Hicks has grouped
national debt into three main
(i) Deadweight Debt.
(ii) Passive Debt.
(iii) Active Debt.
(i) Deadweight Debt:
Deadweight debt is one
which is not covered by any real assets. In the words of Hicks:
"Deadweight it that which is incurred
in consequence of expenditures which in no way increase the productive power of
the community, yielding neither money revenue nor a future flow or utilities."
The loan raised during war period is
a deadweight debt because for such debts no real assets exist to balance them.
(ii) Passive Debt:
Sometimes government raises loans for
spending on such projects which neither yield money income nor help in raising
the productivity of the country. They simply provide enjoyments to the citizens
such as public parks, museums, public buildings etc.
(iii) Active Debt:
Active debt is one
which is spent on those projects that directly help in yielding money income and
increasing the productive power of the community.
J.L. Hanson has classified
national debt into four main classes:
(i) Reproductive debt, (ii)
Deadweight debt, (iii) Unfunded debt, and (iv) Funded debt.
When a debt has assets to balance it,
it is called reproductive debt. For instance, if a state barrows
money for spending it on the construction of canals, railways, factories, etc.,
it is then able to repay the loan from these self liquidating projects.
(ii) Deadweight Debt:
A debt which is not covered by any
real assets is called deadweight debt. Debt invested on war or
prevention of war is a deadweight debt.
(iii) Funded Debt:
Funded debts are long term debts. The
government continues paying the annual interest on such loans but makes no
promise to pay the principal sum to the lender on any specified date, The
examples of funded debts are long term government stocks, war loans etc.
(iv) Floating or Unfunded
Floating or unfunded debt
comprises of short
term bans. It is payable to the lender with interest on or before a fixed date.