This section is from the "The Science Of Wealth" book, by Amasa Walker.
France has a large national debt; yet her government has been revolutionized time and again, without any reference to that fact, and without at all disturbing the security of the rentes. National debts will be paid, if the people please to pay them; and governments will be sustained, if the people choose to sustain them.
But it is said, that, since every person who owns a part of the public debt will be interested in the permanency of the government, all such will certainly be loyal; and, as these will be in great numbers scattered over the whole country, and belonging to the most influential classes, their social and political co-operation will afford security to our political institutions. Such reasoning assumes, that every man who owns a certificate of stock, will, on that account, be loyal to the government. Let us examine the matter. How numerous are those bond-holders who are expected to sustain the government and its debt?
(1) There are those who directly hold the bonds.
(2) Those who have stock in State and national banks whose capital is invested in government securities.
(3) Those who have deposits in savings institutions, the funds of which are largely invested in public stocks and in banks, whose capital, as just stated, is in the same kind of investment.
These are the classes on whom reliance is placed to give stability to government, in consequence of the interest they are supposed to have in the public tranquillity, as security for the national debt.
What the aggregate number of persons in all these classes may be, we have no means to determine; but it is, doubtless, much less than most people imagine. For —
(a) Some seven hundred millions of the bonds are held abroad.
(b) Many millions are held by aliens in this country.
(c) A large amount is held by females.
(d) Vast sums are held by trustees and guardians.
(e) Of the savings-banks depositors, who are interested to a limited extent, a majority, probably, have no vote.
(f) It is well known, that the capital stock of the currency banks is held largely by widows and orphans.
(g) A large part of the debt is absorbed by great capitalists, holding $50,000 to $500,000 each.
How many votes, then, can all these parties give? The whole number of voters in the United States is some five millions. What portion of the whole belong to the above classes? Certainly a very small share indeed.
But this is not a full view of the case. Of those who do own stocks, and can vote, very few — not one in ten, probably — have a sufficient ownership to counterbalance the amount of taxation they encounter in consequence of the debt. The average amount to the credit of each person in the savings banks of New York and Massachusetts is about $225; and we may safely assume that to be the general average throughout the country. Then it is quite certain that an immense majority have an interest in the savings banks of not over $200. What is the interest of all these small holders, in reference to repudiation?
For example, a laboring man, having $200 in bonds or in a savings deposit, expends $400 per annum, derived from his wages, for articles required in the support of his family. What amount of taxation will he incur annually, in consequence of the national debt? Is it not a very moderate estimate, that ten per cent of all his expenditures will be occasioned by the higher duties, taxes, excise, &c. Ten per cent on $400 is $40, which this man must pay annually; while his whole income from the $200 in bonds, or savings-bank deposit, is only $12. Is it for his pecuniary interest that the public faith be kept inviolate? If he must pay $40 annually, while he, gets but $12, how long will it take to use up the $200 he has in government bonds? In less than eight years, he would have lost a sum equal to the amount of his stock, and then be for ever after liable to the same amount of taxation. Very clearly, the sooner the public debt is repudiated, the better for this laborer, though holding $200 in the public funds.
We make the same comparison in regard to a man who holds $1,000 in stock. His income we will suppose $2,000, which he expends. On the scale before given, he will pay, in increased prices, $200, while his coupons are but $60 per annum; a balance against him of $140. How long will his interest require that the coupons be paid? Clearly, the sooner they are worthless, and the taxation they impose removed, the better. Another view may be given, of the relations of the debt to the population of the country. It may be assumed, that the debt will be equal to about $100 to each person, if the population is thirty millions. Then a family of five persons owe $500 of the public debt, and, on an average, must pay the annual interest upon the same; say, from $30 to $40. A little reflection will satisfy any one, that the number of families that hold $500 of the national bonds, compared with the whole number, must be very small; and, therefore, that a vast majority can have no pecuniary interest in securing the payment of the national indebtedness.