THE REFUNDING OF A PQFvTION OF THE NATIONAL DEBT. SPEECH OF HON. MARK H. BUNNELL, OF MINNESOTA, IN THE HOUSE OF REPRESENTATIVES, Saturday, Maech 20, 1880. WASHINGTON. 1880. Avery Architectural and Fine Arts Library Gift of Seymour B. Durst Old York Library SPEECH 07 HON. MARK H. DUNNELL. The House being in Committee of the "Whole, and having under consideration the bill (H. R. No. 4592) to facilitate the refunding of the national debt — Mr. DUNNELL said : The Secretary of the Treasury, in his annual report in December last, called the attention of Congress to the fact that certain bonds of the Government would become payable upon the demand of the holders, December 31, 1880, and that certain other bonds would bo redeemable at different dates in 1881. Those which are so payable in 1880 amount to $lb,415,0u0. The Secretary said that these bonds, the loan of February 8, 1861, maturing December 31, 1880, can pro- bably be provided for from the surplus revenues. Bonds to the amount of $±82,605,550, authorized by acts of July 17 and August 5, 1861, are redeemable June 30, 1881, and bonds to the amount of $71,787,000, authorized by act of March 3, 1863, are redeemable June 30, 1881. Also, bonds to the amount of $823,800, authorized by act of March 2, 1861, are redeemable July 1, 1881. All the above bonds amount in the aggregate to $273,631,350, and bear an interest of 6 per cent. In addition to the foregoing securities, there will be redeemable May 1, 1881,5 per cent, bonds to the amount of $508,440,350. These last were authorized by acts of July 14, 1870, and Jauuary 20, 1871. The total of these bonds, being all the 6 and 5 per cent, bonds of the Gov- ernment now unpaid, is $782,071,700. Taking from this sum the $18,415,000 which are to be provided for from the surplus revenues, there remain $763,656,700 to be taken care of. either by payment in whole or in part or some process of refunding. The Committee on Ways and Means have been charged with the duty of preparing for the consideration of the House a bill providing for refunding these maturing bonds. Every patriot in the country would rejoice if we had the money with which to redeem these obli- gations of the Government and so relieve the people from their pres- ent taxation. As this beneficent result cannot now be attained, it certainly will be deemed wise to refund them on the most favorable terms possible, or such a portion of them as cannot be met by the surplus revenues of the Government prior to the dates when the bonds are redeemable. If these bonds could be paid within two, three, or even four years by the revenues, it would be far better to continue to pay the 6 and 5 per cent, interest on them than refund for a long time at 4 or 34- per cent. It is unreasonable, however, to suppose that even one-half of this amount could be paid iu the longest time named. 4 Before alluding to the bill under consideration it may be proper, in this place, to give the suggestions of the Secretary of the Treasury, made in his last report. He said: It is respectfully suggested that authority be given at the present session of Congress to issue, sell, and dispose of. at not less than par in coin, 4 per cent, bonds of the description set forth in the said act of July 14, 1870, and refunding certifi- cates of the description set forth in the act of February 26, 1679, with like quali- ties, privileges, and exemptions, except as hereinafter stated, to the extent neces- sary to redeem the bonds falling due on or before July 1, 1881, above described, and to use the proceeds for that purpose. It is hoped that the advancing credit of the country will enable the Secretary to sell such bonds and certificates at a premium, but it "seems better to maintain'the general conditions of the 4 per cent, bonds rather than to undertake to sell a bond at lower interest. The 4 per cent, cousol is now universally known. The rate of interest is as low as will generally maintain the bond at pai\ and the premium will measure its advance above par at favorable periods. The certificates should bear the same rate and be sold on the same terms as the bonds. It is important that the authoiity granted should include the power to refund, from the passage of the act at the present session, and to prepay the excess of interest on the bond to be refunded prior to its maturity. The present is believed to be an exceptionally favor- able time for such refunding. These suggestions are : First. That the bonds and certificates to be issued are to be four per cents. Second. That the Secretary be authorized to sell the bonds and cer- tificates and with the proceeds purchase the maturing bonds or pay them at maturity. The Secretary j in his conference with the Committee on Ways and Means, modified the second suggestion above, drawn from his annual report, for he said in reference to the sale of bonds for money : It will not be wise for us to sell them for the money with the uncertainty as to our being able to use that money in buying an equal amount of outstanding bonds not yet matured ; and if you we're to authorize that, we should necessarily have to increase the public debt. "We might not be able to use the money. The committee after mature deliberation decided to report the bill now under discussion. It provides : First. That the Secretary of the Treasury may issue bonds to the amount of $500,000,000, which shall bear interest at the rate of 3^ per cent, per annum, redeemable at the pleasure of the United States after twenty vears, and payable fifty years from date of issue. Second, that he may also issue note's in the amount of $200,000,000, bearing interest at the rate of 3| per cent, rrer annum, redeemable at the pleasure of the United States after two years, and payable in ten years from the date of issue ; but not more* than $40,000,000 of said notes shall be redeemed in any one fiscal year. Third. That he may issue certificates of deposit to an amount not exceeding $50,000,000, fixing the rate of interest to be allowed thereon at 3^ per cent, per annum for one year, after which interest shall cease ; and the said certificates shall be convertible at the option of the holder, when presented in sums of $50 or multiples thereof, into the coupon or registered bonds authorized by this act. By these three provisions, the Secretary may issue bonds and certifi- cates to the amount of seven hundred and fifty millions. The bonds, as already stated, maturing in 1680 and 1881 amount to $782,071,700, and for the conversion of which into securities bearing a lower rate of inter- est, this bill is now before us. The annual interest now paid upon the $782,071,700 is $41,839,898. The annual interest which these new bonds will call for, will be $26,250,000. The annual interest which will be saved by the operation of this bill will be $15,589,898. Assuming that the surplus revenues will wholly absorb the difference between the 5 $78kD71,700 of the bonds to be met and the $750,000,000 herein pro- vided for, the annual interest charge after this exchange of the 3£ per cent, bonds and certificates for the 5 and 6 per cent, bonds has been consummated will be but $68,183,881 over against the annual interest charge August 31, 18(35, of $150,977,017. Here will be a reduction in the annual interest charge since Sep- tember 1, lb05, of $82,793,736. These figures will rind a place in our financial statements, if this bill shall pass and be executed. The in- terest-bearing debt will be $1,705,577,000, instead of $2,381,530,294 as it was August 31, 1805. The thoughtful patriot will rejoice over this result. A national debt is not a blessing. To a republican government it is an abiding curse. Indeed it is a curse to any government. No party or administration, as I believe, will have an indorsement of the American people which does not seek some annual reduction in this debt. This reduction, however, must not come, except in pursuance of policies and methods absolutely honest. We are now, as a government, reaping a rich reward, because its Administrations since the war have kept to fulfillment every letter in our financial pledges. I here insert a table to sustain some of my foregoing statements : Tear. Total interest-bear- iii"' debt. Annual interest charge. 1865, August 31 1866, July 1 . . . . 1867 1868 1869 1870 1871 1872 1873 ..... 1874 1875 1876 1877 1878 1879 $2, 381,530, 2, 332, 331, 2, 218, C67, 2, 202, 088, 2. 162, 060, 2, 046, 455, 1, 034, 696, 1, S14, 794, 1, 710, 483. 1, 738, 930. 1.722, 676, 1,710,685, 1,711,888, 1, 794, 735, 1. 797, 643, 294 96 207 60 387 66 727 69 522 39 722 39 750 00 100 00 950 00 750 00 300 00 450 CO 500 00 650 00 700 00 8150, 977, 146, 068. 138, 892, 128, 459, 125. 523, 118, 784, 111. 949, 103, 988, 98, 049, 93, 796, 96, 855, 95, 104, 93, 160, 04, 654, 83, 773, 697 87 196 29 451 39 598, 14 998 34 960 34 330 50 463 00 804 00 004 50 690 50 269 00 643 50 472 50 778 50 The question which the Committee on Ways and Means first met was, whether the bonds contemplated in this bill could be exchanged for the bonds to be taken up if they were to be 3J per cent. As the bill provides for an adjustment of the difference in interest from the time of the ottered exchange and maturity, the simple question was whether the bonds of the United States to the amount of five hundred millions could be sold at par bearing 3| per cent, interest, redeemable after twenty years and payable after forty. The readiness with which the 4 percent, bonds were sold; the eagerness with which the people sought the new 4 per cent, certificates of deposit ; the premium at which the four percents sold; the premium at which they are now quoted; the fact that these bonds are the only ones which the United States can possibly put upon the market before 1891, and not then unless a war intervene ; the evident existence in the country of large amounts of trust funds, which, as experience has shown, seek permanent and safe investment ; the many assurances which bankers and others com- petent to judge gave, brought the committee to the opinion that no higher rate of interest than 3$ per cent, ueed be paid. 6 It is not certain, I admit, that these securities at the rate of interest fixed can be used as we propose, nor was it certain that the 4 per cent, bonds could be sold. More or as much uncertainty was felt then as now. Certainly the four percents did not absorb all the trust funds in the country, as was apparent when the last sales were made. I entertain the opinion that when Congress has passed this bill, the four percents will reach a premium of 9 per cent, at least, and then investors can do better by seeking the bonds which this bill will pro- vide than any other class of our national securities. The bonds to be issued are to be offered in exchange for the five and six percents till their maturity, and if the exchange is not completed prior to the maturity of the old bonds, then the new bonds are to be sold and the proceeds used in the purchase of the old bonds not exchanged. Aside from moneys which may be called trust funds, there are large amounts of money in the country which the owners thereof do not care to invest in active business enterprises. They are in many in- stances persons who, retiring from business, seek investments which shall be free from needed supervision and consequent anxiety. Such parties prefer a bond of the Government, though it bear a low rate of interest, to any other security. At no time in our national history has our credit been so good as now. Fidelity to pledges, made dur- ing and since the war, has largely contributed to this result. This credit was caused in part by a return to specie payments. Resump- tion not only was a fulfillment of money promises made during the war, but it made the large volume of paper money in circulation equiv- alent in commercial value to the coin of the Constitution. Resump- tion, whether begun too soon or too late, whether reached by pre- cisely the best methods or not, could not fail to strengthen our na- tional credit, and will not now, while sustained, fail to bring forward for permanent and safe investment much money which, if it has not been hoarded, has been employed in transactions but poorly remu- nerative and so employed till the full credit of the Government was reached. While the returning prosperity in business may keep in active cir- culation and venture the great bulk of the acquired wealth of the people, yet no inconsiderable fraction of this wealth will withdraw from hazards which prosperity always begets and seek security. In the midst of the wildest speculations, there are a few at least who then instinctively retire from business, and all the more readily inquire for a place where they may safely lodge their money. We should not forget that the value of the annual productions of all the indus- tries of the United States is so large that the ability to invest in such securities as this bill contemplates, is much greater than we might suppose. A full year will be given in which the bonds provided for in this bill are to be offered in exchange for the 5 and 6 per cent, bonds. These bonds are not to be sold for money till after the maturity of the bonds to be taken up. If this exchange cannot be effected by a 3£ per cent, bond, it will be in time when Congress meets in December next to authorize a 4 per cent. bond. Haste is not needed; nor can it be urged except on the assumption that the times are more favorable now than they will be next year. The questions, Mr. Chairman, which this bill presents are not many, and are very simple. We have bonds maturing in 1880 and 1881, bear- ing 5 and C per cent, interest. Shall they remain to be reduced from year to year by the surplus revenues, which the Secretary of the Treasury judges will be $50,000,000 each year if there be no unlooked- 7 for changes and no marked modifications in the revenue laws of the country, or shall these bonds he refunded with 3$ per cent, bonds, and the Government then use the $50,000,000 in the purchase of the outstanding 4£ per cent, bonds, which are redeemable September 1, 1891, and are in amount $250,000,000 ? I do not hesitate to declare ray opinion that the latter course is the preferable one. The public-debt statement for February, made March 1, confirms me in this opinion. I will here make it a part of my remarks. The rednction in the public debt for the month of February, as will be seen by the official statement, was over $5,500,000, notwithstanding the fact that over $0,000,000 were paid out during the month on account of pensions. The total rev- enues during the month were larger than those ever received before during the month of February under the present revenue laws. The receipts from customs during the month amounted to $10,800,000, while in the corresponding month of 1879 they amounted to only $10,800,000. The receipts from internal revenues last month were over $8,750,000 while in Februarv, 1879, they amounted to more than $1,000,000 less. The following is the official public-debt statement for February : Coin bonds : 6 per cent, bonds $203,948,000 5 per cent, bonds 501, 418, 900 4.J per cent, bonds 250, 000, 000 4 per cent, bonds 738, 962, 000 Refunding certificates 1, 883, 950 Navy pension fund 14, 000, 000 11, 770, 212, 850 Debt bearing no interest : Debt on which interest bas ceased, (matured) 10, 823, 135 Legal-tenders 346, 742, 271 Certificates of deposit 11, 485, 000 Fractional currency ■ 15, 631, 311 Gold and silver certificates = 19, 452, 520 393,311,102 Total 2, 174, 347, 087 Accrued interest 17, 116, 787 Total debt 2,191,463,874 Cash in Treasury 196, 351, 653 Debt, less cash in Treasury 1, 995, 112, 221 Decrease during .February 5,672,019 Decrease since June 30, 1879 32, 095, 035 Current liabilities: Interest due and unpaid 3, 662, 288 Debt on which interest has ceased 10, 823, 135 Interest thereon 897, 003 Gold and siver certificates 19, 452, 520 United States notes held for redemption of certificates of deposit. . . 11, 485, 000 Cash balance available March 1, 1880 150, 031, 706 Total liabilities % 196, 351 , 653 Available assets : Cash in Treasury 196, 351, 653 Bonds issued to Pacific Railroad Companies, interest payable in lawful money : Principal outstanding 64, 623, 572 Interest accrued and not yet paid 646, 235 Interest paid by United States 45, 651, 155 Interest repaid by transportation of mails,