improvidence and unwise restrictions. Obviously, temporary deficits resulting from a failure of current revenue to meet current expenses, should not be allowed to accumulate and then be funded as a permanent debt. This is a vice of boss-ridden government which goes far to explain the rapid growth of American municipal indebtedness in the last half of the nineteenth century. Similarly, in our opinion, debt should not be contracted in order to erect public schools or other durable improvements which, although capable of rendering service through a long period of years, produce no money revenue and represent from the fiscal standpoint continuing liabilities rather than durable assets. It must be admitted that authorities differ on this point; but even among those who sanction the contracting of debt to pay for durable improvements which are financially non-productive, it is agreed that in any event the life of the debt should not exceed the life of the improvement in question. Long-time bonds, for instance, should not be employed to resurface roads and pay for highway improvements which will last only a few years. Finally, in our opinion, restriction may be properly imposed upon public indebtedness contracted for purposes which are fiscally nonproductive, although such restrictions should limit the increase of indebtedness and, for reasons which have been stated on page 653, should not be expressed as a percentage of the assessed valuation of taxable property.

On the other hand, few, if any, restrictions should be placed upon borrowing for the purpose of acquiring income-yielding property. Such restrictions place states and cities at a disadvantage as compared with private corporations. They also ope ate to throw into the hands of private corporations enterprises which cannot be paid for out of one year's revenue, and yet might advantageou ly be acquired by the public. At the present time excessive limitations, unworthy of a free people, make it impossible for some cities to carry out necessary public improvements which would not impose the slightest real burden upon taxpayers. In Chicago, several years ago, after a prolonged and exceedingly expensive campaign for the improvement of the street car service, the city was prevented from carry

ing out a carefully devised plan of reform by a court decision which held that an issue of street railway certificates would increase the indebtedness of the city beyond the limits prescribed by the constitution. Rigid limitations which prevent municipalities from offsetting part of their debt by the value of waterworks, lighting plants, and other assets which yield a monetary return, have no place in a scientific system of public finance.

While not absolutely required by theory, it is probably desirable as a matter of practical political psychology to make provision for the extinction of all public debts within a period, say, of sixty years. It has been customary in the past to do this by means of sinking funds, but experience has shown that the sinking fund is a cumbersome, wasteful, and unscientific method of accomplishing the desired end. Bonds which automatically mature in recurring installments offer a much better device for the retirement of public debts. The serial bond, as such an obligation is called, "can usually be placed at a lower rate of interest than a sinking fund obligation. It is free from most of the possibilities of political abuse and manipulation to which sinking funds are exposed. It substitutes a plain and certain for an uncertain or complicated liability; and it compels the administration which contracted the debt to begin its retirement immediately."1

The Public Domain.

By domains we usually mean agricultural and mineral land and forests owned by the State and managed in the interest of the public revenue, although we might logically subsume under the term the streets and other public property of cities, with all the valuable franchises and privileges which go with them. The direct revenue from this source in the United States is not large, and if account be taken of the cost of the public domain and the expense which it has entailed, the net earnings would possibly be a minus quantity.

Until a comparatively recent date this was not the case. In early feudal times the king had large estates of his own from the produce of which the government was largely supported,

1 Report of the Committee on Increase of Public Expenditures, Proceedings of the National Tax Association, vol. ix, p. 465.

and although he had certain military rights over his subjects, he had very limited rights over their property. Later, the king became a public rather than a private person, and a large part of the crown estate became the property of the public; but even then taxation was relatively unimportant, and the State relied principally in times of peace upon fines, escheats, fees, crown prerogatives (certain dues which the king was entitled to collect as of his own right), and upon the proceeds of the public domain. Blackstone, the great English jurist, writing in 1765, classified taxation among the "extraordinary" revenues of the sovereign; and in some of the German principalities the government was enabled to get along without taxation in times of peace, down to the close of the eighteenth century. Real democracy not yet having been achieved, the people distrusted taxation and resented its imposition, while the sovereign wisely clung to that species of revenue which was independent of the people's caprice. "The public domains," said Bodin, the great political philosopher of France in the latter part of the sixteenth century, "should be holy, sacred, and inalienable either by grant or by prescription."

But as democracy developed and the representatives of the people gained control of the finances, a new policy was everywhere adopted. If State management was uneconomical and wasteful, and if the government could obtain all the revenue needed by taxation, why preserve the wasteful methods of management? Why not turn public property into private property, to be developed and multiplied through the vitalizing force of individual self-interest? The great truth was realized that the property of individuals, when subject to taxation and regulation, is no less part of the great patrimony of the State than those lands and forests whose title is retained by the government itself. This doctrine was generally accepted by the greater countries of the world during the eighteenth century, so that Adam Smith, in defending it in 1776, was able to write that "there is not at present, in Europe, any civilized state of any kind which derives the greater part of its public revenue from the rent of lands which are the property of the state." This

philosophy was dominant when our national government was created in 1789, and has guided our national policy ever since.

1

Land Policy of the United States. By exploration and occupancy, war, and various cessions, the federal government acquired, after the Revolutionary War, a magnificent domain of 2,252,244 square miles. Now, while we have consistently followed the doctrine of alienation until very recent years, trying, apparently, to get rid of the public domain as rapidly as possible, one observes historically a very important change in the manner of development. In the early years of the Republic, large revenues were expected from the sale of public lands; it was the financial side which, according to Alexander Hamilton, claimed "primary attention." Until about 1800, the policy was to sell the land in large blocks, even though it went to speculators; this was followed by an attempt to sell small holdings to actual settlers, the credit system being used with disastrous results; later (1830), the preemption policy was introduced by which bona fide home makers were given certain advantages in purchase; and finally came the Homestead Act of 1862, the Timber Culture Act of 1873 (now repealed), and the other less important laws by which actual settlers can obtain homes practically free of cost. From the very beginning we have used our public lands as bounties, to hasten the development of the country; and this policy has been carried out by enormous grants of land for the endowment of education and the subsidization of canal, railway, and other internal improvement companies. Our original aim, however, was not only to develop the country as rapidly as possible, but to secure as much revenue as possible from the sale of public lands. We still aim to develop the country, but the idea of profit has been replaced by the policy of giving land to the landless. To exaggerate the evolution of policy for the sake of emphasis, it may be said that we began with a productive policy, and modified it with a distributive policy; that in the beginning our object was the greatest good, while now it is the greatest good to the greatest number, or, in terms more appropriate to the exact case in hand, 1 Quoted by Donaldson, The Public Domain, p. 198.

the greatest possible use of the public domain consistent with widespread participation in that use.

Forest Lands. The policy of alienation, while on the whole sound, is subject to certain limitations which it is very important to note. First of these is the case of forests. The ruthless denudation of our timber lands, the striking advance in the price of lumber indicating that the supply has not kept pace with the demand, and the meteoric development and rapid decline of the lumber industry in many localities of the Northwest, all combine to demonstrate that alienation and private ownership have failed to produce that careful industrial management which conduces to the greatest use and the greatest good in the long run. More important still, we have come to realize that the most productive use of other great natural resources has not been subserved by the private ownership of the forests. The regular flow of streams, the success of the great irrigation works which we are building, and the proper development of our mines, all depend more or less upon the permanent preservation of our forests; but private ownership and management in the past has led to destruction, not preservation.

The United States awoke very slowly to these truths. Prussia abandoned the policy of disposing of forest lands in 1831. France and Austria began to increase their forest holdings about 1870. But in the United States it was not until 1876 that an awakened interest showed itself in a congressional appropriation of two thousand dollars for the purpose of employing "a competent man to investigate timber conditions in the United States." In 1881 a Division of Forestry was created in the Department of Agriculture. This expanded into the Bureau of Forestry in 1901, and into the Forest Service in 1905. In 1891 a forward step was taken by the passage of an act authorizing the President to establish forest reserves; and in the same year the first forest reserve was established. In March, 1915, the area of the national forest reserves had increased to 184,611,596 acres (of which 21,337,533 were privately owned); the forest service had developed to a point where it was able to care for the management of this vast national industry, and to