of that period the debt was reduced only about four millions and a halfnot half a million a year. When the war of the French RevoJution commenced, the debt of England was £233,733,609, and before the peace of 1801, it more than doubled, being £561,203,274. The peace which followed this, instead of diminishing the debt to a considerable extent, added forty millions to it. Thus has the debt continued to increase in peace and war for nearly a century, until it has attained its present enormous dimensions, although the sinking fund has been in operation all the time.

But had the result been otherwise had a large amount of the debt been discharged, it would have been at the expense of the nation. The following formula will illustrate this: Suppose a state whose revenue arises from taxation to borrow $20,000,000 at five per cent. interest. It is obvious that as long as this debt remains unpaid the country must submit to a taxation of one million a year for the interest alone. But if $200,000 of the principal is paid, the interest on that amount is no longer due to the creditor ; this is equal to a saving of $10,000 a year to government--the same as if that amount were added to its revenue. But let us suppose that, instead of devoting this amount to any other purpose, the government hands it over to the public creditor

, in addition to the $200,000; then it is clear that $210,000 of of the debt will be extinguished. Now, if, instead of paying in this manner, the government had lent the $200,000, at compound interest, payable half yearly, it would have amoưnted to just the same amount in one year ; that is, the $200,000 would have brought $10,000. When the creditor has received this $210,000 of principal, he is entitled to no further interest on any part of the amount, and the result is the same as if $10,500 were added to the yearly revenue. Without extending the formula, it may be remarked that, in general, at the end of any number of years, the debt extinguished in this manner will be equal to the capital which would have been produced in the same time if the $200,000 had been lent to accumulate by compound interest. But, in either case, how is this money obtained ? Is it produced out of nothing by the magical power of compound interest ? Not a penny of it! : Every dollar which has been appropriated to the extinction of the principal debt, as well as every dollar paid for the interest of what remains unextinguished, is raised by taxation. If this be not sufficiently clear, let any intelligent person ask himself what is to be gained by discharging a debt with borrowed money, if as high interest is to be paid for the latter as for the former. But Mr. Wilkeson sees a great difference between individual debt and government debt, and tells us how, as follows :

6. The difference between the debt of an individual and the debt of a governinent is as broad as the difference between night and day. The holder of an individual's promise to pay watchfully expects pay-day, and demands payment. A great government, like that of England, is not importuned to pay its funded debt-is practically begged not to pay it---practi-' cally entreated to keep the money forever, and only to pay the interest twice a year. Demand for long credit by an individual is accepted all over the world as a measure of inability to pay, and lenders lock their chests and put their hands behind their backs. On the other hand, the longer the credit asked by the government of the United States, the more eager are lenders to lend. The longest government loans are highest priced and most sought. Investments love repose next to security. The life of a government, founded on the will of an intelligent people, is enduring. The contingency of the death of an individual is an element in the measure of his credit. It affects personal credit in every case.

This contingency never affects the credit of a government. The holders of its bonds never have to negotiate with heirs or executors, nor watch with solicitude the administration of an estate whose relations have all been changed by the sudden removal of its manager. The debt of a .constitutional government, like that of Great Britain or the United States, is accepted among men as absolutely sure and perfectly safe. It is not possible for an individual's debt ever to attain to this character of perpetuated and perfect value."-p. 7.

That the holders of United States bonds are perfectly safe we have not the least doubt. There is no bank in Europe or America in which we have more confidence; we entirely agree with Mr. Wilkeson that, as long as the public funds are managed so judiciously as they are now, there is no safer investment, and, consequently, that the longer the credit asked by the government, the more profitable is the investment to the lender. Nor do we mean to question that the government of England is perfectly solvent, or that there is

any serious risk in investing in its stock. At the same

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