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May 27, 2009 – Comments (2)

Our debt is doubly secure--first in the actual wealth and still greater undeveloped resources of the country, and next in the character of our institutions. The most intelligent observers among political economists have not failed to remark that the public debt of a country is safe in proportion as its people are free; that the debt of a republic is the safest of all. Our history confirms and establishes the theory, and is, I firmly believe, destined to give it a still more signal illustration. The secret of this superiority springs not merely from the fact that in a republic the national obligations are distributed more widely through countless numbers in all classes of society; it has its root in the character of our laws. Here all men contribute to the public welfare and bear their fair share of the public burdens. During the war, under the impulses of patriotism, the men of the great body of the people, without regard to their own comparative want of wealth, thronged to our armies and filled our fleets of war, and held themselves ready to offer their lives for the public good. Now, in their turn, the property and income of the country should bear their just proportion of the burden of taxation, while in our impost system, through means of which increased vitality is incidentally imparted to all the industrial interests of the nation, the duties should be so adjusted as to fall most heavily on articles of luxury leaving the necessaries of life as free from taxation as the absolute wants of the Government economically administered will justify. No favored class should demand freedom from assessment, and the taxes should be so distributed as not to fall unduly on the poor, but rather on the accumulated wealth of the country. We should look at the national debt just as it is--not as a national blessing, but as a heavy burden on the industry of the country, to be discharged without unnecessary delay. 

It is estimated by the Secretary of the Treasury that the expenditures for the fiscal year ending the 30th of June, 1866, will exceed the receipts $112,194,947. It is gratifying, however, to state that it is also estimated that the revenue for the year ending the 30th of June, 1867, will exceed the expenditures in the sum of $111,682,818. This amount, or so much as may be deemed sufficient for the purpose, may be applied to the reduction of the public debt, which on the 31st day of October, 1865, was $2,740,854,750. Every reduction will diminish the total amount of interest to be paid, and so enlarge the means of still further reductions, until the whole shall be liquidated; and this, as will be seen from the estimates of the Secretary of the Treasury, may be accomplished by annual payments even within a period not exceeding thirty years. I have faith that we shall do all this within a reasonable time; that as we have amazed the world by the suppression of a civil war which was thought to be beyond the control of any government, so we shall equally show the superiority of our institutions by the prompt and faithful discharge of our national obligations. 

....President Andrew Johnson, First Annual Message, Dec 4, 1865

2 Comments – Post Your Own

#1) On May 27, 2009 at 1:40 PM, jmt587 (99.88) wrote:

Correct me if I'm wrong, but I'm reading a Lincoln biography now, and am under the impression that a lot of the debt then was held by prominent and / or wealthy American citizens.  I'm also under the impression that much of our national debt now is held by other countries (many of whom we exchange real or trumped up animosity from and towards).  Seems to me there is a difference in our interests, as a country (I'm thinking of the annual letter to shareholders of Berkshire from Warren, and the example he gives in that on the debt of NYC).  I wonder not if we'll be less interested / conscientious about paying the debt (and paying it in the right way, i.e. by balancing our budget instead of printing our way out of debt), but how much less interested / conscientious, given the difference in our debt holders.

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#2) On May 27, 2009 at 4:29 PM, devoish (98.38) wrote:

jmt587,

During this time period, I believe you are correct. Even later we sold Liberty bonds to finance WW1.

Frome reading the speeches of the presidents during the USA's first century it is clear that it was well understood that if the Fed or State Gov'ts were to accomplish any task, taxes had to be raised for it. Prior to income tax, we levied import and export tarrifs to raise money. Bonds were sold and paid off through taxes.

Raising money from invetsors outside the USA would have been much more difficult without electronic fund transfers, though I am sure it was doable.

The idea that lower taxes would increase revenues to the Gov't is "New" School.

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