The payment of the public debt improves the national credit by instilling public confidence in the economy, which usually leads to economic growth. Public debts may be paid by a sinking fund or by annuities, but both have the disadvantage of committing the government to fixed annual payments, whether convenient or not. Another method is to use only surplus revenue, setting a permanent appropriation to be paid against principal over and above annual interest rates. The ultimate security of the public debt lies in the willingness of the people to pay and the ability of the government to collect taxes.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.