Let us now consider the natural consequence, supposing that future increase is prevented by means of the sinking fund established for that purpose. As to the probability of this, it depends on so many circumstances that are concealed in the womb of time, that it would be madness to give any other than a hypothetical solution of the question.
If the war continues, and expenses increase nearly as they have hitherto done, great as is the operation of a sinking fund, it will not have time to counteract the evil. If the war stops soon, it will dim- [end of page #240] inish the debt with a most prodigious rapidity, {193} if it continues; the question, whether taxes can be found to pay the interest or not? can only be answered as a matter of opinion, which is, in a case of this sort, equivalent to no answer at all.
With respect to the supposed case of the debt augmenting, the observations that apply to that have been made already; they now only remain to be made with respect to the debt being paid off.
It has been observed already, in the chapter on Taxation, that the case of taxes being taken off to a great amount would be a new one of sudden and hurtful operation. Wages of labour would be diminished, as well as the burthens on those who live on settled income; it would therefore render people of fixed income more affluent, without giving ease to those who want it; in short, as the augmentation of taxes falls most on people with fixed incomes, so the advantages of this would principally be felt by them; and, as the baneful operation carries a sort of counteracting antidote with it, so, likewise, this beneficial operation would be attended with some drawback and inconveniency =sic=.
The diminution of taxes, though the ultimate is not, however, the immediate consequence of the operation of the sinking fund, the efficacy of which depends on the taxes being kept up to their full extent for a considerable time. =sic= The first effect of the fund is, that a large sum, annually expended, as revenue drawn from the subject, is reimbursed to the stockholders, and becomes capital.
This would immediately raise the funds, and thereby would counteract the sinking fund itself in a very material degree. Money would become abundant for all the purposes of trade, and it would be difficult
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{193} A sort of ridicule has been thrown on the operation of compound interest, because its effects are so amazing as not to be capable of being realized; but, on this subject, two things are to be said,-- first of all, it has never been to the operation during the first hundred years that either incredulity or ridicule have applied, and the sinking fund was never meant to continue to operate so long. Secondly, though there are many drawbacks on the employment of large sums laid out at interest, that diminish, and would at last destroy, the result of the calculation in accumulating; it is not so in paying off debt, where the effect calculated is produced with the greatest certainty.
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