Nashville Union And American

THE STATE
DEBT.

Are We Morally or Legally
Bound to Pay It?

Our Bonds Now Worth Only Thirty
Cents—How the State Can Profit
by Shrewd Speculation—
Washington as a
Repudiationist.

To the Union and American:

NASHVILLE, Feb. 15, 1875.—The general interest felt in the question of taxation, is perhaps a sufficient excuse for this and the two other letters which will appear, and which you have been kind enough to agree might be published in your paper, notwithstanding your knowledge that I differed entirely with the views expressed in some of your leading editorials recently.

The friends of low taxes have uniformly rested their case upon the inability of the people to meet all the demands upon them, including the interest upon the bonded debt; but, instead of meeting the issue and discussing this question, those who insist on paying the interest promptly, talk of the honor of the State and the odium of repudiation; and, in your last article, you present, in addition, the great loss which will follow if our State credit is seriously impaired by the taint of repudiation.

You will pardon me for disposing of this last question first. I do not wish to discuss it in connection with the honor of the State and the odium of repudiation; these will play their part when I come to present the results which will necessarily follow from declining now to pay the interest on the public debt; but discussing it as you presented it, as a question of actual loss to the State, I ask wherein?

If there is anything settled in the public mind in reference to our financial policy, it is, that, as a State, we shall cease to borrow money. This in spirit at least has been incorporated into the organic law of the State by the following provision:

Article I, section 31. "The credit of this State shall not be hereafter loaned or given to or in aid of any person, association, company, corporation or municipality," etc.

The spirit of this provision being that we shall pay as we go, there certainly ought to be no implied authority to any State officer to borrow money.

Then how are the people—the whole people—affected by high or low credit. Bonds are now down to 45 cents; suppose they could be advanced to 90 cents, would the people be benefited—would anybody make one single dollar except the gamblers in stocks, and they, it must be admitted, would grow rich by unloading. The Tennessee gamblers, who were on the ground and saw the cat jump, all unloaded in New York, when the State funded, and through its accommodating State officers, in violation of at least the spirit of the Constitution, borrowed money and paid the interest. These gentlemen knew that practically the proposition to pay current expenses and the interest on the public debt, with 47 cents on the one hundred dollars' of property, was a deception; and they wisely unloaded; and they are to-day as complacent and serene and comfortable over the great fight between high and low taxes as Jews at a Christian festival.

They stand ready if bonds go up or down to trade, and then lobby future legislation into an ally in putting bonds up or down as their interest may demand. In the present distressed condition of the people of Tennessee, and until their condition is greatly improved by their becoming a manufacturing people, no power can prevent Tennessee bonds from being anything but dice on the boards of stock gamblers all over the country. Then if the State has decided to pay as we go, and borrow no more money, how are the whole people interested in the question whether bonds are 30 or 90 cents?

It may be an honor to the State to have gamblers make money by trading on a rising instead of a falling market, but certainly the State no more gets a part of the profits in the one case than the other. Upon the question of interest it would not be difficult to show that the very opposite of what you contend for is true. Assuming for the present what I shall undertake to show in a subsequent letter, to-wit: That though able to do nothing now but pay current expenses, with good crops, the people would cheerfully do something more, if by even extraordinary exertions they could see relief, and that this want of cheerful effort will remain until the people can see the way for a fair compromise, upon the principle that sweeping away one half the property owned by a people when they contracted a public debt by a war, is a calamity which ought to fall alike on the debtor and creditor classes. I repeat, assuming this for the present, I insist that the State is directly interested in seeing bonds go down to their true value, which I shall undertake to show is not exceeding 30 cents on the dollar. So that with improved crops the State may buy in its own bonds. Mr. Editor, just keep your seat; I mean what I say—for the State, when it gets able to buy in its own bonds. Who is hurt by the State becoming a bidder in the market for its own bonds? There is just one more purchaser. The newspaper price of State bonds (ex-coupons) to-day is 45 cents, but not a day passes without some holder of a Tennessee bond going to a broker in Nashville hunting a purchaser at this price without finding him, and now where would be the wrong in the State taking the bond at his price, when no broker can be found who will do it? And is not the bond-holder in such case just brought down to the same financial platform of all other owners of property, that is, if forced to sell, accept the situation and share his part of the loss by the general shrinkage in values.

Who can stand up and say ex equo et bono, the loss to a country by either war or bad legislation should fall exclusively on the debtor class? Will any one deny, that war, since our public debt was principally made, has totally changed the condition of the people, changed so far as to make a prosperous and productive people, a destitute and dependent people. Will any one deny that in addition to the natural consequences of the war, including the complete overthrow of the system of labor, and the consequent depreciation of our lands until it can truly be said they have no cash value, corrupt legislation by both the political parties at Washington (under the influence of rings and monopolies, with from eighty to one hundred members directly interested in perpetuating the system of banking adopted in war times if not as a war measure) has brought the entire people, except the fortunate holders of public securities, to the verge of bankruptcy, and all the laboring classes to absolute destitution, at least as to all that portion of the country which has not recovered from the effects of the war. Shall the calamities of war and bad legislation fall exclusively on the debtor class is the question? And the cry of "honor," "State credit" and "good faith," mean simply that the laboring classes shall bear all the burdens, and alone suffer by the general wreck.

Combinations of the money power constantly keep men on the house-tops warning the people against the disgrace of repudiation—of course, the purpose simply is to keep the people from bringing upon themselves a great public scandal—and in the estimation of these pure-minded stock-gamblers for a State to engage in buying in its own paper would scandalize the children yet unborn. For the State to buy in its own paper before due is a legitimate transaction, and would be between man and man in the most fastidious commercial communities. To buy it in after due, is but a fair means of forcing a compromise, which equity and good conscience would sustain.

I will be under obligations to the extreme State credit men if they will name a Government that has long existed by the hand of civilization and made burdensome loans without in some way compromising them, either by failing to pay, or reducing the aggregate debt or the rate of interest. The most striking example,—because now before the eyes of all American people—is that of our own Federal Government. The interest on the public debt, the 10-40's and the greenback issue, are beyond question, under the law, payable in gold. This has never been denied. The Secretary of the Treasury has never had the money to take up the greenback issue, but he occasionally has enough to make a payment. What does he do? Take up a part of the outstanding issue as the Government agreed it would, by paying it off in gold? No, but he gives notice in all the newspapers, that he will buy in the government's obligations, as far as his money will go, and for a time he receives bids which are on a day named opened, and the lowest offer is accepted. It is true the Secretary of the Treasury calls it "selling gold" and accepts the highest bid, but it would be exactly the same thing if he would call it buying the government's paper, and accept the lowest bid.

The stain of repudiation only attaches when a people who are able to pay, decide not to pay, as in the Mississippi case; it does not attach to an equitable compromise of a debt, relieving a people from burdens which sooner or later would bring debt slavery. It did not even attach to Washington and his compeers, who repudiated the entire debt of the Revolution because the people were not able to pay it. Virginia and North Carolina are both now taking steps openly to reduce their debts without paying them, and to bring them down within the ability of the people to pay; and what enlightened editor, either in Europe or this country, has characterized the attempt as a stain upon the honor of the people?

The best judgment always results from a clear understanding of the issue, and it is well to have a clear understanding of the issue now before the country. The public mind has been much disturbed by a supposed issue between capital and labor. There should be no such issue. Capital and labor are alike and equally dependent upon each other, when properly employed. But it cannot be denied that in this country, placing almost the entire capital of the country in interest-bearing, and generally non-taxable bonds, which produce nothing, but heavily tax the labor of the country, has made a square issue between capital and labor. So far, the legislation since the war under the inspiration of combined money, has been on the side of capital, and the result has been, by taking away the sinews of recuperation, withdrawing from the people their circulation, and putting labor entirely at the mercy of capital, that the entire laboring classes are working for a bare support, while capital, though not increased in bulk, has a much more commanding position than at any former time in the history of the country.

All that I ask is that this dead and yet oppressive capital should share its part of the losses by war and bad legislation, instead of profiting by these great calamities.

A. S. COLYAR