To obviate this confusion, Congress, in sec- 

 tion 6 of the act of July 14, 1870, directed 

 that bonds purchased under the sinking-fund 

 act should be canceled and destroyed. It also 

 directed that, in addition to the bonds pur- 

 chased, an amount equal to the interest on pre- 

 vious purchases should be annually applied to 

 the payment of the debt. 



A vague idea exists as to the effect of these 

 sinking-fund laws that they provide in some 

 mysterious way a method by which, without 

 expense, the debt is to be extinguished. This 

 is a delusion : there is no " new way to pay old 

 debts. " Taxation to such an extent that the rev- 

 enues shall exceed the expenditures is the only 

 way in which the debt can ever be paid. These 

 laws are a pledge that the Government will 

 impose such taxes that its revenues after pay- 

 ing current expenses shall be sufficient to pur- 

 chase each year one per cent, of the entire 

 debt, and a certain additional amount equal to 

 the interest which would have accrued on all 

 the bonds purchased had they remained out- 

 standing. 



A statement setting forth the requirements 

 of the sinking fund, from May, 1868, to June, 

 30, 1880, as interpreted by the Treasury, and 

 showing the purchases made to meet such re- 

 quirements, is published with the annual re- 

 port of the Secretary of the Treasury. From 

 the statement in the last report, it seems that 

 the purchases within the period mentioned were 

 $49,817,128.78 less than the amount required by 

 law. Had the purchases been kept up as the 

 sinking-fund law appears to direct, the current 

 expenses of the Government could not have 

 been met. From the same report it appears 

 that for the year ending June 30, 1881, the law 

 requires the purchase during the present year 

 of $39,801,884.48, which, added to the preex- 

 isting deficit above stated, makes $89,619,013. 26 

 of purchases to be made during the present 

 year to balance the sinking-fund account. As 

 the surplus revenues for the year are estimated 

 at $90,000,000, this will probably be done. 

 No calculation is set forth in the statement as 

 to the amount required by law to be purchased 

 for the sinking fund during the years 1862 to 

 1868, nor of the redemptions made, though 

 they were of large amounts; and the statements 

 for subsequent years show that in no year have 

 the apparent terms of the acts been complied 

 with. 



The following is the Department's estimate 

 of the requirements of the sinking fund for the 

 next ten years : 



1882... ,. $43,386,64500 



1833 45,122,110 80 



1834 46,92*5,995 24 



1885 48,804,075 04 



1838 50.756,238 04 



1837 52,786,487 56 



1888 54.897,947 07 



1889 57,093,864 95 



1890 59,377,619 55 



1891 61,752,724 33 



Total $520,904,707 58 



This official statement may become important 

 VOL. xx. 17 A 



FINANCES OF THE UNITED STATES. 



257 



as fixing the maximum limit to which, under 

 existing law, surplus revenues may be appro- 

 priated hereafter to the extinguishment of the 

 bonded debt. Should this interpretation be 

 accepted, the debt can be purchased only to 

 the amount of the sinking fuud as stated above, 

 and any additional surplus revenues must be 

 held in the Treasury until further legislation. 

 On the other hand, if the sinking fund is to 

 be maintained to the amount stated, Congress 

 must provide revenues by taxation sufficient to 

 meet purchases to that amount. 



The amount applied to the sinking fund must 

 not, however, be accepted as the amount of 

 the reduction of the debt. The amount of sur- 

 plus revenue, for any period, represents the re- 

 duction of the debt for that period, whether it 

 is applied to the purchase of outstanding lia- 

 bilities, or remains in the Treasury as unap- 

 propriated assets, for such assets must be con- 

 sidered in any statement of the debt. 



On the 1st of November, 1880, $13,414,000 

 of six per cent, bonds of the act of February 

 8, 1861, remained outstanding, which, by the 

 terms of their issue, were to become payable 

 on the 31st of the following month. In view 

 of this fact further purchases of all classes of 

 bonds were discontinued until November 4th, 

 when the Secretary offered to purchase any of 

 those maturing, at the rate of 102f, including 

 accrued interest; and, although this rate was 

 advanced on the 1st of December to 102, not 

 many were offered. 



During the calendar year ending December 

 31, 1880, the Government, without material 

 reduction of the cash in the Treasury, pur- 

 chased mainly upon bids received at the sub- 

 Treasury in New York, or redeemed at par, 

 outstanding bonds as follows: 



The Secretary of the Treasury in his last an- 

 nual report calls the attention of Congress to 

 the advantages which would arise from re- 

 funding at lower rates the bonds which be- 

 come redeemable in 1881, as follows: 



and he recommends that authority be given for 

 the issue of $400,000,000 of Treasury notes bear- 

 ing interest not exceeding 4 per cent., running 

 from one to ten years, the amount maturing in 



