" This evil must appear so serious to any man who contemplates its character, that I have no doubt it will be felt, however paradoxical it may seem, that the redemption of the whole national debt at once would be productive of something like national bank ruptcy, for the capital would be equivalent almost to nothing, while the interest he had before derived from it would be altogether extinguished. The other evils which would arise from, and which must serve to demonstrate the mischievous consequence of a prompt discharge of the national debt, I will show presently. Different arrangements were adopted in the further provisions made on the subject of the sinking fund in 1792 and in 1802. By the first the sinking fund of 1 per cent., which was thencefor ward to be provided for every new loan, was made to accumulate at compound interest until the whole of the debt created by such new loan should be ex 'tinguished. And, by the second arrangement, all the various sinking funds existing in 1802 were con solidated, and the whole were appropriated to accu mulate at compound interest until the discharge of the whole of the debt also existing in 1802. But the debt, created since 1802, amounting to about one hun dred millions of nominal capital, is still left subject to the acts of 1792, which provides for each separate loan a sinking fund of only 1 per cent, on the nomi nal capital. The plan of 1802, engrafted on the former acts of 1786 and 1792, provided for the still more speedy extinction of the debt to which it ap plied. But it would postpone all relief from the public burthens to a very distant period (computed, in 1802, to be from 1834 to 1844); and it would throw such large and disproportionate sums into the money market in the latter years of its operation, as might produce a "very dangerous depreciation of the value of money. Many inconveniences might also arise from the sudden stop which would be put to the application of those sums when the whole debt should have been redeemed, and from the no less sudden change in the price of all commodities, which must follow from taking off at one and the same mo ment taxes to an extent probably then much ex ceeding thirty millions. The fate of merchants, ma nufacturers, mechanics, and every description of dealers, in such an event, must be contemplated by every thinking man with alarm ; and this applies to my observation respecting a national bankruptcy, for, should the national debt be discharged, and such a weight of taxation taken off at once, all the goods remaining on hand would be, comparatively speak ing, of no value to the holders, because, having been purchased or manufactured while such taxation pre vailed, they must be undersold by all those who might manufacture the same kind of goods after such tax ation had ceased. These objections were foreseen, and to a certain degree acknowledged, at the time when the act of 1802 was passed : and it was then answered, that, whenever the danger approached, it might be obviated by subsequent arrangements." A great many of these objections appear to us to be chimerical, but, if well founded, we agree with the latter part of the extract, " whenever the danger ap proached, it might be obviated by subsequent ar rangements." It was not necessary to legislate in 1607, or in 1813, for a danger which could not hap pen till between 1834 and 1844. It was not neces sary to provide against the evils which would arise from a plethora of wealth at a remote period, when our real difficulty was how to supply our immediate and pressing wants.
What are the evils apprehended from the extra vagant growth of the sinking fund, towards the latter years of' its existence ? Not that taxation will be in creased, because the growth of the sinking fund is occasioned by dividends on stock purchased ; but first, that capital will be returned too suddenly into the hands of the stockholder, without his having any means of deriviog a revenue from it ; and, secondly, that the remission of taxes, to the amount probably of thirty millions, will have a great effect on the prices of particular commodities, and will be very pernici ous to the interest of those who may deal in or ma nufacture such commodities.
It is obvious that the commissioners have no capi tal. They recei4 quarterly, or daily, certain sums arising from the taxes, which they employ in the re demption of debt. One portion of the people pay what another portion receive. If the payers em ployed the sums paid as capital, that is to say, in the production of raw produce, or manfactured commo dities, and the receivers, when they received it, em ployed it in the same manner, there would be little variation in the annual produce. A part of that pro duce might be produced by A instead 'of by B ; not that even this is a necessary consequence, for A, when he received the money for his debt, might lend it to B, and might receive from him a portion of the produce for interest, in which case B would continue to employ the capital as before. On the supposi tion, then, that the sinking fund is furnished by ca pital and not by revenue, no injury would result to the community, however large that fund might be,— there might or might not be a transfer of employ ments, but the annual produce, the real wealth of the country, would undergo no deterioration, and the actual amount of' capital employed would neither be increased nor diminished. But if the payers of taxes, for the interest and sinking fund of the na tional debt, paid them from revenue, then they would retain the same capital as before in active employ ment, and as this revenue, when received by the stockholder, would be by him employed as capital, there would be, in consequence of this operation, a great increase of capital,—every year an additional portion of revenue would be turned into capital, which could be employed only in furnishing new commodities to the market. Now the doubts of those who speak of the mischievous effects of the great accumulation of the sinking fund, proceed from an opinion they entertain that a country may pos sess more capital than it can beneficially employ, and that there may be such a glut of commodities, that it would be impossible to dispose of them on such terms as to secure to the producers any profits on their capitals. The error of this reasoning has been made manifest by M. Say, in his able work Economic Politique, and afterwards by Mr Mill, in his excellent reply to Mr Spence, the advocate of the doctrine of the Economistes. They show that demand is only limited by production; whoever can produce has a right to consume, and he will exercise his privilege to the greatest extent. They do not deny that the demand for particular commodities is limited, and therefore they say, there may be a glut of such commodities, but in a great and civilized country, wants, either for objects of necessity or of luxury, are unlimited, and the employment of capi tal is of equal extent with our ability of supplying food and necessaries for the increasing population, which a continually augmenting capital would em ploy. With every increased difficulty of producing additional supplies of raw produce from the land, corn, and the other necessaries of the labourer, would rise. Hence wages would rise. A real rise of wages is necessarily followed by a real fall of profits, and, therefore, when the land of a country is brought to the highest state of cultivation,—when more labour employed upon it will not yield in return more food than what is necessary to support the labourer so employed, that country is come to the limit of its in-, crease both of capital and population.