The expenditures on account of the Military Academy for the last fiscal year, exclusive of the sum taken for its purposes from appropriations for the support of the Army, were $290,712.07.

The act approved March 3, 1885, designed to compensate officers and enlisted men for loss of private property while in the service of the United States, is so indefinite in its terms and apparently admits so many claims the adjustment of which could not have been contemplated that if it is to remain upon the statute book it needs amendment.

There should be a general law of Congress prohibiting the construction of bridges over navigable waters in such manner as to obstruct navigation, with provisions for preventing the same. It seems that under existing statutes the Government can not intervene to prevent such a construction when entered upon without its consent, though when such consent is asked and granted upon condition the authority to insist upon such condition is clear. Thus it is represented that while the officers of the Government are with great care guarding against the obstruction of navigation by a bridge across the Mississippi River at St. Paul a large pier for a bridge has been built just below this place directly in the navigable channel of the river. If such things are to be permitted, a strong argument is presented against the appropriation of large sums of money to improve the navigation of this and other important highways of commerce.

The report of the Secretary of the Navy gives a history of the operations of his Department and the present condition of the work committed to his charge.

He details in full the course pursued by him to protect the rights of the Government in respect of certain vessels unfinished at the time of his accession to office, and also concerning the dispatch boat Dolphin, claimed to be completed and awaiting the acceptance of the Department. No one can fail to see from recitals contained in this report that only the application of business principles has been insisted upon in the treatment of these subjects, and that whatever controversy has arisen was caused by the exaction on the part of the Department of contract obligations as they were legally construed. In the case of the Dolphin, with entire justice to the contractor, an agreement has been entered into providing for the ascertainment by a judicial inquiry of the complete or partial compliance with the contract in her construction, and further providing for the assessment of any damages to which the Government may be entitled on account of a partial failure to perform such contract, or the payment of the sum still remaining unpaid upon her price in case a full performance is adjudged.

The contractor, by reason of his failure in business, being unable to complete the other three vessels, they were taken possession of by the Government in their unfinished state under a clause in the contract permitting such a course, and are now in process of completion in the yard of the contractor, but under the supervision of the Navy Department.

Congress at its last session authorized the construction of two additional new cruisers and two gunboats, at a cost not exceeding in the aggregate $2,995,000. The appropriation for this purpose having become available on the 1st day of July last, steps were at once taken for the procurement of such plans for the construction of these vessels as would be likely to insure their usefulness when completed. These are of the utmost importance, considering the constant advance in the art of building vessels of this character, and the time is not lost which is spent in their careful consideration and selection.

All must admit the importance of an effective navy to a nation like ours, having such an extended seacoast to protect; and yet we have not a single vessel of war that could keep the seas against a first-class vessel of any important power. Such a condition ought not longer to continue. The nation that can not resist aggression is constantly exposed to it. Its foreign policy is of necessity weak and its negotiations are conducted with disadvantage because it is not in condition to enforce the terms dictated by its sense of right and justice.

Inspired, as I am, by the hope, shared by all patriotic citizens, that the day is not very far distant when our Navy will be such as befits our standing among the nations of the earth, and rejoiced at every step that leads in the direction of such a consummation, I deem it my duty to especially direct the attention of Congress to the close of the report of the Secretary of the Navy, in which the humiliating weakness of the present organization of his Department is exhibited and the startling abuses and waste of its present methods are exposed. The conviction is forced upon us with the certainty of mathematical demonstration that before we proceed further in the restoration of a Navy we need a thoroughly reorganized Navy Department. The fact that within seventeen years more than $75,000,000 have been spent in the construction, repair, equipment, and armament of vessels, and the further fact that instead of an effective and creditable fleet we have only the discontent and apprehension of a nation undefended by war vessels, added to the disclosures now made, do not permit us to doubt that every attempt to revive our Navy has thus far for the most part been misdirected, and all our efforts in that direction have been little better than blind gropings and expensive, aimless follies.

Unquestionably if we are content with the maintenance of a Navy Department simply as a shabby ornament to the Government, a constant watchfulness may prevent some of the scandal and abuse which have found their way into our present organization, and its incurable waste may be reduced to the minimum. But if we desire to build ships for present usefulness instead of naval reminders of the days that are past, we must have a Department organized for the work, supplied with all the talent and ingenuity our country affords, prepared to take advantage of the experience of other nations, systematized so that all effort shall unite and lead in one direction, and fully imbued with the conviction that war vessels, though new, are useless unless they combine all that the ingenuity of man has up to this day brought forth relating to their construction.

I earnestly commend the portion of the Secretary's report devoted to this subject to the attention of Congress, in the hope that his suggestions touching the reorganization of his Department may be adopted as the first step toward the reconstruction of our Navy.

The affairs of the postal service are exhibited by the report of the Postmaster-General, which will be laid before you.

The postal revenue, whose ratio of gain upon the rising prosperity of 1882 and 1883 outstripped the increasing expenses of our growing service, was checked by the reduction in the rate of letter postage which took effect with the beginning of October in the latter year, and it diminished during the two past fiscal years $2,790,000, in about the proportion of $2,270,000 in 1884 to $520,000 in 1885. Natural growth and development have meantime increased expenditure, resulting in a deficiency in the revenue to meet the expenses of the Department of five and a quarter million dollars for the year 1884 and eight and a third million in the last fiscal year. The anticipated and natural revival of the revenue has been oppressed and retarded by the unfavorable business condition of the country, of which the postal service is a faithful indicator. The gratifying fact is shown, however, by the report that our returning prosperity is marked by a gain of $380,000 in the revenue of the latter half of the last year over the corresponding period of the preceding year.

The change in the weight of first-class matter which may be carried for a single rate of postage from a half ounce to an ounce, and the reduction by one-half of the rate of newspaper postage, which, under recent legislation, began with the current year, will operate to restrain the augmentation of receipts which otherwise might have been expected to such a degree that the scale of expense may gain upon the revenue and cause an increased deficiency to be shown at its close. Yet, after no long period of reawakened prosperity, by proper economy it is confidently anticipated that even the present low rates, now as favorable as any country affords, will be adequate to sustain the cost of the service.

The operation of the Post-Office Department is for the convenience and benefit of the people, and the method by which they pay the charges of this useful arm of their public service, so that it be just and impartial, is of less importance to them than the economical expenditure of the means they provide for its maintenance and the due improvement of its agencies, so that they may enjoy its highest usefulness.

A proper attention has been directed to the prevention of waste or extravagance, and good results appear from the report to have already been accomplished.

I approve the recommendation of the Postmaster-General to reduce the charges on domestic money orders of $5 and less from 8 to 5 cents. This change will materially aid those of our people who most of all avail themselves of this instrumentality, but to whom the element of cheapness is of the greatest importance. With this reduction the system would still remain self-supporting.

The free-delivery system has been extended to 19 additional cities during the year, and 178 now enjoy its conveniences. Experience has commended it to those who enjoy its benefits, and further enlargement of its facilities is due to other communities to which it is adapted. In the cities where it has been established, taken together the local postage exceeds its maintenance by nearly $1,300,000. The limit to which this system is now confined by law has been nearly reached, and the reasons given justify its extension, which is proposed.

It was decided, with my approbation, after a sufficient examination, to be inexpedient for the Post-Office Department to contract for carrying our foreign mails under the additional authority given by the last Congress. The amount limited was inadequate to pay all within the purview of the law the full rate of 50 cents per mile, and it would have been unjust and unwise to have given it to some and denied it to others. Nor could contracts have been let under the law to all at a rate to have brought the aggregate within the appropriation without such practical prearrangement of terms as would have violated it.

The rate of sea and inland postage which was proffered under another statute clearly appears to be a fair compensation for the desired service, being three times the price necessary to secure transportation by other vessels upon any route, and much beyond the charges made to private persons for services not less burdensome.

Some of the steamship companies, upon the refusal of the Postmaster-General to attempt, by the means provided, the distribution of the sum appropriated as an extra compensation, withdrew the services of their vessels and thereby occasioned slight inconvenience, though no considerable injury, the mails having been dispatched by other means.

Whatever may be thought of the policy of subsidizing any line of public conveyance or travel, I am satisfied that it should not be done under cover of an expenditure incident to the administration of a Department, nor should there be any uncertainty as to the recipients of the subsidy or any discretion left to an executive officer as to its distribution. If such gifts of the public money are to be made for the purpose of aiding any enterprise in the supposed interest of the public, I can not but think that the amount to be paid and the beneficiary might better be determined by Congress than in any other way.

The international congress of delegates from the Postal Union countries convened at Lisbon, in Portugal, in February last, and after a session of some weeks the delegates signed a convention amendatory of the present postal-union convention in some particulars designed to advance its purposes. This additional act has had my approval and will be laid before you with the departmental report.

I approve the recommendation of the postmaster-General that another assistant be provided for his Department. I invite your consideration to the several other recommendations contained in his report.

The report of the Attorney-General contains a history of the conduct of the Department of Justice during the last year and a number of valuable suggestions as to needed legislation, and I invite your careful attention to the same.

The condition of business in the courts of the United States is such that there seems to be an imperative necessity for remedial legislation on the subject. Some of these courts are so overburdened with pending causes that the delays in determining litigation amount often to a denial of justice. Among the plans suggested for relief is one submitted by the Attorney-General. Its main features are: The transfer of all the original jurisdiction of the circuit courts to the district courts and an increase of judges for the latter where necessary; an addition of judges to the circuit courts, and constituting them exclusively courts of appeal, and reasonably limiting appeals thereto; further restrictions of the right to remove causes from the State to Federal courts; permitting appeals to the Supreme Court from the courts of the District of Columbia and the Territories only in the same cases as they are allowed from State courts, and guarding against an unnecessary number of appeals from the circuit courts.

I approve the plan thus outlined, and recommend the legislation necessary for its application to our judicial system.

The present mode of compensating United States marshals and district attorneys should, in my opinion, be changed. They are allowed to charge against the Government certain fees for services, their income being measured by the amount of such fees within a fixed limit as to their annual aggregate. This is a direct inducement for them to make their fees in criminal cases as large as possible in an effort to reach the maximum sum permitted. As an entirely natural consequence, unscrupulous marshals are found encouraging frivolous prosecutions, arresting people on petty charges of crime and transporting them to distant places for examination and trial, for the purpose of earning mileage and other fees; and district attorneys uselessly attend criminal examinations far from their places of residence for the express purpose of swelling their accounts against the Government. The actual expenses incurred in these transactions are also charged against the Government.

Thus the rights and freedom of our citizens are outraged and public expenditures increased for the purpose of furnishing public officers pretexts for increasing the measure of their compensation.

I think marshals and district attorneys should be paid salaries, adjusted by a rule which will make them commensurate with services fairly rendered.

In connection with this subject I desire to suggest the advisability, if it be found not obnoxious to constitutional objection, of investing United States commissioners with the power to try and determine certain violations of law within the grade of misdemeanors. Such trials might be made to depend upon the option of the accused. The multiplication of small and technical offenses, especially under the provisions of our internal-revenue law, render some change in our present system very desirable in the interests of humanity as well as economy. The district courts are now crowded with petty prosecutions, involving a punishment in case of conviction, of only a slight fine, while the parties accused are harassed by an enforced attendance upon courts held hundreds of miles from their homes. If poor and friendless, they are obliged to remain in jail during months, perhaps, that elapse before a session of the court is held, and are finally brought to trial surrounded by strangers and with but little real opportunity for defense. In the meantime frequently the marshal has charged against the Government his fees for an arrest, the transportation of the accused and the expense of the same, and for summoning witnesses before a commissioner, a grand jury, and a court; the witnesses have been paid from the public funds large fees and traveling expenses, and the commissioner and district attorney have also made their charges against the Government.

This abuse in the administration of our criminal law should be remedied; and if the plan above suggested is not practicable, some other should be devised.

The report of the Secretary of the Interior, containing an account of the operations of this important Department and much interesting information, will be submitted for your consideration.

The most intricate and difficult subject in charge of this Department is the treatment and management of the Indians. I am satisfied that some progress may be noted in their condition as a result of a prudent administration of the present laws and regulations for their control.

But it is submitted that there is lack of a fixed purpose or policy on this subject, which should be supplied. It is useless to dilate upon the wrongs of the Indians, and as useless to indulge in the heartless belief that because their wrongs are revenged in their own atrocious manner, therefore they should be exterminated.

They are within the care of our Government, and their rights are, or should be, protected from invasion by the most solemn obligations. They are properly enough called the wards of the Government; and it should be borne in mind that this guardianship involves on our part efforts for the improvement of their condition and the enforcement of their rights. There seems to be general concurrence in the proposition that the ultimate object of their treatment should be their civilization and citizenship. Fitted by these to keep pace in the march of progress with the advanced civilization about them, they will readily assimilate with the mass of our population, assuming the responsibilities and receiving the protection incident to this condition.

The difficulty appears to be in the selection of the means to be at present employed toward the attainment of this result.

Our Indian population, exclusive of those in Alaska, is reported as numbering 260,000, nearly all being located on lands set apart for their use and occupation, aggregating over 134,000,000 acres. These lands are included in the boundaries of 171 reservations of different dimensions, scattered in 21 States and Territories, presenting great variations in climate and in the kind and quality of their soils. Among the Indians upon these several reservations there exist the most marked differences in natural traits and disposition and in their progress toward civilization. While some are lazy, vicious, and stupid, others are industrious, peaceful, and intelligent; while a portion of them are self-supporting and independent, and have so far advanced in civilization that they make their own laws, administered through officers of their own choice, and educate their children in schools of their own establishment and maintenance, others still retain, in squalor and dependence, almost the savagery of their natural state.

In dealing with this question the desires manifested by the Indians should not be ignored. Here again we find a great diversity. With some the tribal relation is cherished with the utmost tenacity, while its hold upon others is considerably relaxed; the love of home is strong with all, and yet there are those whose attachment to a particular locality is by no means unyielding; the ownership of their lands in severalty is much desired by some, while by others, and sometimes among the most civilized, such a distribution would be bitterly opposed.

The variation of their wants, growing out of and connected with the character of their several locations, should be regarded. Some are upon reservations most fit for grazing, but without flocks or herds; and some on arable land, have no agricultural implements. While some of the reservations are double the size necessary to maintain the number of Indians now upon them, in a few cases, perhaps, they should be enlarged.

Add to all this the difference in the administration of the agencies. While the same duties are devolved upon all, the disposition of the agents and the manner of their contact with the Indians have much to do with their condition and welfare. The agent who perfunctorily performs his duty and slothfully neglects all opportunity to advance their moral and physical improvement and fails to inspire them with a desire for better things will accomplish nothing in the direction of their civilization, while he who feels the burden of an important trust and has an interest in his work will, by consistent example, firm yet considerate treatment, and well-directed aid and encouragement, constantly lead those under his charge toward the light of their enfranchisement.

The history of all the progress which has been made in the civilization of the Indian I think will disclose the fact that the beginning has been religious teaching, followed by or accompanying secular education. While the self-sacrificing and pious men and women who have aided in this good work by their independent endeavor have for their reward the beneficent results of their labor and the consciousness of Christian duty well performed, their valuable services should be fully acknowledged by all who under the law are charged with the control and management of our Indian wards.

What has been said indicates that in the present condition of the Indians no attempt should be made to apply a fixed and unyielding plan of action to their varied and varying needs and circumstances.

The Indian Bureau, burdened as it is with their general oversight and with the details of the establishment, can hardly possess itself of the minute phases of the particular cases needing treatment; and thus the propriety of creating an instrumentality auxiliary to those already established for the care of the Indians suggests itself.

I recommend the passage of a law authorizing the appointment of six commissioners, three of whom shall be detailed from the Army, to be charged with the duty of a careful inspection from time to time of all the Indians upon our reservations or subject to the care and control of the Government, with a view of discovering their exact condition and needs and determining what steps shall be taken on behalf of the Government to improve their situation in the direction of their self-support and complete civilization; that they ascertain from such inspection what, if any, of the reservations may be reduced in area, and in such cases what part not needed for Indian occupation may be purchased by the Government from the Indians and disposed of for their benefit; what, if any, Indians may, with their consent, be removed to other reservations, with a view of their concentration and the sale on their behalf of their abandoned reservations; what Indian lands now held in common should be allotted in severalty; in what manner and to what extent the Indians upon the reservations can be placed under the protection of our laws and subjected to their penalties, and which, if any, Indians should be invested with the right of citizenship. The powers and functions of the commissioners in regard to these subjects should be clearly defined, though they should, in conjunction with the Secretary of the Interior, be given all the authority to deal definitely with the questions presented deemed safe and consistent.

They should be also charged with the duty of ascertaining the Indians who might properly be furnished with implements of agriculture, and of what kind; in what cases the support of the Government should be withdrawn; where the present plan of distributing Indian supplies should be changed; where schools may be established and where discontinued; the conduct, methods, and fitness of agents in charge of reservations; the extent to which such reservations are occupied or intruded upon by unauthorized persons, and generally all matters related to the welfare and improvement of the Indian.

They should advise with the Secretary of the Interior concerning these matters of detail in management, and he should be given power to deal with them fully, if he is not now invested with such power.

This plan contemplates the selection of persons for commissioners who are interested in the Indian question and who have practical ideas upon the subject of their treatment.

The expense of the Indian Bureau during the last fiscal year was more than six and a halt million dollars. I believe much of this expenditure might be saved under the plan proposed; that its economical effects would be increased with its continuance; that the safety of our frontier settlers would be subserved under its operation, and that the nation would be saved through its results from the imputation of inhumanity, injustice, and mismanagement.

In order to carry out the policy of allotment of Indian lands in severalty, when deemed expedient, it will be necessary to have surveys completed of the reservations, and, I hope that provision will be made for the prosecution of this work.

In May of the present year a small portion of the Chiricahua Apaches on the White Mountain Reservation, in Arizona, left the reservation and committed a number of murders and depredations upon settlers in that neighborhood. Though prompt and energetic action was taken by the military, the renegades eluded capture and escaped into Mexico. The formation of the country through which these Indians passed, their thorough acquaintance with the same, the speed of their escape, and the manner in which they scattered and concealed themselves among the mountains near the scene of their outrages put our soldiers at a great disadvantage in their efforts to capture them, though the expectation is still entertained that they will be ultimately taken and punished for their crimes.

The threatening and disorderly conduct of the Cheyennes in the Indian Territory early last summer caused considerable alarm and uneasiness. Investigation proved that their threatening attitude was due in a great measure to the occupation of the land of their reservation by immense herds of cattle, which their owners claimed were rightfully there under certain leases made by the Indians. Such occupation appearing upon examination to be unlawful notwithstanding these leases, the intruders were ordered to remove with their cattle from the lands of the Indians by Executive proclamation. The enforcement of this proclamation had the effect of restoring peace and order among the Indians, and they are now quiet and well behaved.

By an Executive order issued on February 27, 1885, by my predecessor, a portion of the tract of country in the territory known as the Old Winnebago and Crow Creek reservations was directed to be restored to the public domain and opened to settlement under the land laws of the United States, and a large number of persons entered upon those lands. This action alarmed the Sioux Indians, who claimed the territory as belonging to their reservation under the treaty of 1868. This claim was determined, after careful investigation, to be well rounded, and consequently the Executive order referred to was by proclamation of April 17, 1885, declared to be inoperative and of no effect, and all persons upon the land were warned to leave. This warning has been substantially complied with.

The public domain had its origin in cessions of land by the States to the General Government. The first cession was made by the State of New York, and the largest, which in area exceeded all the others, by the State of Virginia. The territory the proprietorship of which became thus vested in the General Government extended from the western line of Pennsylvania to the Mississippi River. These patriotic donations of the States were encumbered with no condition except that they should the held and used "for the common benefit of the United States." By purchase with the common fund of all the people additions were made to this domain until it extended to the northern line of Mexico, the Pacific Ocean, and the Polar Sea. The original trust, "for the common benefit of the United States," attached to all. In the execution of that trust the policy of many homes, rather than large estates, was adopted by the Government. That these might be easily obtained, and be the abode of security and contentment, the laws for their acquisition were few, easily understood, and general in their character. But the pressure of local interests, combined with a speculative spirit, have in many instances procured the passage of laws which marred the harmony of the general plan and encumbered the system with a multitude of general and special enactments which render the land laws complicated, subject the titles to uncertainty, and the purchasers often to oppression and wrong. Laws which were intended for the "common benefit" have been perverted so that large quantities of land are vesting in single ownerships. From the multitude and character of the laws, this consequence seems incapable of correction by mere administration.

It is not for the "common benefit of the United States" that a large area of the public lands should be acquired, directly or through fraud, in the hands of a single individual. The nation's strength is in the people. The nation's prosperity is in their prosperity. The nation's glory is in the equality of her justice. The nation's perpetuity is in the patriotism of all her people. Hence, as far as practicable, the plan adopted in the disposal of the public lands should have in view the original policy, which encouraged many purchases of these lands for homes and discouraged the massing of large areas. Exclusive of Alaska, about three-fifths of the national domain has been sold or subjected to contract or grant. Of the remaining two-fifths a considerable portion is either mountain or desert. A rapidly increasing population creates a growing demand for homes, and the accumulation of wealth inspires an eager competition to obtain the public land for speculative purposes. In the future this collision of interests will be more marked than in the past, and the execution of the nation's trust in behalf of our settlers will be more difficult. I therefore commend to your attention the recommendations contained in the report of the Secretary of the Interior with reference to the repeal and modification of certain of our land laws.

The nation has made princely grants and subsidies to a system of railroads projected as great national highways to connect the Pacific States with the East. It has been charged that these donations from the people have been diverted to private gain and corrupt uses, and thus public indignation has been aroused and suspicion engendered. Our great nation does not begrudge its generosity, but it abhors speculation and fraud; and the favorable regard of our people for the great corporations to which these grants were made can only be revived by a restoration of confidence, to be secured by their constant, unequivocal, and clearly manifested integrity. A faithful application of the undiminished proceeds of the grants to the construction and perfecting of their roads, an honest discharge of their obligations, and entire justice to all the people in the enjoyment of their rights on these highways of travel are all the public asks, and it will be content with no less. To secure these things should be the common purpose of the officers of the Government, as well as of the corporations. With this accomplishment prosperity would be permanently secured to the roads, and national pride would take the place of national complaint.

It appears from the report of the Commissioner of Pensions that there were on the 1st day of July, 1885, 345,125 persons borne upon the pension rolls, who were classified as follows: Army invalids, 241,456; widows, minor children, and dependent relatives of deceased soldiers, 78,841; navy invalids, 2,745; navy widows, minor children, and dependents, 1,926; survivors of the War of 1812, 2,945; and widows of those who served in that war, 17,212. About one man in ten of all those who enlisted in the late war are reported as receiving pensions, exclusive of the dependents of deceased soldiers. On the 1st of July, 1875, the number of pensioners was 234,821, and the increase within the ten years next thereafter was 110,304.

While there is no expenditure of the public funds which the people more cheerfully approve than that made in recognition of the services of our soldiers living and dead, the sentiment underlying the subject should not be vitiated by the introduction of any fraudulent practices. Therefore it is fully as important that the rolls should be cleansed of all those who by fraud have secured a place thereon as that meritorious claims should be speedily examined and adjusted. The reforms in the methods of doing the business of this Bureau which have lately been inaugurated promise better results in both these directions.

The operations of the Patent Office demonstrate the activity of the inventive genius of the country. For the year ended June 30, 1885, the applications for patents, including reissues, and for the registration of trade-marks and labels, numbered 35,688. During the same period there were 22,928 patents granted and reissued and 1,429 trade-marks and labels registered. The number of patents issued in the year 1875 was 14,387. The receipts during the last fiscal year were $ 1,074,974.35, and the total expenditures, not including contingent expenses, $934,123.11.

There were 9,788 applications for patents pending on the 1st day of July, 1884, and 5,786 on the same date in the year 1885. There has been considerable improvement made in the prompt determination of applications and a consequent relief to expectant inventors.

A number of suggestions and recommendations are contained in the report of the Commissioner of patents which are well entitled to the consideration of Congress.

In the Territory of Utah the law of the United States passed for the Suppression of polygamy has been energetically and faithfully executed during the past year, with measurably good results. A number of convictions have been secured for unlawful cohabitation, and in some cases pleas of guilty have been entered and a slight punishment imposed, upon a promise by the accused that they would not again offend against the law, nor advise, counsel, aid, or abet in any way its violation by others.

The Utah commissioners express the opinion, based upon such information as they are able to obtain, that but few polygamous marriages have taken place in the Territory during the last year. They further report that while there can not be found upon the registration lists of voters the name of a man actually guilty of polygamy, and while none of that class are holding office, yet at the last election in the Territory all the officers elected, except in one county, were men who, though not actually living in the practice of polygamy, subscribe to the doctrine of polygamous marriages as a divine revelation and a law unto all higher and more binding upon the conscience than any human law, local or national. Thus is the strange spectacle presented of a community protected by a republican form of government, to which they owe allegiance, sustaining by their suffrages a principle and a belief which set at naught that obligation of absolute obedience to the law of the land which lies at the foundation of republican institutions.

The strength, the perpetuity, and the destiny of the nation rest upon our homes, established by the law of God, guarded by parental care, regulated by parental authority, and sanctified by parental love.

These are not the homes of polygamy.

The mothers of our land, who rule the nation as they mold the characters and guide the actions of their sons, live according to God's holy ordinances, and each, secure and happy in the exclusive love of the father of her children, sheds the warm light of true womanhood, unperverted and unpolluted, upon all within her pure and wholesome family circle.

These are not the cheerless, crushed, and unwomanly mothers of polygamy.

The fathers of our families are the best citizens of the Republic. Wife and children are the sources of patriotism, and conjugal and parental affection beget devotion to the country. The man who, undefiled with plural marriage, is surrounded in his single home with his wife and children has a stake in the country which inspires him with respect for its laws and courage for its defense.

These are not the fathers of polygamous families.

There is no feature of this practice or the system which sanctions it which is not opposed to all that is of value in our institutions.

There should be no relaxation in the firm but just execution of the law now in operation, and I should be glad to approve such further discreet legislation as will rid the country of this blot upon its fair fame.

Since the people upholding polygamy in our Territories are reenforced by immigration from other lands, I recommend that a law be passed to prevent the importation of Mormons into the country.

The agricultural interest of the country demands just recognition and liberal encouragement. It sustains with certainty and unfailing strength our nation's prosperity by the products of its steady toil, and bears its full share of the burden of taxation without complaint. Our agriculturists have but slight personal representation in the councils of the nation, and are generally content with the humbler duties of citizenship and willing to trust to the bounty of nature for a reward of their labor. But the magnitude and value of this industry are appreciated when the statement is made that of our total annual exports more than three-fourths are the products of agriculture, and of our total population nearly one-half are exclusively engaged in that occupation.

The Department of Agriculture was created for the purpose of acquiring and diffusing among the people useful information respecting the subjects it has in charge, and aiding in the cause of intelligent and progressive farming, by the collection of statistics, by testing the value and usefulness of new seeds and plants, and distributing such as are found desirable among agriculturists. This and other powers and duties with which this Department is invested are of the utmost importance, and if wisely exercised must be of great benefit to the country. The aim of our beneficent Government is the improvement of the people in every station and the amelioration of their condition. Surely our agriculturists should not be neglected. The instrumentality established in aid of the farmers of the land should not only be well equipped for the accomplishment of its purpose, but those for whose benefit it has been adopted should be encouraged to avail themselves fully of its advantages.

The prohibition of the importation into several countries of certain of our animals and their products, based upon the suspicion that health is endangered in their use and consumption, suggests the importance of such precautions for the protection of our stock of all kinds against disease as will disarm suspicion of danger and cause the removal of such an injurious prohibition.

If the laws now in operation are insufficient to accomplish this protection, I recommend their amendment to meet the necessities of the situation; and I commend to the consideration of Congress the suggestions contained in the report of the Commissioner of Agriculture calculated to increase the value and efficiency of this Department.

The report of the Civil Service Commission, which will be submitted, contains an account of the manner in which the civil-service law has been executed during the last year and much valuable information on this important subject.

I am inclined to think that there is no sentiment more general in the minds of the people of our country than a conviction of the correctness of the principle upon which the law enforcing civil-service reform is based. In its present condition the law regulates only a part of the subordinate public positions throughout the country. It applies the test of fitness to applicants for these places by means of a competitive examination, and gives large discretion to the Commissioners as to the character of the examination and many other matters connected with its execution. Thus the rules and regulations adopted by the Commission have much to do with the practical usefulness of the statute and with the results of its application.

The people may well trust the Commission to execute the law with perfect fairness and with as little irritation as is possible. But of course no relaxation of the principle which underlies it and no weakening of the safeguards which surround it can be expected. Experience in its administration will probably suggest amendment of the methods of its execution, but I venture to hope that we shall never again be remitted to the system which distributes public positions purely as rewards for partisan service. Doubts may well be entertained whether our Government could survive the strain of a continuance of this system, which upon every change of Administration inspires an immense army of claimants for office to lay siege to the patronage of Government, engrossing the time of public officers with their importunities, spreading abroad the contagion of their disappointment, and filling the air with the tumult of their discontent.

The allurements of an immense number of offices and places exhibited to the voters of the land, and the promise of their bestowal in recognition of partisan activity; debauch the suffrage and rob political action of its thoughtful and deliberative character. The evil would increase with the multiplication of offices consequent upon our extension, and the mania for office holding, growing from its indulgence, would pervade our population so generally that patriotic purpose, the support of principle, the desire for the public good, and solicitude for the nation's welfare would be nearly banished from the activity of our party contests and cause them to degenerate into ignoble, selfish, and disgraceful struggles for the possession of office and public place.

Civil-service reform enforced by law came none too soon to check the progress of demoralization.

One of its effects, not enough regarded, is the freedom it brings to the political action of those conservative and sober men who, in fear of the confusion and risk attending an arbitrary and sudden change in all the public offices with a change of party rule, cast their ballots against such a chance.

Parties seem to be necessary, and will long continue to exist; nor can it be now denied that there are legitimate advantages, not disconnected with office holding, which follow party supremacy. While partisanship continues bitter and pronounced and supplies so much of motive to sentiment and action, it is not fair to hold public officials in charge of important trusts responsible for the best results in the performance of their duties, and yet insist that they shall rely in confidential and important places upon the work of those not only opposed to them in political affiliation, but so steeped in partisan prejudice and rancor that they have no loyalty to their chiefs and no desire for their success. Civil-service reform does not exact this, nor does it require that those in subordinate positions who fail in yielding their best service or who are incompetent should be retained simply because they are in place. The whining of a clerk discharged for indolence or incompetency, who, though he gained his place by the worst possible operation of the spoils system, suddenly discovers that he is entitled to protection under the sanction of civil-service reform, represents an idea no less absurd than the clamor of the applicant who claims the vacant position as his compensation for the most questionable party work.

The civil-service law does not prevent the discharge of the indolent or incompetent clerk, but it does prevent supplying his place with the unfit party worker. Thus in both these phases is seen benefit to the public service. And the people who desire good government, having secured this statute, will not relinquish its benefits without protest. Nor are they unmindful of the fact that its full advantages can only be gained through the complete good faith of those having its execution in charge. And this they will insist upon.

I recommend that the salaries of the Civil Service Commissioners be increased to a sum more nearly commensurate to their important duties.

It is a source of considerable and not unnatural discontent that no adequate provision has yet been made for accommodating the principal library of the Government. Of the vast collection of books and pamphlets gathered at the Capitol, numbering some 700,000, exclusive of manuscripts, maps, and the products of the graphic arts, also of great volume and value, only about 300,000 volumes, or less than half the collection, are provided with shelf room. The others, which are increasing at the rate of from twenty-five to thirty thousand volumes a year, are not only inaccessible to the public, but are subject to serious damage and deterioration from other causes in their present situation.

A consideration of the facts that the library of the Capitol has twice been destroyed or damaged by fire, its daily increasing value, and its importance as a place of deposit of books under the law relating to copyright makes manifest the necessity of prompt action to insure its proper accommodation and protection.

My attention has been called to a controversy which has arisen from the condition of the law relating to railroad facilities in the city of Washington, which has involved the Commissioners of the District in much annoyance and trouble. I hope this difficulty will be promptly settled by appropriate legislation.

The Commissioners represent that enough of the revenues of the District are now on deposit in the Treasury of the United States to repay the sum advanced by the Government for sewer improvements under the act of June 30, 1884. They desire now an advance of the share which ultimately should be borne by the District of the cost of extensive improvements to the streets of the city. The total expense of these contemplated improvements is estimated at $1,000,000, and they are of the opinion that a considerable sum could be saved if they had all the money in hand, so that contracts for the whole work could be made at the same time. They express confidence that if the advance asked for should be made the Government would be reimbursed the same within a reasonable time. I have no doubt that these improvements could be made much cheaper if undertaken together and prosecuted according to a general plan.

The license law now in force within the District is deficient and uncertain in some of its provisions and ought to be amended. The Commissioners urge, with good reason, the necessity of providing a building for the use of the District government which shall better secure the safety and preservation of its valuable books and records.

The present condition of the law relating to the succession to the Presidency in the event of the death, disability, or removal of both the President and Vice-President is such as to require immediate amendment. This subject has repeatedly been considered by Congress, but no result has been reached. The recent lamentable death of the Vice-President, and vacancies at the same time in all other offices the incumbents of which might immediately exercise the functions of the presidential office, has caused public anxiety and a just demand that a recurrence of such a condition of affairs should not be permitted.

In conclusion I commend to the wise care and thoughtful attention of Congress the needs, the welfare, and the aspirations of an intelligent and generous nation. To subordinate these to the narrow advantages of partisanship or the accomplishment of selfish aims is to violate the people's trust and betray the people's interests; but an individual sense of responsibility on the part of each of us and a stern determination to perform our duty well must give us place among those who have added in their day and generation to the glory and prosperity of our beloved land.

***

In connection with this subject I earnestly reiterate the practical necessity of supplying some mode of trustworthy inspection and report of the manner in which the consulates are conducted. In the absence of such reliable information efficiency can scarcely be rewarded or its opposite corrected.

Increasing competition in trade has directed attention to the value of the consular reports printed by the Department of State, and the efforts of the Government to extend the practical usefulness of these reports have created a wider demand for them at home and a spirit of emulation abroad. Constituting a record at the changes occurring in trade and of the progress of the arts and invention in foreign countries, they are much sought for by all interested in the subjects which they embrace.

The report of the Secretary of the Treasury exhibits in detail the condition of the public finances and of the several branches of the Government related to his Department. I especially direct the attention of the Congress to the recommendations contained in this and the last preceding report of the Secretary touching the simplification and amendment of the laws relating to the collection of our revenues, and in the interest of economy and justice to the Government I hope they may be adopted by appropriate legislation.

The ordinary receipts of the Government for the fiscal year ended June 30, 1886, were $336,439,727.06. Of this amount $192,905,023.41 was received from customs and $116,805,936.48 from internal revenue. The total receipts, as here stated, were $13,749,020.68 greater than for the previous year, but the increase from customs was $11,434,084.10 and from internal revenue $4,407,210.94, making a gain in these items for the last year of $15,841,295.04, a falling off in other resources reducing the total increase to the smaller amount mentioned.

The expense at the different custom-houses of collecting this increased customs revenue was less than the expense attending the collection of such revenue for the preceding year by $490,608, and the increased receipts of internal revenue were collected at a cost to the Internal-Revenue Bureau $155,944.99 less than the expense of such collection for the previous year.

The total ordinary expenses of the Government for the fiscal year ended June 30, 1886, were $242,483,138.50, being less by $17,788,797 than such expenditures for the year preceding, and leaving a surplus in the Treasury at the close of the last fiscal year of $93,956,588.56, as against $63,463,771.27 at the close of the previous year, being an increase in such surplus of $30,492,817.29.

The expenditures are compared with those of the preceding fiscal year and classified as follows:

For the current year to end June 30, 1887, the ascertained receipts up to October 1, 1886, with such receipts estimated for the remainder of the year, amount to $356,000,000.

The expenditures ascertained and estimated for the same period are $266,000,000, indicating an anticipated surplus at the close of the year of $90,000,000.

The total value of the exports from the United States to foreign countries during the fiscal year is stated and compared with the preceding year as follows:

The value of some of our leading exports during the last fiscal year, as compared with the value of the same for the year immediately preceding, is here given, and furnishes information both interesting and suggestive:

Our imports during the last fiscal year, as compared with the previous year, were as follows:

In my last annual message to the Congress attention was directed to the fact that the revenues of the Government exceeded its actual needs, and it was suggested that legislative action should be taken to relieve the people from the unnecessary burden of taxation thus made apparent.

In view of the pressing importance of the subject I deem it my duty to again urge its consideration.

The income of the Government, by its increased volume and through economies in its collection, is now more than ever in excess of public necessities. The application of the surplus to the payment of such portion of the public debt as is now at our option subject to extinguishment, if continued at the rate which has lately prevailed, would retire that class of indebtedness within less than one year from this date. Thus a continuation of our present revenue system would soon result in the receipt of an annual income much greater than necessary to meet Government expenses, with no indebtedness upon which it could be applied. We should then be confronted with a vast quantity of money, the circulating medium of the people, hoarded in the Treasury when it should be in their hands, or we should be drawn into wasteful public extravagance, with all the corrupting national demoralization which follows in its train.

But it is not the simple existence of this surplus and its threatened attendant evils which furnish the strongest argument against our present scale of Federal taxation. Its worst phase is the exaction of such a surplus through a perversion of the relations between the people and their Government and a dangerous departure from the rules which limit the right of Federal taxation.

Good government, and especially the government of which every American citizen boasts, has for its objects the protection of every person within its care in the greatest liberty consistent with the good order of society and his perfect security in the enjoyment of his earnings with the least possible diminution for public needs. When more of the people's substance is exacted through the form of taxation than is necessary to meet the just obligations of the Government and the expense of its economical administration, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free government.

The indirect manner in which these exactions are made has a tendency to conceal their true character and their extent. But we have arrived at a stage of superfluous revenue which has aroused the people to a realization of the fact that the amount raised professedly for the support of the Government is paid by them as absolutely if added to the price of the things which supply their daily wants as if it was paid at fixed periods into the hand of the tax gatherer.

Those who toil for daily wages are beginning to understand that capital, though sometimes vaunting its importance and clamoring for the protection and favor of the Government, is dull and sluggish till, touched by the magical hand of labor, it springs into activity, furnishing an occasion for Federal taxation and gaining the value which enables it to bear its burden. And the laboring man is thoughtfully inquiring whether in these circumstances, and considering the tribute he constantly pays into the public Treasury as he supplies his daily wants, he receives his fair share of advantages.

There is also a suspicion abroad that the surplus of our revenues indicates abnormal and exceptional business profits, which, under the system which produces such surplus, increase without corresponding benefit to the people at large the vast accumulations of a few among our citizens, whose fortunes, rivaling the wealth of the most favored in antidemocratic nations, are not the natural growth of a steady, plain, and industrious republic.

Our farmers, too, and those engaged directly and indirectly in supplying the products of agriculture, see that day by day, and as often as the daily wants of their households recur, they are forced to pay excessive and needless taxation, while their products struggle in foreign markets with the competition of nations, which, by allowing a freer exchange of productions than we permit, enable their people to sell for prices which distress the American farmer.

As every patriotic citizen rejoices in the constantly increasing pride of our people in American citizenship and in the glory of our national achievements and progress, a sentiment prevails that the leading strings useful to a nation in its infancy may well be to a great extent discarded in the present stage of American ingenuity, courage, and fearless self-reliance; and for the privilege of indulging this sentiment with true American enthusiasm our citizens are quite willing to forego an idle surplus in the public Treasury.

And all the people know that the average rate of Federal taxation upon imports is to-day, in time of peace, but little less, while upon some articles of necessary consumption it is actually more, than was imposed by the grievous burden willingly borne at a time when the Government needed millions to maintain by war the safety and integrity of the Union.

It has been the policy of the Government to collect the principal part of its revenues by a tax upon imports, and no change in this policy is desirable. But the present condition of affairs constrains our people to demand that by a revision of our revenue laws the receipts of the Government shall be reduced to the necessary expense of its economical administration; and this demand should be recognized and obeyed by the people's representatives in the legislative branch of the Government.

In readjusting the burdens of Federal taxation a sound public policy requires that such of our citizens as have built up large and important industries under present conditions should not be suddenly and to their injury deprived of advantages to which they have adapted their business; but if the public good requires it they should be content with such consideration as shall deal fairly and cautiously with their interests, while the just demand of the people for relief from needless taxation is honestly answered.

A reasonable and timely submission to such a demand should certainly be possible without disastrous shock to any interest; and a cheerful concession sometimes averts abrupt and heedless action, often the outgrowth of impatience and delayed justice.

Due regard should be also accorded in any proposed readjustment to the interests of American labor so far as they are involved. We congratulate ourselves that there is among us no laboring class fixed within unyielding bounds and doomed under all conditions to the inexorable fate of daily toil. We recognize in labor a chief factor in the wealth of the Republic, and we treat those who have it in their keeping as citizens entitled to the most careful regard and thoughtful attention. This regard and attention should be awarded them, not only because labor is the capital of our workingmen, justly entitled to its share of Government favor, but for the further and not less important reason that the laboring man, surrounded by his family in his humble home, as a consumer is vitally interested in all that cheapens the cost of living and enables him to bring within his domestic circle additional comforts and advantages.

This relation of the workingman to the revenue laws of the country and the manner in which it palpably influences the question of wages should not be forgotten in the justifiable prominence given to the proper maintenance of the supply and protection of well-paid labor. And these considerations suggest such an arrangement of Government revenues as shall reduce the expense of living, while it does not curtail the opportunity for work nor reduce the compensation of American labor and injuriously affect its condition and the dignified place it holds in the estimation of our people.

But our farmers and agriculturists--those who from the soil produce the things consumed by all--are perhaps more directly and plainly concerned than any other of our citizens in a just and careful system of Federal taxation. Those actually engaged in and more remotely connected with this kind of work number nearly one-half of our population. None labor harder or more continuously than they. No enactments limit their hours of toil and no interposition of the Government enhances to any great extent the value of their products. And yet for many of the necessaries and comforts of life, which the most scrupulous economy enables them to bring into their homes, and for their implements of husbandry, they are obliged to pay a price largely increased by an unnatural profit, which by the action of the Government is given to the more favored manufacturer.

I recommend that, keeping in view all these considerations, the increasing and unnecessary surplus of national income annually accumulating be released to the people by an amendment to our revenue laws which shall cheapen the price of the necessaries of life and give freer entrance to such imported materials as by American labor may be manufactured into marketable commodities.

Nothing can be accomplished, however, in the direction of this much-needed reform unless the subject is approached in a patriotic spirit of devotion to the interests of the entire country and with a willingness to yield something for the public good.

The sum paid upon the public debt during the fiscal year ended June 30, 1886, was $44,551,043.36.

During the twelve months ended October 31,1886, 3 per cent bonds were called for redemption amounting to $127,283,100, of which $80,643,200 was so called to answer the requirements of the law relating to the sinking fund and $46,639,900 for the purpose of reducing the public debt by application of a part of the surplus in the Treasury to that object. Of the bonds thus called $102,269,450 became subject under such calls to redemption prior to November 1, 1886. The remainder, amounting to $25,013,650, matured under the calls after that date.

In addition to the amount subject to payment and cancellation prior to November 1, there were also paid before that day certain of these bonds, with the interest thereon, amounting to $5,072,350, which were anticipated as to their maturity, of which $2,664,850 had not been called, Thus $107,341,800 had been actually applied prior to the 1st of November, 1886, to the extinguishment of our bonded and interest-bearing debt, leaving on that day still outstanding the sum of $1,153,443,112. Of this amount $86,848,700 were still represented by 3 per cent bonds. They however, have been since November 1, or will at once be, further reduced by $22,606,150, being bonds which have been called, as already stated, but not redeemed and canceled before the latter date.

During the fiscal year ended June 30, 1886, there were coined, under the compulsory silver-coinage act of 1878,29,838,905 silver dollars, and the cost of the silver used in such coinage was $23,448,960.01. There had been coined up to the close of the previous fiscal year under the provisions of the law 203,882,554 silver dollars, and on the 1st day of December, 1886, the total amount of such coinage was $247,131,549.

The Director of the Mint reports that at the time of the passage of the law of 1878 directing this coinage the intrinsic value of the dollars thus coined was 94 1/4 cents each, and that on the 31st day of July, 1886, the price of silver reached the lowest stage ever known, so that the intrinsic or bullion price of our standard silver dollar at that date was less than 72 cents. The price of silver on the 30th day of November last was such as to make these dollars intrinsically worth 78 cents each.

These differences in value of the coins represent the fluctuations in the price of silver, and they certainly do not indicate that compulsory coinage by the Government enhances the price of that commodity or secures uniformity in its value.

Every fair and legal effort has been made by the Treasury Department to distribute this currency among the people. The withdrawal of United States Treasury notes of small denominations and the issuing of small silver certificates have been resorted to in the endeavor to accomplish this result, in obedience to the will and sentiments of the representatives of the people in the Congress. On the 27th day of November, 1886, the people held of these coins, or certificates representing them, the nominal sum of $166,873,041, and we still had $79,464,345 in the Treasury as against about $142,894,055 so in the hands of the people and $72,865,376 remaining in the Treasury one year ago. The Director of the Mint again urges the necessity of more vault room for the purpose of storing these silver dollars which are not needed for circulation by the people.

I have seen no reason to change the views expressed in my last annual message on the subject of this compulsory coinage, and I again urge its suspension on all the grounds contained in my former recommendation, reenforced by the significant increase of our gold exportations during the last year, as appears by the comparative statement herewith presented, and for the further reasons that the more this currency is distributed among the people the greater becomes our duty to protect it from disaster, that we now have abundance for all our needs, and that there seems but little propriety in building vaults to store such currency when the only pretense for its coinage is the necessity of its use by the people as a circulating medium.

The great number of suits now pending in the United States courts for the southern district of New York growing out of the collection of customs revenue at the port of New York and the number of such suits that are almost daily instituted are certainly worthy the attention of the Congress. These legal controversies, based upon conflicting views by importers and the collector as to the interpretation of our present complex and indefinite revenue laws, might be largely obviated by an amendment of those laws.

But pending such amendment the present condition of this litigation should be relieved. There are now pending about 2,500 of these suits. More than 1,100 have been commenced within the past eighteen months, and many of the others have been at issue for more than twenty-five years. These delays subject the Government to loss of evidence and prevent the preparation necessary to defeat unjust and fictitious claims, while constantly accruing interest threatens to double the demands involved.

In the present condition of the dockets of the courts, well filled with private suits, and of the force allowed the district attorney, no greater than is necessary for the ordinary and current business of his office, these revenue litigations can not be considered.

In default of the adoption by the Congress of a plan for the general reorganization of the Federal courts, as has been heretofore recommended, I urge the propriety of passing a law permitting the appointment of an additional Federal judge in the district where these Government suits have accumulated, so that by continuous sessions of the courts devoted to the trial of these cases they may be determined.

It is entirely plain that a great saving to the Government would be accomplished by such a remedy, and the suitors who have honest claims would not be denied justice through delay.

The report of the Secretary of War gives a detailed account of the administration of his Department and contains sundry recommendations for the improvement of the service, which I fully approve.

The Army consisted at the date of the last consolidated return of 2,103 officers and 24,946 enlisted men.

The expenses of the Department for the last fiscal year were $36,990,903.38, including $6,294,305.43 for public works and river and harbor improvements.

I especially direct the attention of the Congress to the recommendation that officers be required to submit to an examination as a preliminary to their promotion. I see no objection, but many advantages, in adopting this feature, which has operated so beneficially in our Navy Department, as well as in some branches of the Army.

The subject of coast defenses and fortifications has been fully and carefully treated by the Board on Fortifications, whose report was submitted at the last session of Congress; but no construction work of the kind recommended by the board has been possible during the last year from the lack of appropriations for such purpose.

The defenseless condition of our seacoast and lake frontier is perfectly palpable. The examinations made must convince us all that certain of our cities named in the report of the board should be fortified and that work on the most important of these fortifications should be commenced at once. The work has been thoroughly considered and laid out, the Secretary of War reports, but all is delayed in default of Congressional action.

The absolute necessity, judged by all standards of prudence and foresight, of our preparation for an effectual resistance against the armored ships and steel guns and mortars of modern construction which may threaten the cities on our coasts is so apparent that I hope effective steps will be taken in that direction immediately.

The valuable and suggestive treatment of this question by the Secretary of War is earnestly commended to the consideration of the Congress.

In September and October last the hostile Apaches who, under the leadership of Geronimo, had for eighteen months been on the war path, and during that time had committed many murders and been the cause of constant terror to the settlers of Arizona, surrendered to General Miles, the military commander who succeeded General Crook in the management and direction of their pursuit.

Under the terms of their surrender as then reported, and in view of the understanding which these murderous savages seemed to entertain of the assurances given them, it was considered best to imprison them in such manner as to prevent their ever engaging in such outrages again, instead of trying them for murder. Fort Pickens having been selected as a safe place of confinement, all the adult males were sent thither and will be closely guarded as prisoners. In the meantime the residue of the band, who, though still remaining upon the reservation, were regarded as unsafe and suspected of furnishing aid to those on the war path, had been removed to Fort Marion. The women and larger children of the hostiles were also taken there, and arrangements have been made for putting the children of proper age in Indian schools.

The report of the Secretary of the Navy contains a detailed exhibit of the condition of his Department, with such a statement of the action needed to improve the same as should challenge the earnest attention of the Congress.

The present Navy of the United States, aside from the ships in course of construction, consists of--

First. Fourteen single-turreted monitors, none of which are in commission nor at the present time serviceable. The batteries of these ships are obsolete, and they can only be relied upon as auxiliary ships in harbor defense, and then after such an expenditure upon them as might not be deemed justifiable.

Second. Five fourth-rate vessels of small tonnage, only one of which was designed as a war vessel, and all of which are auxiliary merely.

Third. Twenty-seven cruising ships, three of which are built of iron, of small tonnage, and twenty-four of wood. Of these wooden vessels it is estimated by the Chief Constructor of the Navy that only three will be serviceable beyond a period of six years, at which time it may be said that of the present naval force nothing worthy the name will remain.

All the vessels heretofore authorized are under contract or in course of construction except the armored ships, the torpedo and dynamite boats, and one cruiser. As to the last of these, the bids were in excess of the limit fixed by Congress. The production in the United States of armor and gun steel is a question which it seems necessary to settle at an early day if the armored war vessels are to be completed with those materials of home manufacture. This has been the subject of investigation by two boards and by two special committees of Congress within the last three years. The report of the Gun Foundry Board in 1884, of the Board on Fortifications made in January last, and the reports of the select committees of the two Houses made at the last session of Congress have entirely exhausted the subject, so far as preliminary investigation is involved, and in their recommendations they are substantially agreed.

In the event that the present invitation of the Department for bids to furnish such of this material as is now authorized shall fail to induce domestic manufacturers to undertake the large expenditures required to prepare for this new manufacture, and no other steps are taken by Congress at its coming session, the Secretary contemplates with dissatisfaction the necessity of obtaining abroad the armor and the gun steel for the authorized ships. It would seem desirable that the wants of the Army and the Navy in this regard should be reasonably met, and that by uniting their contracts such inducement might be offered as would result in securing the domestication of these important interests.

The affairs of the postal service show marked and gratifying improvement during the past year. A particular account of its transactions and condition is given in the report of the Postmaster-General, which will be laid before you.

The reduction of the rate of letter postage in 1883, rendering the postal revenues inadequate to sustain the expenditures, and business depression also contributing, resulted in an excess of cost for the fiscal year ended June 30, 1885, of eight and one-third millions of dollars. An additional check upon receipts by doubling the measure of weight in rating sealed correspondence and diminishing one-half the charge for newspaper carriage was imposed by legislation which took effect with the beginning of the past fiscal year, while the constant demand of our territorial development and growing population for the extension and increase of mail facilities and machinery necessitates steady annual advance in outlay, and the careful estimate of a year ago upon the rates of expenditure then existing contemplated the unavoidable augmentation of the deficiency in the last fiscal year by nearly $2,000,000. The anticipated revenue for the last year failed of realization by about $64,000, but proper measures of economy have so satisfactorily limited the growth of expenditure that the total deficiency in fact fell below that of 1885, and at this time the increase of revenue is in a gaining ratio over the increase of cost, demonstrating the sufficiency of the present rates of postage ultimately to sustain the service. This is the more pleasing because our people enjoy now both cheaper postage proportionably to distances and a vaster and more costly service than any other upon the globe.

Retrenchment has been effected in the cost of supplies, some expenditures unwarranted by law have ceased, and the outlays for mail carriage have been subjected to beneficial scrutiny. At the close of the last fiscal year the expense of transportation on star routes stood at an annual rate of cost less by over $560,000 than at the close of the previous year and steamboat and mail-messenger service at nearly $200,000 less.

The service has been in the meantime enlarged and extended by the establishment of new offices, increase of routes of carriage, expansion of carrier-delivery conveniences, and additions to the railway mail facilities, in accordance with the growing exigencies of the country and the long-established policy of the Government.

The Postmaster-General calls attention to the existing law for compensating railroads and expresses the opinion that a method may be devised which will prove more just to the carriers and beneficial to the Government; and the subject appears worthy of your early consideration.

The differences which arose during the year with certain of the ocean steamship companies have terminated by the acquiescence of all in the policy of the Government approved by the Congress in the postal appropriation at its last session, and the Department now enjoys the utmost service afforded by all vessels which sail from our ports upon either ocean--a service generally adequate to the needs of our intercourse. Petitions have, however, been presented to the Department by numerous merchants and manufacturers for the establishment of a direct service to the Argentine Republic and for semimonthly dispatches to the Empire of Brazil, and the subject is commended to your consideration. It is an obvious duty to provide the means of postal communication which our commerce requires, and with prudent forecast of results the wise extension of it may lead to stimulating intercourse and become the harbinger of a profitable traffic which will open new avenues for the disposition of the products of our industry. The circumstances of the countries at the far south of our continent are such as to invite our enterprise and afford the promise of sufficient advantages to justify an unusual effort to bring about the closer relations which greater freedom of communication would tend to establish.

I suggest that, as distinguished from a grant or subsidy for the mere benefit of any line of trade or travel, whatever outlay may be required to secure additional postal service, necessary and proper and not otherwise attainable, should be regarded as within the limit of legitimate compensation for such service.

The extension of the free-delivery service as suggested by the Postmaster-General has heretofore received my sanction, and it is to be hoped a suitable enactment may soon be agreed upon.

The request for an appropriation sufficient to enable the general inspection of fourth-class offices has my approbation.

I renew my approval of the recommendation of the Postmaster-General that another assistant be provided for the Post-Office Department, and I invite your attention to the several other recommendations in his report.

The conduct of the Department of Justice for the last fiscal year is fully detailed in the report of the Attorney-General, and I invite the earnest attention of the Congress to the same and due consideration of the recommendations therein contained.

In the report submitted by this officer to the last session of the Congress he strongly recommended the erection of a penitentiary for the confinement of prisoners convicted and sentenced in the United States courts, and he repeats the recommendation in his report for the last year.

This is a matter of very great importance and should at once receive Congressional action. United States prisoners are now confined in more than thirty different State prisons and penitentiaries scattered in every part of the country. They are subjected to nearly as many different modes of treatment and discipline and are far too much removed from the control and regulation of the Government. So far as they are entitled to humane treatment and an opportunity for improvement and reformation, the Government is responsible to them and society that these things are forthcoming. But this duty can scarcely be discharged without more absolute control and direction than is possible under the present system.

Many of our good citizens have interested themselves, with the most beneficial results, in the question of prison reform. The General Government should be in a situation, since there must be United States prisoners, to furnish important aid in this movement, and should be able to illustrate what may be practically done in the direction of this reform and to present an example in the treatment and improvement of its prisoners worthy of imitation.

With prisons under its own control the Government could deal with the somewhat vexed question of convict labor, so far as its convicts were concerned, according to a plan of its own adoption, and with due regard to the rights and interests of our laboring citizens, instead of sometimes aiding in the operation of a system which causes among them irritation and discontent.

Upon consideration of this subject it might be thought wise to erect more than one of these institutions, located in such places as would best subserve the purposes of convenience and economy in transportation. The considerable cost of maintaining these convicts as at present, in State institutions, would be saved by the adoption of the plan proposed, and by employing them in the manufacture of such articles as were needed for use by the Government quite a large pecuniary benefit would be realized in partial return for our outlay.

I again urge a change in the Federal judicial system to meet the wants of the people and obviate the delays necessarily attending the present condition of affairs in our courts. All are agreed that something should be done, and much favor is shown by those well able to advise to the plan suggested by the Attorney-General at the last session of the Congress and recommended in my last annual message. This recommendation is here renewed, together with another made at the same time, touching a change in the manner of compensating district attorneys and marshals; and the latter subject is commended to the Congress for its action in the interest of economy to the Government, and humanity, fairness, and justice to our people.

The report of the Secretary of the Interior presents a comprehensive summary of the work of the various branches of the public service connected with his Department, and the suggestions and recommendations which it contains for the improvement of the service should receive your careful consideration.

The exhibit made of the condition of our Indian population and the progress of the work for their enlightenment, notwithstanding the many embarrassments which hinder the better administration of this important branch of the service, is a gratifying and hopeful one.

The funds appropriated for the Indian service for the fiscal year just passed, with the available income from Indian land and trust moneys, amounting in all to $7,850,775.12, were ample for the service under the conditions and restrictions of laws regulating their expenditure. There remained a balance on hand on June 30, 1886, of $1,660,023.30, of which $ 1,337,768.21 are permanent funds for fulfillment of treaties and other like purposes, and the remainder, $322,255.09, is subject to be carried to the surplus fund as required by law.

The estimates presented for appropriations for the ensuing fiscal year amount to $5,608,873.64, or $442,386.20 less than those laid before the Congress last year.

The present system of agencies, while absolutely necessary and well adapted for the management of our Indian affairs and for the ends in view when it was adopted, is in the present stage of Indian management inadequate, standing alone, for the accomplishment of an object which has become pressing in its importance--the more rapid transition from tribal organizations to citizenship of such portions of the Indians as are capable of civilized life.

When the existing system was adopted, the Indian race was outside of the limits of organized States and Territories and beyond the immediate reach and operation of civilization, and all efforts were mainly directed to the maintenance of friendly relations and the preservation of peace and quiet on the frontier. All this is now changed. There is no such thing as the Indian frontier. Civilization, with the busy hum of industry and the influences of Christianity, surrounds these people at every point. None of the tribes are outside of the bounds of organized government and society, except that the Territorial system has not been extended over that portion of the country known as the Indian Territory. As a race the Indians are no longer hostile, but may be considered as submissive to the control of the Government. Few of them only are troublesome. Except the fragments of several bands, all are now gathered upon reservations.

It is no longer possible for them to subsist by the chase and the spontaneous productions of the earth.

With an abundance of land, if furnished with the means and implements for profitable husbandry, their life of entire dependence upon Government rations from day to day is no longer defensible. Their inclination, long fostered by a defective system of control, is to cling to the habits and customs of their ancestors and struggle with persistence against the change of life which their altered circumstances press upon them. But barbarism and civilization can not live together. It is impossible that such incongruous conditions should coexist on the same soil.

They are a portion of our people, are under the authority of our Government, and have a peculiar claim upon and are entitled to the fostering care and protection of the nation. The Government can not relieve itself of this responsibility until they are so far trained and civilized as to be able wholly to manage and care for themselves. The paths in which they should walk must be clearly marked out for them, and they must be led or guided until they are familiar with the way and competent to assume the duties and responsibilities of our citizenship.

Progress in this great work will continue only at the present slow pace and at great expense unless the system and methods of management are improved to meet the changed conditions and urgent demands of the service.

The agents, having general charge and supervision in many cases of more than 5,000 Indians, scattered over large reservations, and burdened with the details of accountability for funds and supplies, have time to look after the industrial training and improvement of a few Indians only. The many are neglected and remain idle and dependent, conditions not favorable for progress and civilization.

The compensation allowed these agents and the conditions of the service are not calculated to secure for the work men who are fitted by ability and skill to properly plan and intelligently direct the methods best adapted to produce the most speedy results and permanent benefits.

Hence the necessity for a supplemental agency or system directed to the end of promoting the general and more rapid transition of the tribes from habits and customs of barbarism to the ways of civilization.

With an anxious desire to devise some plan of operation by which to secure the welfare of the Indians and to relieve the Treasury as far as possible from the support of an idle and dependent population, I recommended in my previous annual message the passage of a law authorizing the appointment of a commission as an instrumentality auxiliary to those already established for the care of the Indians. It was designed that this commission should be composed of six intelligent and capable persons--three to be detailed from the Army--having practical ideas upon the subject of the treatment of Indians and interested in their welfare, and that it should be charged, under the direction of the Secretary of the Interior, with the management of such matters of detail as can not with the present organization be properly and successfully conducted, and which present different phases, as the Indians themselves differ in their progress, needs, disposition, and capacity for improvement or immediate self-support.

By the aid of such a commission much unwise and useless expenditure of money, waste of materials, and unavailing efforts might be avoided; and it is hoped that this or some measure which the wisdom of Congress may better devise to supply the deficiency of the present system may receive your consideration and the appropriate legislation be provided.

The time is ripe for the work of such an agency.

There is less opposition to the education and training of the Indian youth, as shown by the increased attendance upon the schools, and there is a yielding tendency for the individual holding of lands. Development and advancement in these directions are essential, and should have every encouragement. As the rising generation are taught the language of civilization and trained in habits of industry they should assume the duties, privileges, and responsibilities of citizenship.

No obstacle should hinder the location and settlement of any Indian willing to take land in severalty; on the contrary, the inclination to do so should be stimulated at all times when proper and expedient. But there is no authority of law for making allotments on some of the reservations, and on others the allotments provided for are so small that the Indians, though ready and desiring to settle down, are not willing to accept such small areas when their reservations contain ample lands to afford them homesteads of sufficient size to meet their present and future needs.

These inequalities of existing special laws and treaties should be corrected and some general legislation on the subject should be provided, so that the more progressive members of the different tribes may be settled upon homesteads, and by their example lead others to follow, breaking away from tribal customs and substituting therefor the love of home, the interest of the family, and the rule of the state.

The Indian character and nature are such that they are not easily led while brooding over unadjusted wrongs. This is especially so regarding their lands. Matters arising from the construction and operation of railroads across some of the reservations, and claims of title and right of occupancy set up by white persons to some of the best land within other reservations require legislation for their final adjustment.

The settlement of these matters will remove many embarrassments to progress in the work of leading the Indians to the adoption of our institutions and bringing them under the operation, the influence, and the protection of the universal laws of our country.

The recommendations of the Secretary of the Interior and the Commissioner of the General Land Office looking to the better protection of public lands and of the public surveys, the preservation of national forests, the adjudication of grants to States and corporations and of private land claims, and the increased efficiency of the public-land service are commended to the attention of Congress. To secure the widest distribution of public lands in limited quantities among settlers for residence and cultivation, and thus make the greatest number of individual homes, was the primary object of the public-land legislation in the early days of the Republic. This system was a simple one. It commenced with an admirable scheme of public surveys, by which the humblest citizen could identify the tract upon which he wished to establish his home. The price of lands was placed within the reach of all the enterprising, industrious, and honest pioneer citizens of the country. It was soon, however, found that the object of the laws was perverted, under the system of cash sales, from a distribution of land among the people to an accumulation of land capital by wealthy and speculative persons. To check this tendency a preference right of purchase was given to settlers on the land, a plan which culminated in the general preemption act of 1841. The foundation of this system was actual residence and cultivation. Twenty years later the homestead law was devised to more surely place actual homes in the possession of actual cultivators of the soil. The land was given without price, the sole conditions being residence, improvement, and cultivation. Other laws have followed, each designed to encourage the acquirement and use of land in limited individual quantities. But in later years these laws, through vicious administrative methods and under changed conditions of communication and transportation, have been so evaded and violated that their beneficent purpose is threatened with entire defeat. The methods of such evasions and violations are set forth in detail in the reports of the Secretary of the Interior and Commissioner of the General Land Office. The rapid appropriation of our public lands without bona fide settlements or cultivation, and not only without intention of residence, but for the purpose of their aggregation in large holdings, in many cases in the hands of foreigners, invites the serious and immediate attention of the Congress.

The energies of the Land Department have been devoted during the present Administration to remedy defects and correct abuses in the public-land service. The results of these efforts are so largely in the nature of reforms in the processes and methods of our land system as to prevent adequate estimate; but it appears by a compilation from the reports of the Commissioner of the General Land Office that the immediate effect in leading cases which have come to a final termination has been the restoration to the mass of public lands of 2,750,000 acres; that 2,370,000 acres are embraced in investigations now pending before the Department or the courts, and that the action of Congress has been asked to effect the restoration of 2,790,000 acres additional; besides which 4,000,000 acres have been withheld from reservation and the rights of entry thereon maintained.

I recommend the repeal of the preemption and timber-culture acts, and that the homestead laws be so amended as to better secure compliance with their requirements of residence, improvement, and cultivation for the period of five years from date of entry, without commutation or provision for speculative relinquishment. I also recommend the repeal of the desert-land laws unless it shall be the pleasure of the Congress to so amend these laws as to render them less liable to abuses. As the chief motive for an evasion of the laws and the principal cause of their result in land accumulation instead of land distribution is the facility with which transfers are made of the right intended to be secured to settlers, it may be deemed advisable to provide by legislation some guards and checks upon the alienation of homestead rights and lands covered thereby until patents issue.

Last year an Executive proclamation was issued directing the removal of fences which inclosed the public domain. Many of these have been removed in obedience to such order, but much of the public land still remains within the lines of these unlawful fences. The ingenious methods resorted to in order to continue these trespasses and the hardihood of the pretenses by which in some cases such inclosures are justified are fully detailed in the report of the Secretary of the Interior.

The removal of the fences still remaining which inclose public lands will be enforced with all the authority and means with which the executive branch of the Government is or shall be invested by the Congress for that purpose.

The report of the Commissioner of Pensions contains a detailed and most satisfactory exhibit of the operations of the Pension Bureau during the last fiscal year. The amount of work done was the largest in any year since the organization of the Bureau, and it has been done at less cost than during the previous year in every division.

On the 30th day of June, 1886, there were 365,783 pensioners on the rolls of the Bureau.

Since 1861 there have been 1,018,735 applications for pensions filed, of which 78,834 were based upon service in the War of 1812. There were 621,754 of these applications allowed, including 60,178 to the soldiers of 1812 and their widows.

The total amount paid for pensions since 1861 is $808,624,811.57.

The number of new pensions allowed during the year ended June 30, 1886, is 40,857, a larger number than has been allowed in any year save one since 1861. The names of 2,229 pensioners which had been previously dropped from the rolls were restored during the year, and after deducting those dropped within the same time for various causes a net increase remains for the year of 20,658 names.

From January 1, 1861, to December 1, 1885, 1,967 private pension acts had been passed. Since the last-mentioned date, and during the last session of the Congress, 644 such acts became laws.

It seems to me that no one can examine our pension establishment and its operations without being convinced that through its instrumentality justice can be very nearly done to all who are entitled under present laws to the pension bounty of the Government.

But it is undeniable that cases exist, well entitled to relief, in which the Pension Bureau is powerless to aid. The really worthy cases of this class are such as only lack by misfortune the kind or quantity of proof which the law and regulations of the Bureau require, or which, though their merit is apparent, for some other reason can not be justly dealt with through general laws. These conditions fully justify application to the Congress and special enactments. But resort to the Congress for a special pension act to overrule the deliberate and careful determination of the Pension Bureau on the merits or to secure favorable action when it could not be expected under the most liberal execution of general laws, it must be admitted opens the door to the allowance of questionable claims and presents to the legislative and executive branches of the Government applications concededly not within the law and plainly devoid of merit, but so surrounded by sentiment and patriotic feeling that they are hard to resist. I suppose it will not be denied that many claims for pension are made without merit and that many have been allowed upon fraudulent representations. This has been declared from the Pension Bureau, not only in this but in prior Administrations.

The usefulness and the justice of any system for the distribution of pensions depend upon the equality and uniformity of its operation.

It will be seen from the report of the Commissioner that there are now paid by the Government 131 different rates of pension.

He estimates from the best information he can obtain that 9,000 of those who have served in the Army and Navy of the United States are now supported, in whole or in part, from public funds or by organized charities, exclusive of those in soldiers' homes under the direction and control of the Government. Only 13 per cent of these are pensioners, while of the entire number of men furnished for the late war something like 20 per cent, including their widows and relatives, have been or now are in receipt of pensions.

The American people, with a patriotic and grateful regard for our ex-soldiers, too broad and too sacred to be monopolized by any special advocates, are not only willing but anxious that equal and exact justice should be done to all honest claimants for pensions. In their sight the friendless and destitute soldier, dependent on public charity, if otherwise entitled, has precisely the same right to share in the provision made for those who fought their country's battles as those better able, through friends and influence, to push their claims. Every pension that is granted under our present plan upon any other grounds than actual service and injury or disease incurred in such service, and every instance of the many in which pensions are increased on other grounds than the merits of the claim, work an injustice to the brave and crippled, but poor and friendless, soldier, who is entirely neglected or who must be content with the smallest sum allowed under general laws.

There are far too many neighborhoods in which are found glaring cases of inequality of treatment in the matter of pensions, and they are largely due to a yielding in the Pension Bureau to importunity on the part of those, other than the pensioner, who are especially interested, or they arise from special acts passed for the benefit of individuals.

The men who fought side by side should stand side by side when they participate in a grateful nation's kind remembrance.

Every consideration of fairness and justice to our ex-soldiers and the protection of the patriotic instinct of our citizens from perversion and violation point to the adoption of a pension system broad and comprehensive enough to cover every contingency, and which shall make unnecessary an objectionable volume of special legislation.

As long as we adhere to the principle of granting pensions for service, and disability as the result of the service, the allowance of pensions should be restricted to cases presenting these features.

Every patriotic heart responds to a tender consideration for those who, having served their country long and well, are reduced to destitution and dependence, not as an incident of their service, but with advancing age or through sickness or misfortune. We are all tempted by the contemplation of such a condition to supply relief, and are often impatient of the limitations of public duty. Yielding to no one in the desire to indulge this feeling of consideration, I can not rid myself of the conviction that if these ex-soldiers are to be relieved they and their cause are entitled to the benefit of an enactment under which relief may be claimed as a right, and that such relief should be granted under the sanction of law, not in evasion of it; nor should such worthy objects of care, all equally entitled, be remitted to the unequal operation of sympathy or the tender mercies of social and political influence, with their unjust discriminations.

The discharged soldiers and sailors of the country are our fellow-citizens, and interested with us in the passage and faithful execution of wholesome laws. They can not be swerved from their duty of citizenship by artful appeals to their spirit of brotherhood born of common peril and suffering, nor will they exact as a test of devotion to their welfare a willingness to neglect public duty in their behalf.

On the 4th of March, 1885, the current business of the Patent Office was, on an average, five and a half months in arrears, and in several divisions more than twelve months behind. At the close of the last fiscal year such current work was but three months in arrears, and it is asserted and believed that in the next few months the delay in obtaining an examination of an application for a patent will be but nominal.

The number of applications for patents during the last fiscal year, including reissues, designs, trade-marks, and labels, equals 40,678, which is considerably in excess of the number received during any preceding year.

The receipts of the Patent Office during the year aggregate $1,205,167.80, enabling the office to turn into the Treasury a surplus revenue, over and above all expenditures, of about $163,710.30.

The number of patents granted during the last fiscal year, including reissues, trade-marks, designs, and labels, was 25,619, a number also quite largely in excess of that of any preceding year.

The report of the Commissioner shows the office to be in a prosperous condition and constantly increasing in its business. No increase of force is asked for.

The amount estimated for the fiscal year ending June 30, 1886, was $890,760. The amount estimated for the year ending June 30, 1887, was $853,960. The amount estimated for the fiscal year ending June 30, 1888, is $778,770.

The Secretary of the Interior suggests a change in the plan for the payment of the indebtedness of the Pacific subsidized roads to the Government. His suggestion has the unanimous indorsement of the persons selected by the Government to act as directors of these roads and protect the interests of the United States in the board of direction. In considering the plan proposed the sole matters which should be taken into account, in my opinion, are the situation of the Government as a creditor and the surest way to secure the payment of the principal and interest of its debt.

By a recent decision of the Supreme Court of the United States it has been adjudged that the laws of the several States are inoperative to regulate rates of transportation upon railroads if such regulation interferes with the rate of carriage from one State into another. This important field of control and regulation having been thus left entirely unoccupied, the expediency of Federal action upon the subject is worthy of consideration.

The relations of labor to capital and of laboring men to their employers are of the utmost concern to every patriotic citizen. When these are strained and distorted, unjustifiable claims are apt to be insisted upon by both interests, and in the controversy which results the welfare of all and the prosperity of the country are jeopardized. Any intervention of the General Government, within the limits of its constitutional authority, to avert such a condition should be willingly accorded.

In a special message transmitted to the Congress at its last session I suggested the enlargement of our present Labor Bureau and adding to its present functions the power of arbitration in cases where differences arise between employer and employed. When these differences reach such a stage as to result in the interruption of commerce between the States, the application of this remedy by the General Government might be regarded as entirely within its constitutional powers. And I think we might reasonably hope that such arbitrators, if carefully selected and if entitled to the confidence of the parties to be affected, would be voluntarily called to the settlement of controversies of less extent and not necessarily within the domain of Federal regulation.

I am of the opinion that this suggestion is worthy the attention of the Congress.

But after all has been done by the passage of laws, either Federal or State, to relieve a situation full of solicitude, much more remains to be accomplished by the reinstatement and cultivation of a true American sentiment which recognizes the equality of American citizenship. This, in the light of our traditions and in loyalty to the spirit of our institutions, would teach that a hearty cooperation on the part of all interests is the surest path to national greatness and the happiness of all our people; that capital should, in recognition of the brotherhood of our citizenship and in a spirit of American fairness, generously accord to labor its just compensation and consideration, and that contented labor is capital's best protection and faithful ally. It would teach, too, that the diverse situations of our people are inseparable from our civilization; that every citizen should in his sphere be a contributor to the general good; that capital does not necessarily tend to the oppression of labor, and that violent disturbances and disorders alienate from their promoters true American sympathy and kindly feeling.

The Department of Agriculture, representing the oldest and largest of our national industries, is subserving well the purposes of its organization. By the introduction of new subjects of farming enterprise and by opening new sources of agricultural wealth and the dissemination of early information concerning production and prices it has contributed largely to the country's prosperity. Through this agency advanced thought and investigation touching the subjects it has in charge should, among other things, be practically applied to the home production at a low cost of articles of food which are now imported from abroad. Such an innovation will necessarily, of course, in the beginning be within the domain of intelligent experiment, and the subject in every stage should receive all possible encouragement from the Government.

The interests of millions of our citizens engaged in agriculture are involved in an enlargement and improvement of the results of their labor, and a zealous regard for their welfare should be a willing tribute to those whose productive returns are a main source of our progress and power.

The existence of pleuro-pneumonia among the cattle of various States has led to burdensome and in some cases disastrous restrictions in an important branch of our commerce, threatening to affect the quantity and quality of our food supply. This is a matter of such importance and of such far-reaching consequences that I hope it will engage the serious attention of the Congress, to the end that such a remedy may be applied as the limits of a constitutional delegation of power to the General Government will permit.

I commend to the consideration of the Congress the report of the Commissioner and his suggestions concerning the interest intrusted to his care.

The continued operation of the law relating to our civil service has added the most convincing proofs of its necessity and usefulness. It is a fact worthy of note that every public officer who has a just idea of his duty to the people testifies to the value of this reform. Its staunchest, friends are found among those who understand it best, and its warmest supporters are those who are restrained and protected by its requirements.

The meaning of such restraint and protection is not appreciated by those who want places under the Government regardless of merit and efficiency, nor by those who insist that the selection of such places should rest upon a proper credential showing active partisan work. They mean to public officers, if not their lives, the only opportunity afforded them to attend to public business, and they mean to the good people of the country the better performance of the work of their Government.

It is exceedingly strange that the scope and nature of this reform are so little understood and that so many things not included within its plan are called by its name. When cavil yields more fully to examination, the system will have large additions to the number of its friends.

Our civil-service reform may be imperfect in some of its details; it may be misunderstood and opposed; it may not always be faithfully applied; its designs may sometimes miscarry through mistake or willful intent; it may sometimes tremble under the assaults of its enemies or languish under the misguided zeal of impracticable friends; but if the people of this country ever submit to the banishment of its underlying principle from the operation of their Government they will abandon the surest guaranty of the safety and success of American institutions.

I invoke for this reform the cheerful and ungrudging support of the Congress. I renew my recommendation made last year that the salaries of the Commissioners be made equal to other officers of the Government having like duties and responsibilities, and I hope that such reasonable appropriations may be made as will enable them to increase the usefulness of the cause they have in charge.

I desire to call the attention of the Congress to a plain duty which the Government owes to the depositors in the Freedman's Savings and Trust Company.

This company was chartered by the Congress for the benefit of the most illiterate and humble of our people, and with the intention of encouraging in them industry and thrift. Most of its branches were presided over by officers holding the commissions and clothed in the uniform of the United States. These and other circumstances reasonably, I think, led these simple people to suppose that the invitation to deposit their hard-earned savings in this institution implied an undertaking on the part of their Government that their money should be safely kept for them.

When this company failed, it was liable in the sum of $2,939,925.22 to 61,131 depositors. Dividends amounting in the aggregate to 62 per cent have been declared, and the sum called for and paid of such dividends seems to be $1,648,181.72. This sum deducted from the entire amount of deposits leaves $1,291,744.50 still unpaid. Past experience has shown that quite a large part of this sum will not be called for. There are assets still on hand amounting to the estimated sum of $16,000.

I think the remaining 38 per cent of such of these deposits as have claimants should be paid by the Government, upon principles of equity and fairness.

The report of the commissioner, soon to be laid before Congress, will give more satisfactory details on this subject.

The control of the affairs of the District of Columbia having been placed in the hands of purely executive officers, while the Congress still retains all legislative authority relating to its government, it becomes my duty to make known the most pressing needs of the District and recommend their consideration.

The laws of the District appear to be in an uncertain and unsatisfactory condition, and their codification or revision is much needed.

During the past year one of the bridges leading from the District to the State of Virginia became unfit for use, and travel upon it was forbidden. This leads me to suggest that the improvement of all the bridges crossing the Potomac and its branches from the city of Washington is worthy the attention of Congress.

The Commissioners of the District represent that the laws regulating the sale of liquor and granting licenses therefor should be at once amended, and that legislation is needed to consolidate, define, and enlarge the scope and powers of charitable and penal institutions within the District.

I suggest that the Commissioners be clothed with the power to make, within fixed limitations, police regulations. I believe this power granted and carefully guarded would tend to subserve the good order of the municipality.

It seems that trouble still exists growing out of the occupation of the streets and avenues by certain railroads having their termini in the city. It is very important that such laws should be enacted upon this subject as will secure to the railroads all the facilities they require for the transaction of their business and at the same time protect citizens from injury to their persons or property.

The Commissioners again complain that the accommodations afforded them for the necessary offices for District business and for the safe-keeping of valuable books and papers are entirely insufficient. I recommend that this condition of affairs be remedied by the Congress, and that suitable quarters be furnished for the needs of the District government.

In conclusion I earnestly invoke such wise action on the part of the people's legislators as will subserve the public good and demonstrate during the remaining days of the Congress as at present organized its ability and inclination to so meet the people's needs that it shall be gratefully remembered by an expectant constituency.

***

It has been suggested that the present bonded debt might be refunded at a less rate of interest and the difference between the old and new security paid in cash, thus finding use for the surplus in the Treasury. The success of this plan, it is apparent, must depend upon the volition of the holders of the present bonds; and it is not entirely certain that the inducement which must be offered them would result in more financial benefit to the Government than the purchase of bonds, while the latter proposition would reduce the principal of the debt by actual payment instead of extending it.

The proposition to deposit the money held by the Government in banks throughout the country for use by the people is, it seems to me, exceedingly objectionable in principle, as establishing too close a relationship between the operations of the Government Treasury and the business of the country and too extensive a commingling of their money, thus fostering an unnatural reliance in private business upon public funds. If this scheme should be adopted, it should only be done as a temporary expedient to meet an urgent necessity. Legislative and executive effort should generally be in the opposite direction, and should have a tendency to divorce, as much and as fast as can be safely done, the Treasury Department from private enterprise.

Of course it is not expected that unnecessary and extravagant appropriations will be made for the purpose of avoiding the accumulation of an excess of revenue. Such expenditure, besides the demoralization of all just conceptions of public duty which it entails, stimulates a habit of reckless improvidence not in the least consistent with the mission of our people or the high and beneficent purposes of our Government.

I have deemed it my duty to thus bring to the knowledge of my countrymen, as well as to the attention of their representatives charged with the responsibility of legislative relief, the gravity of our financial situation. The failure of the Congress heretofore to provide against the dangers which it was quite evident the very nature of the difficulty must necessarily produce caused a condition of financial distress and apprehension since your last adjournment which taxed to the utmost all the authority and expedients within executive control; and these appear now to be exhausted. If disaster results from the continued inaction of Congress, the responsibility must rest where it belongs.

Though the situation thus far considered is fraught with danger which should be fully realized, and though it presents features of wrong to the people as well as peril to the country, it is but a result growing out of a perfectly palpable and apparent cause, constantly reproducing the same alarming circumstances--a congested National Treasury and a depleted monetary condition in the business of the country. It need hardly be stated that while the present situation demands a remedy, we can only be saved from a like predicament in the future by the removal of its cause.

Our scheme of taxation, by means of which this needless surplus is taken from the people and put into the public Treasury, consists of a tariff or duty levied upon importations from abroad and internal-revenue taxes levied upon the consumption of tobacco and spirituous and malt liquors. It must be conceded that none of the things subjected to internal-revenue taxation are, strictly speaking, necessaries. There appears to be no just complaint of this taxation by the consumers of these articles, and there seems to be nothing so well able to bear the burden without hardship to any portion of the people.

But our present tariff laws, the vicious, inequitable, and illogical source of unnecessary taxation, ought to be at once revised and amended. These laws, as their primary and plain effect, raise the price to consumers of all articles imported and subject to duty by precisely the sum paid for such duties. Thus the amount of the duty measures the tax paid by those who purchase for use these imported articles. Many of these things, however, are raised or manufactured in our own country, and the duties now levied upon foreign goods and products are called protection to these home manufactures, because they render it possible for those of our people who are manufacturers to make these taxed articles and sell them for a price equal to that demanded for the imported goods that have paid customs duty. So it happens that while comparatively a few use the imported articles, millions of our people, who never used and never saw any of the foreign products, purchase and use things of the same kind made in this country, and pay therefor nearly or quite the same enhanced price which the duty adds to the imported articles. Those who buy imports pay the duty charged thereon into the public Treasury, but the great majority of our citizens, who buy domestic articles of the same class, pay a sum at least approximately equal to this duty to the home manufacturer. This reference to the operation of our tariff laws is not made by way of instruction, but in order that we may be constantly reminded of the manner in which they impose a burden upon those who consume domestic products as well as those who consume imported articles, and thus create a tax upon all our people.

It is not proposed to entirely relieve the country of this taxation. It must be extensively continued as the source of the Government's income; and in a readjustment of our tariff the interests of American labor engaged in manufacture should be carefully considered, as well as the preservation of our manufacturers. It may be called protection or by any other name, but relief from the hardships and dangers of our present tariff laws should be devised with especial precaution against imperiling the existence of our manufacturing interests. But this existence should not mean a condition which, without regard to the public welfare or a national exigency, must always insure the realization of immense profits instead of moderately profitable returns. As the volume and diversity of our national activities increase, new recruits are added to those who desire a continuation of the advantages which they conceive the present system of tariff taxation directly affords them. So stubbornly have all efforts to reform the present condition been resisted by those of our fellow-citizens thus engaged that they can hardly complain of the suspicion, entertained to a certain extent, that there exists an organized combination all along the line to maintain their advantage.

We are in the midst of centennial celebrations, and with becoming pride we rejoice in American skill and ingenuity, in American energy and enterprise, and in the wonderful natural advantages and resources developed by a century's national growth. Yet when an attempt is made to justify a scheme which permits a tax to be laid upon every consumer in the land for the benefit of our manufacturers, quite beyond a reasonable demand for governmental regard, it suits the purposes of advocacy to call our manufactures infant industries still needing the highest and greatest degree of favor and fostering care that can be wrung from Federal legislation.

It is also said that the increase in the price of domestic manufactures resulting from the present tariff is necessary in order that higher wages may be paid to our workingmen employed in manufactories than are paid for what is called the pauper labor of Europe. All will acknowledge the force of an argument which involves the welfare and liberal compensation of our laboring people. Our labor is honorable in the eyes of every American citizen; and as it lies at the foundation of our development and progress, it is entitled, without affectation or hypocrisy, to the utmost regard. The standard of our laborers' life should not be measured by that of any other country less favored, and they are entitled to their full share of all our advantages.

By the last census it is made to appear that of the 17,392,099 of our population engaged in all kinds of industries 7,670,493 are employed in agriculture, 4,074,238 in professional and personal service (2,934,876 of whom are domestic servants and laborers), while 1,810,256 are employed in trade and transportation and 3,837,112 are classed as employed in manufacturing and mining.

For present purposes, however, the last number given should be considerably reduced. Without attempting to enumerate all, it will be conceded that there should be deducted from those which it includes 375,143 carpenters and joiners, 285,401 milliners, dressmakers, and seamstresses, 172,726 blacksmiths, 133,756 tailors and tailoresses, 102,473 masons, 76,241 butchers, 41,309 bakers, 22,083 plasterers, and 4,891 engaged in manufacturing agricultural implements, amounting in the aggregate to 1,214,023, leaving 2,623,089 persons employed in such manufacturing industries as are claimed to be benefited by a high tariff.

To these the appeal is made to save their employment and maintain their wages by resisting a change. There should be no disposition to answer such suggestions by the allegation that they are in a minority among those who labor, and therefore should forego an advantage in the interest of low prices for the majority. Their compensation, as it may be affected by the operation of tariff laws, should at all times be scrupulously kept in view; and yet with slight reflection they will not overlook the fact that they are consumers with the rest; that they too have their own wants and those of their families to supply from their earnings, and that the price of the necessaries of life, as well as the amount of their wages, will regulate the measure of their welfare and comfort.

But the reduction of taxation demanded should be so measured as not to necessitate or justify either the loss of employment by the workingman or the lessening of his wages; and the profits still remaining to the manufacturer after a necessary readjustment should furnish no excuse for the sacrifice of the interests of his employees, either in their opportunity to work or in the diminution of their compensation. Nor can the worker in manufactures fail to understand that while a high tariff is claimed to be necessary to allow the payment of remunerative wages, it certainly results in a very large increase in the price of nearly all sorts of manufactures, which, in almost countless forms, he needs for the use of himself and his family. He receives at the desk of his employer his wages, and perhaps before he reaches his home is obliged, in a purchase for family use of an article which embraces his own labor, to return in the payment of the increase in price which the tariff permits the hard-earned compensation of many days of toil.

The farmer and the agriculturist, who manufacture nothing, but who pay the increased price which the tariff imposes upon every agricultural implement, upon all he wears, and upon all he uses and owns, except the increase of his flocks and herds and such things as his husbandry produces from the soil, is invited to aid in maintaining the present situation; and he is told that a high duty on imported wool is necessary for the benefit of those who have sheep to shear, in order that the price of their wool may be increased. They, of course, are not reminded that the farmer who has no sheep is by this scheme obliged, in his purchases of clothing and woolen goods, to pay a tribute to his fellow-farmer as well as to the manufacturer and merchant, nor is any mention made of the fact that the sheep owners themselves and their households must wear clothing and use other articles manufactured from the wool they sell at tariff prices, and thus as consumers must return their share of this increased price to the tradesman.

I think it may be fairly assumed that a large proportion of the sheep owned by the farmers throughout the country are found in small flocks, numbering from twenty-five to fifty. The duty on the grade of imported wool which these sheep yield is 10 cents each pound if of the value of 30 cents or less and 12 cents if of the value of more than 30 cents. If the liberal estimate of 6 pounds be allowed for each fleece, the duty thereon would be 60 or 72 cents; and this may be taken as the utmost enhancement of its price to the farmer by reason of this duty. Eighteen dollars would thus represent the increased price of the wool from twenty-five sheep and $36 that from the wool of fifty sheep; and at present values this addition would amount to about one-third of its price. If upon its sale the farmer receives this or a less tariff profit, the wool leaves his hands charged with precisely that sum, which in all its changes will adhere to it until it reaches the consumer. When manufactured into cloth and other goods and material for use, its cost is not only increased to the extent of the farmer's tariff profit, but a further sum has been added for the benefit of the manufacturer under the operation of other tariff laws. In the meantime the day arrives when the farmer finds it necessary to purchase woolen goods and material to clothe himself and family for the winter. When he faces the tradesman for that purpose, he discovers that he is obliged not only to return in the way of increased prices his tariff profit on the wool he sold, and which then perhaps lies before him in manufactured form, but that he must add a considerable sum thereto to meet a further increase in cost caused by a tariff duty on the manufacture. Thus in the end he is aroused to the fact that he has paid upon a moderate purchase, as a result of the tariff scheme, which when he sold his wool seemed so profitable, an increase in price more than sufficient to sweep away all the tariff profit he received upon the wool he produced and sold.

When the number of farmers engaged in wool raising is compared with all the farmers in the country and the small proportion they bear to our population is considered; when it is made apparent that in the case of a large part of those who own sheep the benefit of the present tariff on wool is illusory; and, above all, when it must be conceded that the increase of the cost of living caused by such tariff becomes a burden upon those with moderate means and the poor, the employed and unemployed, the sick and well, and the young and old, and that it constitutes a tax which with relentless grasp is fastened upon the clothing of every man, woman, and child in the land, reasons are suggested why the removal or reduction of this duty should be included in a revision of our tariff laws.

In speaking of the increased cost to the consumer of our home manufactures resulting from a duty laid upon imported articles of the same description, the fact is not ever looked that competition among our domestic producers sometimes has the effect of keeping the price of their products below the highest limit allowed by such duty. But it is notorious that this competition is too often strangled by combinations quite prevalent at this time, and frequently called trusts, which have for their object the regulation of the supply and price of commodities made and sold by members of the combination. The people can hardly hope for any consideration in the operation of these selfish schemes.

If, however, in the absence of such combination, a healthy and free competition reduces the price of any particular dutiable article of home production below the limit which it might otherwise reach under our tariff laws, and if with such reduced price its manufacture continues to thrive, it is entirely evident that one thing has been discovered which should be carefully scrutinized in an effort to reduce taxation.

The necessity of combination to maintain the price of any commodity to the tariff point furnishes proof that someone is willing to accept lower prices for such commodity and that such prices are remunerative; and lower prices produced by competition prove the same thing. Thus where either of these conditions exists a case would seem to be presented for an easy reduction of taxation.

The considerations which have been presented touching our tariff laws are intended only to enforce an earnest recommendation that the surplus revenues of the Government be prevented by the reduction of our customs duties, and at the same time to emphasize a suggestion that in accomplishing this purpose we may discharge a double duty to our people by granting to them a measure of relief from tariff taxation in quarters where it is most needed and from sources where it can be most fairly and justly accorded.

Nor can the presentation made of such considerations be with any degree of fairness regarded as evidence of unfriendliness toward our manufacturing interests or of any lack of appreciation of their value and importance.

These interests constitute a leading and most substantial element of our national greatness and furnish the proud proof of our country's progress. But if in the emergency that presses upon us our manufacturers are asked to surrender something for the public good and to avert disaster, their patriotism, as well as a grateful recognition of advantages already afforded, should lead them to willing cooperation. No demand is made that they shall forego all the benefits of governmental regard; but they can not fail to be admonished of their duty, as well as their enlightened self-interest and safety, when they are reminded of the fact that financial panic and collapse, to which the present condition tends, afford no greater shelter or protection to our manufactures than to other important enterprises. Opportunity for safe, careful, and deliberate reform is now offered; and none of us should be unmindful of a time when an abused and irritated people, heedless of those who have resisted timely and reasonable relief, may insist upon a radical and sweeping rectification of their wrongs.

The difficulty attending a wise and fair revision of our tariff laws is not underestimated. It will require on the part of the Congress great labor and care, and especially a broad and national contemplation of the subject and a patriotic disregard of such local and selfish claims as are unreasonable and reckless of the welfare of the entire country.

Under our present laws more than 4,000 articles are subject to duty. Many of these do not in any way compete with our own manufactures, and many are hardly worth attention as subjects of revenue. A considerable reduction can be made in the aggregate by adding them to the free list. The taxation of luxuries presents no features of hardship; but the necessaries of life used and consumed by all the people, the duty upon which adds to the cost of living in every home, should be greatly cheapened.

The radical reduction of the duties imposed upon raw material used in manufactures, or its free importation, is of course an important factor in any effort to reduce the price of these necessaries. It would not only relieve them from the increased cost caused by the tariff on such material, but the manufactured product being thus cheapened that part of the tariff now laid upon such product, as a compensation to our manufacturers for the present price of raw material, could be accordingly modified. Such reduction or free importation would serve besides to largely reduce the revenue. It is not apparent how such a change can have any injurious effect upon our manufacturers. On the contrary, it would appear to give them a better chance in foreign markets with the manufacturers of other countries, who cheapen their wares by free material. Thus our people might have the opportunity of extending their sales beyond the limits of home consumption, saving them from the depression, interruption in business, and loss caused by a glutted domestic market and affording their employees more certain and steady labor, with its resulting quiet and contentment.

The question thus imperatively presented for solution should be approached in a spirit higher than partisanship and considered in the light of that regard for patriotic duty which should characterize the action of those intrusted with the weal of a confiding people. But the obligation to declared party policy and principle is not wanting to urge prompt and effective action. Both of the great political parties now represented in the Government have by repeated and authoritative declarations condemned the condition of our laws which permit the collection from the people of unnecessary revenue, and have in the most solemn manner promised its correction; and neither as citizens nor partisans are our countrymen in a mood to condone the deliberate violation of these pledges.

Our progress toward a wise conclusion will not be improved by dwelling upon the theories of protection and free trade. This savors too much of bandying epithets. It is a condition which confronts us, not a theory. Relief from this condition may involve a slight reduction of the advantages which we award our home productions, but the entire withdrawal of such advantages should not be contemplated. The question of free trade is absolutely irrelevant, and the persistent claim made in certain quarters that all the efforts to relieve the people from unjust and unnecessary taxation are schemes of so-called free traders is mischievous and far removed from any consideration for the public good.

The simple and plain duty which we owe the people is to reduce taxation to the necessary expenses of an economical operation of the Government and to restore to the business of the country the money which we hold in the Treasury through the perversion of governmental powers. These things can and should be done with safety to all our industries, without danger to the opportunity for remunerative labor which our workingmen need, and with benefit to them and all our people by cheapening their means of subsistence and increasing the measure of their comforts.

The Constitution provides that the President "shall from time to time give to the Congress information of the state of the Union." It has been the custom of the Executive, in compliance with this provision, to annually exhibit to the Congress, at the opening of its session, the general condition of the country, and to detail with some particularity the operations of the different Executive Departments. It would be especially agreeable to follow this course at the present time and to call attention to the valuable accomplishments of these Departments during the last fiscal year; but I am so much impressed with the paramount importance of the subject to which this communication has thus far been devoted that I shall forego the addition of any other topic, and only urge upon your immediate consideration the "state of the Union" as shown in the present condition of our Treasury and our general fiscal situation, upon which every element of our safety and prosperity depends.

The reports of the heads of Departments, which will be submitted, contain full and explicit information touching the transaction of the business intrusted to them and such recommendations relating to legislation in the public interest as they deem advisable. I ask for these reports and recommendations the deliberate examination and action of the legislative branch of the Government.

There are other subjects not embraced in the departmental reports demanding legislative consideration, and which I should be glad to submit. Some of them, however, have been earnestly presented in previous messages, and as to them I beg leave to repeat prior recommendations.

As the law makes no provision for any report from the Department of State, a brief history of the transactions of that important Department, together with other matters which it may hereafter be deemed essential to commend to the attention of the Congress, may furnish the occasion for a future communication.

***

Last summer some charitable and kind people asked permission to send two teachers to these Indians for the purpose of instructing the adults as well as such children as should be found there. Such permission was readily granted, accommodations were provided for the teachers, and some portions of the buildings at the barracks were made available for school purposes. The good work contemplated has been commenced, and the teachers engaged are paid by the ladies with whom the plan originated.

I am not at all in sympathy with those benevolent but injudicious people who are constantly insisting that these Indians should be returned to their reservation. Their removal was an absolute necessity if the lives and property of citizens upon the frontier are to be at all regarded by the Government. Their continued restraint at a distance from the scene of their repeated and cruel murders and outrages is still necessary. It is a mistaken philanthropy, every way injurious, which prompts the desire to see these savages returned to their old haunts. They are in their present location as the result of the best judgment of those having official responsibility in the matter, and who are by no means lacking in kind consideration for the Indians. A number of these prisoners have forfeited their lives to outraged law and humanity. Experience has proved that they are dangerous and can not be trusted. This is true not only of those who on the warpath have heretofore actually been guilty of atrocious murder, but of their kindred and friends, who, while they remained upon their reservation, furnished aid and comfort to those absent with bloody intent.

These prisoners should be treated kindly and kept in restraint far from the locality of their former reservation; they should be subjected to efforts calculated to lead to their improvement and the softening of their savage and cruel instincts, but their return to their old home should be persistently resisted.

The Secretary in his report gives a graphic history of these Indians, and recites with painful vividness their bloody deeds and the unhappy failure of the Government to manage them by peaceful means. It will be amazing if a perusal of this history will allow the survival of a desire for the return of these prisoners to their reservation upon sentimental or any other grounds.

The report of the Secretary of the Navy demonstrates very intelligent management in that important Department, and discloses the most satisfactory progress in the work of reconstructing the Navy made during the past year. Of the ships in course of construction five, viz, the Charleston, Baltimore, Yorktown, Vesuvius, and the Petrel, have in that time been launched and are rapidly approaching completion; and in addition to the above, the Philadelphia, the San Francisco, the Newark, the Bennington, the Concord, and the Herreshoff torpedo boat are all under contract for delivery to the Department during the next year. The progress already made and being made gives good ground for the expectation that these eleven vessels will be incorporated as part of the American Navy within the next twelve months.

The report shows that notwithstanding the large expenditures for new construction and the additional labor they involve the total ordinary or current expenditures of the Department for the three years ending June 30, 1888, are less by more than 20 per cent than such expenditures for the three years ending June 30, 1884.

The various steps which have been taken to improve the business methods of the Department are reviewed by the Secretary. The purchasing of supplies has been consolidated and placed under a responsible bureau head. This has resulted in the curtailment of open purchases, which in the years 1884 and 1885 amounted to over 50 per cent of all the purchases of the Department, to less than 11 per cent; so that at the present time about 90 per cent of the total departmental purchases are made by contract and after competition. As the expenditures on this account exceed an average of $2,000,000 annually, it is evident that an important improvement in the system has been inaugurated and substantial economies introduced.

The report of the Postmaster-General shows a marked increase of business in every branch of the postal service.

The number of post-offices on July 1, 1888, was 57,376, an increase of 6,124 in three years and of 2,219 for the last fiscal year. The latter-mentioned increase is classified as follows:

New England States -

Middle States - 181

Southern States and Indian Territory (41) - 1,406

The States and Territories of the Pacific Coast - 190

The ten States and Territories of the West and Northwest - 435

District of Columbia - 2

***

It seems to me to be entirely inconsistent with the character of this reform, as well as with its best enforcement, to oblige the Commission to rely for clerical assistance upon clerks detailed from other Departments. There ought not to be such a condition in any Department that clerks hired to do work there can be spared to habitually work at another place, and it does not accord with a sensible view of civil-service reform that persons should be employed on the theory that their labor is necessary in one Department when in point of fact their services are devoted to entirely different work in another Department.

I earnestly urge that the clerks necessary to carry on the work of the Commission be regularly put upon its roster and that the system of obliging the Commissioners to rely upon the services of clerks belonging to other Departments be discontinued. This ought not to increase the expense to the Government, while it would certainly be more consistent and add greatly to the efficiency of the Commission.

Economy in public expenditure is a duty that can not innocently be neglected by those intrusted with the control of money drawn from the people for public uses. It must be confessed that our apparently endless resources, the familiarity of our people with immense accumulations of wealth, the growing sentiment among them that the expenditure of public money should in some manner be to their immediate and personal advantage, the indirect and almost stealthy manner in which a large part of our taxes is exacted, and a degenerated sense of official accountability have led to growing extravagance in governmental appropriations.

At this time, when a depleted public Treasury confronts us, when many of our people are engaged in a hard struggle for the necessaries of life, and when enforced economy is pressing upon the great mass of our countrymen, I desire to urge with all the earnestness at my command that Congressional legislation be so limited by strict economy as to exhibit an appreciation of the condition of the Treasury and a sympathy with the straitened circumstances of our fellow-citizens.

The duty of public economy is also of immense importance in its intimate and necessary relation to the task now in hand of providing revenue to meet Government expenditures and yet reducing the people's burden of Federal taxation.

After a hard struggle tariff reform is directly before us. Nothing so important claims our attention and nothing so clearly presents itself as both an opportunity and a duty--an opportunity to deserve the gratitude of our fellow-citizens and a duty imposed upon us by our oft-repeated professions and by the emphatic mandate of the people. After full discussion our countrymen have spoken in favor of this reform, and they have confided the work of its accomplishment to the hands of those who are solemnly pledged to it.

If there is anything in the theory of a representation in public places of the people and their desires, if public officers are really the servants of the people, and if political promises and professions have any binding force, our failure to give the relief so long awaited will be sheer recreancy. Nothing should intervene to distract our attention or disturb our effort until this reform is accomplished by wise and careful legislation.

While we should stanchly adhere to the principle that only the necessity of revenue justifies the imposition of tariff duties and other Federal taxation and that they should be limited by strict economy, we can not close our eyes to the fact that conditions have grown up among us which in justice and fairness call for discriminating care in the distribution of such duties and taxation as the emergencies of our Government actually demand.

Manifestly if we are to aid the people directly through tariff reform, one of its most obvious features should be a reduction in present tariff charges upon the necessaries of life. The benefits of such a reduction would be palpable and substantial, seen and felt by thousands who would be better fed and better clothed and better sheltered. These gifts should be the willing benefactions of a Government whose highest function is the promotion of the welfare of the people.

Not less closely related to our people's prosperity and well-being is the removal of restrictions upon the importation of the raw materials necessary to our manufactures. The world should be open to our national ingenuity and enterprise. This can not be while Federal legislation through the imposition of high tariff forbids to American manufacturers as cheap materials as those used by their competitors. It is quite obvious that the .enhancement of the price of our manufactured products resulting from this policy not only confines the market for these products within our own borders, to the direct disadvantage of our manufacturers, but also increases their cost to our citizens.

The interests of labor are certainly, though indirectly, involved in this feature of our tariff system. The sharp competition and active struggle among our manufacturers to supply the limited demand for their goods soon fill the narrow market to which they are confined. Then follows a suspension of work in mills and factories, a discharge of employees, and distress in the homes of our workingmen.

Even if the often-disproved assertion could be made good that a lower rate of wages would result from free raw materials and low tariff duties, the intelligence of our workmen leads them quickly to discover that their steady employment, permitted by free raw materials, is the most important factor in their relation to tariff legislation.

A measure has been prepared by the appropriate Congressional committee embodying tariff reform on the lines herein suggested, which will be promptly submitted for legislative action. It is the result of much patriotic and unselfish work, and I believe it deals with its subject consistently and as thoroughly as existing conditions permit.

I am satisfied that the reduced tariff duties provided for in the proposed legislation, added to existing internal-revenue taxation, will in the near future, though perhaps not immediately, produce sufficient revenue to meet the needs of the Government.

The committee, after full consideration and to provide against a temporary deficiency which may exist before the business of the country adjusts itself to the new tariff schedules, have wisely embraced in their plan a few additional internal-revenue taxes, including a small tax upon incomes derived from certain corporate investments.

These new adjustments are not only absolutely just and easily borne, but they have the further merit of being such as can be remitted without unfavorable business disturbance whenever the necessity of their imposition no longer exists.

In my great desire for the success of this measure I can not restrain the suggestion that its success can only be attained by means of unselfish counsel on the part of the friends of tariff reform and as a result of their willingness to subordinate personal desires and ambitions to the general good. The local interests affected by the proposed reform are so numerous and so varied that if all are insisted upon the legislation embodying the reform must inevitably fail.

In conclusion my intense feeling of responsibility impels me to invoke for the manifold interests of a generous and confiding people the most scrupulous care and to pledge my willing support to every legislative effort for the advancement of the greatness and prosperity of our beloved country.

GROVER CLEVELAND

***

The Commissioner of Pensions is of the opinion that the year 1895, being the thirtieth after the close of the War of the Rebellion, must, according to all sensible human calculation, see the highest limit of the pension roll, and that after that year it must begin to decline.

The claims pending in the Bureau have decreased more than 90,000 during the year. A large proportion of the new claims filed are for increase of pension by those now on the rolls.

The number of certificates issued was 80,213.

The names dropped from the rolls for all causes during the year numbered 37,951.

Among our pensioners are 9 widows and 3 daughters of soldiers of the Revolution and 45 survivors of the War of 1812.

The barefaced and extensive pension frauds exposed under the direction of the courageous and generous veteran soldier now at the head of the Bureau leave no room for the claim that no purgation of our pension rolls was needed or that continued vigilance and prompt action are not necessary to the same end.

The accusation that an effort to detect pension frauds is evidence of unfriendliness toward our worthy veterans and a denial of their claims to the generosity of the Government suggests an unfortunate indifference to the commission of any offense which has for its motive the securing of a pension and indicates a willingness to be blind to the existence of mean and treacherous crimes which play upon demagogic fears and make sport of the patriotic impulse of a grateful people.

The completion of the Eleventh Census is now in charge of the Commissioner of Labor. The total disbursements on account of the work for the fiscal year ending June 30, 1894, amounted to $10,365,676.81. At the close of the year the number of persons employed in the Census Office was 679; at present there are about 400. The whole number of volumes necessary to comprehend the Eleventh Census will be 25, and they will contain 22,270 printed pages. The assurance is confidently made that before the close of the present calendar year the material still incomplete will be practically in hand, and the census can certainly be closed by the 4th of March, 1895. After that the revision and proof reading necessary to bring out the volumes will still be required.

The text of the census volumes has been limited as far as possible to the analysis of the statistics presented. This method, which is in accordance with law, has caused more or less friction and in some instances individual disappointment, for when the Commissioner of Labor took charge of the work he found much matter on hand which according to this rule he was compelled to discard. The census is being prepared according to the theory that it is designed to collect facts and certify them to the public, not to elaborate arguments or to present personal views.

The Secretary of Agriculture in his report reviews the operations of his Department for the last fiscal year and makes recommendations for the further extension of its usefulness. He reports a saving in expenditures during the year of $600,000, which is covered back into the Treasury. This sum is 23 per cent of the entire appropriation.

A special study has been made of the demand for American farm products in all foreign markets, especially Great Britain, That country received from the United States during the nine months ending September 30, 1894, 305,910 live beef cattle, valued at $26,500,000, as against 182,611 cattle, valued at $16,634,000, during the same period for 1893.

During the first six months of 1894 the United Kingdom took also 112,000,000 pounds of dressed beef from the United States, valued at nearly $10,000,000.

The report shows that during the nine months immediately preceding September 30, 1894, the United States exported to Great Britain 222,676,000 pounds of pork; of apples, 1,900,000 bushels, valued at $2,500,000, and of horses 2,811, at an average value of $139 per head. There was a falling off in American wheat exports of 13,500,000 bushels, and the Secretary is inclined to believe that wheat may not in the future be the staple export cereal product of our country, but that corn will continue to advance in importance as an export on account of the new uses to which it is constantly being appropriated.

The exports of agricultural products from the United States for the fiscal year ending June 30, 1894, amounted to $628,363,038, being 72.28 per cent of American exports of every description, and the United Kingdom of Great Britain took more than 54 per cent of all farm products finding foreign markets.

The Department of Agriculture has undertaken during the year two new and important lines of research. The first relates to grasses and forage plants, with the purpose of instructing and familiarizing the people as to the distinctive grasses of the United States and teaching them how to introduce valuable foreign forage plants which may be adapted to this country. The second relates to agricultural soils and crop production, involving the analyses of samples of soils from all sections of the American Union, to demonstrate their adaptability to particular plants and crops. Mechanical analyses of soils may be of such inestimable utility that it is foremost in the new lines of agricultural research, and the Secretary therefore recommends that a division having it in charge be permanently established in the Department.

The amount appropriated for the Weather Bureau was $951,100. Of that sum $138,500, or 14 per cent, has been saved and is returned to the Treasury.

As illustrating the usefulness of this service it may be here stated that the warnings which were very generally given of two tropical storms occurring in September and October of the present year resulted in detaining safely in port 2,305 vessels, valued at $36,183,913, laden with cargoes of probably still greater value. What is much more important and gratifying, many human lives on these ships were also undoubtedly saved.

The appropriation to the Bureau of Animal Industry was $850,000, and the expenditures for the year were only $495,429.24, thus leaving unexpended $354,570.76. The inspection of beef animals for export and interstate trade has been continued, and 12,944,056 head were inspected during the year, at a cost of 1 3/4 cents per head, against 4 3/4 cents for 1893. The amount of pork microscopically examined was 35,437,937 pounds, against 20,677,410 pounds in the preceding year. The cost of this inspection has been diminished from 8 3/4 cents per head in 1893 to 6 1/2 cents in 1894.

The expense of inspecting the pork sold in 1894 to Germany and France by the United States was $88,922.10. The quantity inspected was greater by 15,000,000 pounds than during the preceding year, when the cost of such inspection was $172,367.08. The Secretary of Agriculture recommends that the law providing for the microscopic inspection of export and interstate meat be so amended as to compel owners of the meat inspected to pay the cost of such inspection, and I call attention to the arguments presented in his report in support of this recommendation.

The live beef cattle exported and tagged during the year numbered 353,535. This is an increase of 69,533 head over the previous year.

The sanitary inspection of cattle shipped to Europe has cost an average of 10 3/4 cents for each animal, and the cost of inspecting Southern cattle and the disinfection of cars and stock yards averages 2.7 cents per animal.

The scientific inquiries of the Bureau of Animal Industry have progressed steadily during the year. Much tuberculin and mallein have been furnished to State authorities for use in the agricultural colleges and experiment stations for the treatment of tuberculosis and glanders.

Quite recently this Department has published the results of its investigations of bovine tuberculosis, and its researches will be vigorously continued. Certain herds in the District of Columbia will be thoroughly inspected and will probably supply adequate scope for the Department to intelligently prosecute its scientific work and furnish sufficient material for purposes of illustration, description, and definition.

The sterilization of milk suspected of containing the bacilli of tuberculosis has been during the year very thoroughly explained in a leaflet by Dr. D. E. Salmon, the Chief of the Bureau, and given general circulation throughout the country.

The Office of Experiment Stations, which is a part of the United States Department of Agriculture, has during the past year engaged itself almost wholly in preparing for publication works based upon the reports of agricultural experiment stations and other institutions for agricultural inquiry in the United States and foreign countries.

The Secretary in his report for 1893 called attention to the fact that the appropriations made for the support of the experiment stations throughout the Union were the only moneys taken out of the National Treasury by act of Congress for which no accounting to Federal authorities was required. Responding to this suggestion, the Fifty-third Congress, in making the appropriation for the Department for the present fiscal year, provided that--

The Secretary of Agriculture shall prescribe the form of annual financial statement required by section 3 of said act of March 2, 1887; shall ascertain whether the expenditures under the appropriation hereby made are in accordance with the provisions of said act, and shall make report thereon to Congress. In obedience to this law the Department of Agriculture immediately sent out blank forms of expense accounts to each station, and proposes in addition to make, through trusted experts, systematic examination of the several stations during each year for the purpose of acquiring by personal investigation the detailed information necessary to enable the Secretary of Agriculture to make, as the statute provides, a satisfactory report to Congress. The boards of management of the several stations with great alacrity and cordiality have approved the amendment to the law providing this supervision of their expenditures, anticipating that it will increase the efficiency of the stations and protect their directors and managers from loose charges concerning their use of public funds, besides bringing the Department of Agriculture into closer and more confidential relations with the experimental stations, and through their joint service largely increasing their usefulness to the agriculture of the country.
Acting upon a recommendation contained in the report of 1893, Congress appropriated $10,000 "to enable the Secretary of Agriculture to investigate and report upon the nutritive value of the various articles and commodities used for human food, with special suggestions of full, wholesome, and edible rations less wasteful and more economical than those in common use."

Under this appropriation the Department has prepared and now has nearly ready for distribution an elementary discussion of the nutritive value and pecuniary economy of food. When we consider that fully one-half of all the money earned by the wage earners of the civilized world is expended by them for food, the importance and utility of such an investigation is apparent.

The Department expended in the fiscal year 1893 $2,354,809.56, and out of that sum the total amount expended in scientific research was 45.6 per cent. But in the year ending June 30, 1894, out of a total expenditure of $1,948,988.38, the Department applied 51.8 per cent of that sum to scientific work and investigation. It is therefore very plainly observable that the economies which have been practiced in the administration of the Department have not been at the expense of scientific research.

The recommendation contained in the report of the Secretary for 1893 that the vicious system of promiscuous free distribution of its departmental documents be abandoned is again urged. These publications may well be furnished without cost to public libraries, educational institutions, and the officers and libraries of States and of the Federal Government; but from all individuals applying for them a price covering the cost of the document asked for should be required. Thus the publications and documents would be secured by those who really desire them for proper purposes. Half a million of copies of the report of the Secretary of Agriculture are printed for distribution, at an annual cost of about $300,000. Large numbers of them are cumbering storerooms at the Capitol and the shelves of secondhand-book stores throughout the country. All this labor and waste might be avoided if the recommendations of the Secretary were adopted.

The Secretary also again recommends that the gratuitous distribution of seeds cease and that no money be appropriated for that purpose except to experiment stations. He reiterates the reasons given in his report for 1893 for discontinuing this unjustifiable gratuity, and I fully concur in the conclusions which he has reached.

The best service of the statistician of the Department of Agriculture is the ascertainment, by diligence and care, of the actual and real conditions, favorable or unfavorable, of the farmers and farms of the country, and to seek the causes which produce these conditions, to the end that the facts ascertained may guide their intelligent treatment.

A further important utility in agricultural statistics is found in their elucidation of the relation of the supply of farm products to the demand for them in the markets of the United States and of the world.

It is deemed possible that an agricultural census may be taken each year through the agents of the statistical division of the Department. Such a course is commended for trial by the chief of that division. Its scope would be: (1) The area under each of the more important crops.
(2) The aggregate products of each of such crops.
(3) The quantity of wheat and corn in the hands of farmers at a date after the spring sowings and plantings and before the beginning of harvest, and also the quantity of cotton and tobacco remaining in the hands of planters, either at the same date or at some other designated time.

The cost of the work is estimated at $500,000.

Owing to the peculiar quality of the statistician's work and the natural and acquired fitness necessary to its successful prosecution, the Secretary of Agriculture expresses the opinion that every person employed in gathering statistics under the chief of that division should be admitted to that service only after a thorough, exhaustive, and successful examination at the hands of the United States Civil Service Commission. This has led him to call for such examination of candidates for the position of assistant statisticians, and also of candidates for chiefs of sections in that division.

The work done by the Department of Agriculture is very superficially dealt with in this communication, and I commend the report of the Secretary and the very important interests with which it deals to the careful attention of the Congress.

The advantages to the public service of an adherence to the principles of civil-service reform are constantly more apparent, and nothing is so encouraging to those in official life who honestly desire good government as the increasing appreciation by our people of these advantages. A vast majority of the voters of the land are ready to insist that the time and attention of those they select to perform for them important public duties should not be distracted by doling out minor offices, and they are growing to be unanimous in regarding party organization as something that should be used in establishing party principles instead of dictating the distribution of public places as rewards of partisan activity.

Numerous additional offices and places have lately been brought within civil-service rules and regulations, and some others will probably soon be included.

The report of the Commissioners will be submitted to the Congress, and I invite careful attention to the recommendations it contains.

I am entirely convinced that we ought not to be longer without a national board of health or national health officer charged with no other duties than such as pertain to the protection of our country from the invasion of pestilence and disease. This would involve the establishment by such board or officer of proper quarantine precautions, or the necessary aid and counsel to local authorities on the subject; prompt advice and assistance to local boards of health or health officers in the suppression of contagious disease, and in cases where there are no such local boards or officers the immediate direction by the national board or officer of measures of suppression; constant and authentic information concerning the health of foreign countries and all parts of our own country as related to contagious diseases, and consideration of regulations to be enforced in foreign ports to prevent the introduction of contagion into our cities and the measures which should be adopted to secure their enforcement.

There seems to be at this time a decided inclination to discuss measures of protection against contagious diseases in international conference, with a view of adopting means of mutual assistance. The creation of such a national health establishment would greatly aid our standing in such conferences and improve our opportunities to avail ourselves of their benefits.

I earnestly recommend the inauguration of a national board of health or similar national instrumentality, believing the same to be a needed precaution against contagious disease and in the interest of the safety and health of our people.

By virtue of a statute of the United States passed in 1888 I appointed in July last Hon. John D. Kernan, of the State of New York, and Hon. Nicholas E. Worthington, of the State of Illinois, to form, with Hon. Carroll D. Wright, Commissioner of Labor, who was designated by said statute, a commission for the purpose of making careful inquiry into the causes of the controversies between certain railroads and their employees which had resulted in an extensive and destructive strike, accompanied by much violence and dangerous disturbance, with considerable loss of life and great destruction of property.

The report of the commissioners has been submitted to me and will be transmitted to the Congress with the evidence taken upon their investigation.

Their work has been well done, and their standing and intelligence give assurance that the report and suggestions they make are worthy of careful consideration.

The tariff act passed at the last session of the Congress needs important amendments if it is to be executed effectively and with certainty. In addition to such necessary amendments as will not change rates of duty, I am still very decidedly in favor of putting coal and iron upon the free list.

So far as the sugar schedule is concerned, I would be glad, under existing aggravations, to see every particle of differential duty in favor of refined sugar stricken out of our tariff law. If with all the favor now accorded the sugar-refining interest in our tariff laws it still languishes to the extent of closed refineries and thousands of discharged workmen, it would seem to present a hopeless case for reasonable legislative aid. Whatever else is done or omitted, I earnestly repeat here the recommendation I have made in another portion of this communication, that the additional duty of one-tenth of a cent per pound laid upon sugar imported from countries paying a bounty on its export be abrogated. It seems to me that exceedingly important considerations point to the propriety of this amendment.

With the advent of a new tariff policy not only calculated to relieve the consumers of our land in the cost of their daily life, but to invite a better development of American thrift and create for us closer and more profitable commercial relations with the rest of the world, it follows as a logical and imperative necessity that we should at once remove the chief if not the only obstacle which has so long prevented our participation in the foreign carrying trade of the sea. A tariff built upon the theory that it is well to check imports and that a home market should bound the industry and effort of American producers was fitly supplemented by a refusal to allow American registry to vessels built abroad, though owned and navigated by our people, thus exhibiting a willingness to abandon all contest for the advantages of American transoceanic carriage. Our new tariff policy, built upon the theory that it is well to encourage such importations as our people need, and that our products and manufactures should find markets in every part of the habitable globe, is consistently supplemented by the greatest possible liberty to our citizens in the ownership and navigation of ships in which our products and manufactures may be transported. The millions now paid to foreigners for carrying American passengers and products across the sea should be turned into American hands. Shipbuilding, which has been protected to strangulation, should be revived by the prospect of profitable employment for ships when built, and the American sailor should be resurrected and again take his place--a sturdy and industrious citizen in time of peace and a patriotic and safe defender of American interests in the day of conflict.

The ancient provision of our law denying American registry to ships built abroad and owned by Americans appears in the light of present conditions not only to be a failure for good at every point, but to be nearer a relic of barbarism than anything that exists under the permission of a statute of the United States. I earnestly recommend its prompt repeal.

During the last month the gold reserved in the Treasury for the purpose of redeeming the notes of the Government circulating as money in the hands of the people became so reduced and its further depletion in the near future seemed so certain that in the exercise of proper care for the public welfare it became necessary to replenish this reserve and thus maintain popular faith in the ability and determination of the Government to meet as agreed its pecuniary obligations.

It would have been well if in this emergency authority had existed to issue the bonds of the Government bearing a low rate of interest and maturing within a short period; but the Congress having failed to confer such authority, resort was necessarily had to the resumption act of 1875, and pursuant to its provisions bonds were issued drawing interest at the rate of 5 per cent per annum and maturing ten years after their issue, that being the shortest time authorized by the act. I am glad to say, however, that on the sale of these bonds the premium received operated to reduce the rate of interest to be paid by the Government to less than 3 per cent.

Nothing could be worse or further removed from sensible finance than the relations existing between the currency the Government has issued, the gold held for its redemption, and the means which must be resorted to for the purpose of replenishing such redemption fund when impaired. Even if the claims upon this fund were confined to the obligations originally intended and if the redemption of these obligations meant their cancellation, the fund would be very small. But these obligations when received and redeemed in gold are not canceled, but are reissued and may do duty many times by way of drawing gold from the Treasury. Thus we have an endless chain in operation constantly depleting the Treasury's gold and never near a final rest. As if this was not bad enough, we have, by a statutory declaration that it is the policy of the Government to maintain the parity between gold and silver, aided the force and momentum of this exhausting process and added largely to the currency obligations claiming this peculiar gold redemption. Our small gold reserve is thus subject to drain from every side. The demands that increase our danger also increase the necessity of protecting this reserve against depletion, and it is most unsatisfactory to know that the protection afforded is only a temporary palliation.

It is perfectly and palpably plain that the only way under present conditions by which this reserve when dangerously depleted can be replenished is through the issue and sale of the bonds of the Government for gold, and yet Congress has not only thus far declined to authorize the issue of bonds best suited to such a purpose, but there seems a disposition in some quarters to deny both the necessity and power for the issue of bonds at all.

I can not for a moment believe that any of our citizens are deliberately willing that their Government should default in its pecuniary obligations or that its financial operations should be reduced to a silver basis. At any rate, I should not feel that my duty was done if I omitted any effort I could make to avert such a calamity. As long, therefore, as no provision is made for the final redemption or the putting aside of the currency obligation now used to repeatedly and constantly draw from the Government its gold, and as long as no better authority for bond issues is allowed than at present exists, such authority will be utilized whenever and as often as it becomes necessary to maintain a sufficient gold reserve, and in abundant time to save the credit of our country and make good the financial declarations of our Government.

Questions relating to our banks and currency are closely connected with the subject just referred to, and they also present some unsatisfactory features. Prominent among them are the lack of elasticity in our currency circulation and its frequent concentration in financial centers when it is most needed in other parts of the country.

The absolute divorcement of the Government from the business of banking is the ideal relationship of the Government to the circulation of the currency of the country.

This condition can not be immediately reached, but as a step in that direction and as a means of securing a more elastic currency and obviating other objections to the present arrangement of bank circulation the Secretary of the Treasury presents in his report a scheme modifying present banking laws and providing for the issue of circulating notes by State banks free from taxation under certain limitations.

The Secretary explains his plan so plainly and its advantages are developed by him with such remarkable clearness that any effort on my part to present argument in its support would be superfluous. I shall therefore content myself with an unqualified indorsement of the Secretary's proposed changes in the law and a brief and imperfect statement of their prominent features. It is proposed to repeal all laws providing for the deposit of United States bonds as security for circulation; to permit national banks to issue circulating notes not exceeding in amount 75 per cent of their paid-up and unimpaired capital, provided they deposit with the Government as a guaranty fund, in United States legal-tender notes, including Treasury notes of 1890, a sum equal in amount to 30 per cent of the notes they desire to issue, this deposit to be maintained at all times, but whenever any bank retires any part of its circulation a proportional part of its guaranty fund shall be returned to it; to permit the Secretary of the Treasury to prepare and keep on hand ready for issue in case an increase in circulation is desired blank national-bank notes for each bank having circulation and to repeal the provisions of the present law imposing limitations and restrictions upon banks desiring to reduce or increase their circulation, thus permitting such increase or reduction within the limit of 75 per cent of capital to be quickly made as emergencies arise.

In addition to the guaranty fund required, it is proposed to provide a safety fund for the immediate redemption of the circulating notes of failed banks by imposing a small annual tax, say one-half of 1 per cent, upon the average circulation of each bank until the fund amounts to 5 per cent of the total circulation outstanding. When a bank fails its guaranty fund is to be paid into this safety fund and its notes are to be redeemed in the first instance from such safety fund thus augmented, any impairment of such fund caused thereby to be made good from the immediately available cash assets of said bank, and if these should be insufficient such impairment to be made good by pro rata assessment among the other banks, their contributions constituting a first lien upon the assets of the failed bank in favor of the contributing banks. As a further security it is contemplated that the existing provision fixing the individual liability of stockholders is to be retained and the bank's indebtedness on account of its circulating notes is to be made a first lien on all its assets.

For the purpose of meeting the expense of printing notes, official supervision, cancellation, and other like charges there shall be imposed a tax of say one-half of 1 per cent per annum upon the average amount of notes in circulation.

It is further provided that there shall be no national-bank notes issued of a less denomination than $10; that each national bank, except in case of a failed bank, shall redeem or retire its notes in the first instance at its own office or at agencies to be designated by it, and that no fixed reserve need be maintained on account of deposits.

Another very important feature of this plan is the exemption of State banks from taxation by the United States in cases where it is shown to the satisfaction of the Secretary of the Treasury and Comptroller of the Currency by banks claiming such exemption that they have not had outstanding their circulating notes exceeding 75 per cent of their paid-up and unimpaired capital; that their stockholders are individually liable for the redemption of their circulating notes to the full extent of their ownership of stock; that the liability of said banks upon their circulating notes constitutes under their State law a first lien upon their assets; that such banks have kept and maintained a guaranty fund in United States legal-tender notes, including Treasury notes of 1890, equal to 30 per cent of their outstanding circulating notes, and that such banks have promptly redeemed their circulating notes when presented at their principal or branch offices.

It is quite likely that this scheme may be usefully amended in some of its details, but I am satisfied it furnishes a basis for a very great improvement in our present banking and currency system.

I conclude this communication fully appreciating that the responsibility for all legislation affecting the people of the United States rests upon their representatives in the Congress, and assuring them that, whether in accordance with recommendations I have made or not, I shall be glad to cooperate in perfecting any legislation that tends to the prosperity and welfare of our country.

GROVER CLEVELAND

***

As we turn from a review of our foreign relations to the contemplation of our national financial situation we are immediately aware that we approach a subject of domestic concern more important than any other that can engage our attention, and one at present in such a perplexing and delicate predicament as to require prompt and wise treatment.

We may well be encouraged to earnest effort in this direction when we recall the steps already taken toward improving our economic and financial situation and when we appreciate how well the way has been prepared for further progress by an aroused and intelligent popular interest in these subjects.

By command of the people a customs-revenue system designed for the protection and benefit of favored classes at the expense of the great mass of our countrymen, and which, while inefficient for the purpose of revenue, curtailed our trade relations and impeded our entrance to the markets of the world, has been superseded by a tariff policy which in principle is based upon a denial of the right of the Government to obstruct the avenues to our people's cheap living or lessen their comfort and contentment for the sake of according especial advantages to favorites, and which, while encouraging our intercourse and trade with other nations, recognizes the fact that American self-reliance, thrift, and ingenuity can build up our country's industries and develop its resources more surely than enervating paternalism.

The compulsory purchase and coinage of silver by the Government, unchecked and unregulated by business conditions and heedless of our currency needs, which for more than fifteen years diluted our circulating medium, undermined confidence abroad in our financial ability, and at last culminated in distress and panic at home, has been recently stopped by the repeal of the laws which forced this reckless scheme upon the country.

The things thus accomplished, notwithstanding their extreme importance and beneficent effects, fall far short of curing the monetary evils from which we suffer as a result of long indulgence in ill-advised financial expedients.

The currency denominated United States notes and commonly known as greenbacks was issued in large volume during the late Civil War and was intended originally to meet the exigencies of that period. It will be seen by a reference to the debates in Congress at the time the laws were passed authorizing the issue of these notes that their advocates declared they were intended for only temporary use and to meet the emergency of war. In almost if not all the laws relating to them some provision was made contemplating their voluntary or compulsory retirement. A large quantity of them, however, were kept on foot and mingled with the currency of the country, so that at the close of the year 1874 they amounted to $381,999,073.

Immediately after that date, and in January, 1875, a law was passed providing for the resumption of specie payments, by which the Secretary of the Treasury was required whenever additional circulation was issued to national banks to retire United States notes equal in amount to 80 per cent of such additional national-bank circulation until such notes were reduced to $300,000,000. This law further provided that on and after the 1st day of January, 1879, the United States notes then outstanding should be redeemed in coin, and in order to provide and prepare for such redemption the Secretary of the Treasury was authorized not only to use any surplus revenues of the Government, but to issue bonds of the United States and dispose of them for coin and to use the proceeds for the purposes contemplated by the statute.

In May, 1878, and before the date thus appointed for the redemption and retirement of these notes, another statute was passed forbidding their further cancellation and retirement. Some of them had, however, been previously redeemed and canceled upon the issue of additional national-bank circulation, as permitted by the law of 1875, so that the amount outstanding at the time of the passage of the act forbidding their further retirement was $346,681,016.

The law of 1878 did not stop at distinct prohibition, but contained in addition the following express provision:

And when any of said notes may be redeemed or be received into the Treasury under any law from any source whatever, and shall belong to the United States, they shall not be retired, canceled, or destroyed, but they shall be reissued and paid out again and kept in circulation. This was the condition of affairs on the 1st day of January, 1879, which had been fixed upon four years before as the date for entering upon the redemption and retirement of all these notes, and for which such abundant means had been provided.
The Government was put in the anomalous situation of owing to the holders of its notes debts payable in gold on demand which could neither be retired by receiving such notes in discharge of obligations due the Government nor canceled by actual payment in gold. It was forced to redeem without redemption and to pay without acquittance.

There had been issued and sold $95,500,000 of the bonds authorized by the resumption act of 1875, the proceeds of which, together with other gold in the Treasury, created a gold fund deemed sufficient to meet the demands which might be made upon it for the redemption of the outstanding United States notes. This fund, together with such other gold as might be from time to time in the Treasury available for the same purpose, has been since called our gold reserve, and $100,000,000 has been regarded as an adequate amount to accomplish its object. This fund amounted on the 1st day of January, 1879, to $114,193,360, and though thereafter constantly fluctuating it did not fall below that sum until July, 1892. In April, 1893, for the first time since its establishment, this reserve amounted to less than $100,000,000, containing at that date only $97,011,330.

In the meantime, and in July, 1890, an act had been passed directing larger governmental monthly purchases of silver than had been required under previous laws, and providing that in payment for such silver Treasury notes of the United States should be issued payable on demand in gold or silver coin, at the discretion of the Secretary of the Treasury. It was, however, declared in the act to be" the established policy of the United States to maintain the two metals on a parity with each other upon the present legal ratio or such ratio as may be provided by law." In view of this declaration it was not deemed permissible for the Secretary of the Treasury to exercise the discretion in terms conferred on him by refusing to pay gold on these notes when demanded, because by such discrimination in favor of the gold dollar the so-called parity of the two metals would be destroyed and grave and dangerous consequences would be precipitated by affirming or accentuating the constantly widening disparity between their actual values under the existing ratio.

It thus resulted that the Treasury notes issued in payment of silver purchases under the law of 1890 were necessarily treated as gold obligations at the option of the holder. These notes on the 1st day of November, 1893, when the law compelling the monthly purchase of silver was repealed, amounted to more than $155,000,000. The notes of this description now outstanding added to the United States notes still undiminished by redemption or cancellation constitute a volume of gold obligations amounting to nearly $500,000,000.

These obligations are the instruments which ever since we had a gold reserve have been used to deplete it.

This reserve, as has been stated, had fallen in April, 1893, to $97,111,330. It has from that time to the present, with very few and unimportant upward movements, steadily decreased, except as it has been temporarily replenished by the sale of bonds.

Among the causes for this constant and uniform shrinkage in this fund may be mentioned the great falling off of exports under the operation of the tariff law until recently in force, which crippled our exchange of commodities with foreign nations and necessitated to some extent the payment of our balances in gold; the unnatural infusion of silver into our currency and the increasing agitation for its free and unlimited coinage, which have created apprehension as to our disposition or ability to continue gold payments; the consequent hoarding of gold at home and the stoppage of investments of foreign capital, as well as the return of our securities already sold abroad; and the high rate of foreign exchange, which induced the shipment of our gold to be drawn against as a matter of speculation.

In consequence of these conditions the gold reserve on the 1st day of February, 1894, was reduced to $65,438,377, having lost more than $31,000,000 during the preceding nine months, or since April, 1893. Its replenishment being necessary and no other manner of accomplishing it being possible, resort was had to the issue and sale of bonds provided for by the resumption act of 1875. Fifty millions of these bonds were sold, yielding $58,633,295.71, which was added to the reserve fund of gold then on hand. As a result of this operation this reserve, which had suffered constant and large withdrawals in the meantime, stood on the 6th day of March, 1894, at the sum of $107,446,802. Its depletion was, however, immediately thereafter so accelerated that on the 30th day of June, 1894, it had fallen to $64,873,025, thus losing by withdrawals more than $42,000,000 in five months and dropping slightly below its situation when the sale of $50,000,000 in bonds was effected for its replenishment.

This depressed condition grew worse, and on the 24th day of November, 1894, our gold reserve being reduced to $57,669,701, it became necessary to again strengthen it.

This was done by another sale of bonds amounting to $50,000,000, from which there was realized $58,538,500, with which the fund was increased to $111,142,021 on the 4th day of December, 1894.

Again disappointment awaited the anxious hope for relief. There was not even a lull in the exasperating withdrawals of gold. On the contrary, they grew larger and more persistent than ever. Between the 4th day of December, 1894, and early in February, 1895, a period of scarcely more than two months after the second reenforcement of our gold reserve by the sale of bonds, it had lost by such withdrawals more than $69,000,000 and had fallen to $41,340,181. Nearly $43,000,000 had been withdrawn within the month immediately preceding this situation.

In anticipation of impending trouble I had on the 28th day of January, 1895, addressed a communication to the Congress fully setting forth our difficulties and dangerous position and earnestly recommending that authority be given the Secretary of the Treasury to issue bonds bearing a low rate of interest, payable by their terms in gold, for the purpose of maintaining a sufficient gold reserve and also for the redemption and cancellation of outstanding United States notes and the Treasury notes issued for the purchase of silver under the law of 1890. This recommendation did not, however, meet with legislative approval.

In February, 1895, therefore, the situation was exceedingly critical. With a reserve perilously low and a refusal of Congressional aid, everything indicated that the end of gold payments by the Government was imminent. The results of prior bond issues had been exceedingly unsatisfactory, and the large withdrawals of gold immediately succeeding their public sale in open market gave rise to a reasonable suspicion that a large part of the gold paid into the Treasury upon such sales was promptly drawn out again by the presentation of United States notes or Treasury notes, and found its way to the hands of those who had only temporarily parted with it in the purchase of bonds.

In this emergency, and in view of its surrounding perplexities, it became entirely apparent to those upon whom the struggle for safety was devolved not only that our gold reserve must, for the third time in less than thirteen months, be restored by another issue and sale of bonds bearing a high rate of interest and badly suited to the purpose, but that a plan must be adopted for their disposition promising better results than those realized on previous sales. An agreement was therefore made with a number of financiers and bankers whereby it was stipulated that bonds described in the resumption act of 1875, payable in coin thirty years after their date, bearing interest at the rate of 4 pet cent per annum, and amounting to about $62,000,000, should be exchanged for gold, receivable by weight, amounting to a little more than $65,000,000.

This gold was to be delivered in such installments as would complete its delivery within about six months from the date of the contract, and at least one-half of the amount was to be furnished from abroad. It was also agreed by those supplying this gold that during the continuance of the contract they would by every means in their power protect the Government against gold withdrawals. The contract also provided that if Congress would authorize their issue bonds payable by their terms in gold and bearing interest at the rate of 3 per cent per annum might within ten days be substituted at par for the 4 per cent bonds described in the agreement.

On the day this contract was made its terms were communicated to Congress by a special Executive message, in which it was stated that more than $16,000,000 would be saved to the Government if gold bonds bearing 3 per cent interest were authorized to be substituted for those mentioned in the contract.

The Congress having declined to grant the necessary authority to secure this saving, the contract, unmodified, was carried out, resulting in a gold reserve amounting to $107,571,230 on the 8th day of July, 1895. The performance of this contract not only restored the reserve, but checked for a time the withdrawals of gold and brought on a period of restored confidence and such peace and quiet in business circles as were of the greatest possible value to every interest that affects our people. I have never had the slightest misgiving concerning the wisdom or propriety of this arrangement, and am quite willing to answer for my full share of responsibility for its promotion. I believe it averted a disaster the imminence of which was, fortunately, not at the time generally understood by our people.

Though the contract mentioned stayed for a time the tide of gold withdrawal, its good results could not be permanent. Recent withdrawals have reduced the reserve from $107,571,230 on the 8th day of July, 1895, to $79,333,966. How long it will remain large enough to render its increase unnecessary is only matter of conjecture, though quite large withdrawals for shipment in the immediate future are predicted in well-informed quarters. About $16,000,000 has been withdrawn during the month of November.

The foregoing statement of events and conditions develops the fact that after increasing our interest-bearing bonded indebtedness more than $162,000,000 to save our gold reserve we are nearly where we started, having now in such reserve $79,333,966, as against $65,438,377 in February, 1894, when the first bonds were issued.

Though the amount of gold drawn from the Treasury appears to be very large as gathered from the facts and figures herein presented, it actually was much larger, considerable sums having been acquired by the Treasury within the several periods stated without the issue of bonds. On the 28th of January, 1895, it was reported by the Secretary of the Treasury that more than $172,000,000 of gold had been withdrawn for hoarding or shipment during the year preceding. He now reports that from January 1, 1879, to July 14, 1890, a period of more than eleven years, only a little over $28,000,000 was withdrawn, and that between July 14, 1890, the date of the passage of the law for an increased purchase of silver, and the 1st day of December, 1895, or within less than five and a half years, there was withdrawn nearly $375,000,000, making a total of more than $403,000,000 drawn from the Treasury in gold since January 1, 1879, the date fixed in 1875 for the retirement of the United States notes.

Nearly $327,000,000 of the gold thus withdrawn has been paid out on these United States notes, and yet every one of the $346,000,000 is still uncanceled and ready to do service in future gold depletions.

More than $76,000,000 in gold has since their creation in 1890 been paid out from the Treasury upon the notes given on the purchase of silver by the Government, and yet the whole, amounting to $155,000,000, except a little more than $16,000,000 which has been retired by exchanges for silver at the request of the holders, remains outstanding and prepared to join their older and more experienced allies in future raids upon the Treasury's gold reserve.

In other words, the Government has paid in gold more than nine-tenths of its United States notes and still owes them all. It has paid in gold about one-half of its notes given for silver purchases without extinguishing by such payment one dollar of these notes.

When, added to all this, we are reminded that to carry on this astound, lug financial scheme the Government has incurred a bonded indebtedness of $95,500,000 in establishing a gold reserve and of $162,315,400 in efforts to maintain it; that the annual interest charge on such bonded indebtedness is more than $11,000,000; that a continuance of our present course may result in further bond issues, and that we have suffered or are threatened with all this for the sake of supplying gold for foreign shipment or facilitating its hoarding at home, a situation is exhibited which certainly ought to arrest attention and provoke immediate legislative relief.

I am convinced the only thorough and practicable remedy for our troubles is found in the retirement and cancellation of our United States notes, commonly called greenbacks, and the outstanding Treasury notes issued by the Government in payment of silver purchases under the act of 1890.

I believe this could be quite readily accomplished by the exchange of these notes for United States bonds, of small as well as large denominations, bearing a low rate of interest. They should be long-term bonds, thus increasing their desirability as investments, and because their payment could be well postponed to a period far removed from present financial burdens and perplexities, when with increased prosperity and resources they would be more easily met.

To further insure the cancellation of these notes and also provide a way by which gold may be added to our currency in lieu of them, a feature in the plan should be an authority given to the Secretary of the Treasury to dispose of the bonds abroad for gold if necessary to complete the contemplated redemption and cancellation, permitting him to use the proceeds of such bonds to take up and cancel any of the notes that may be in the Treasury or that may be received by the Government on any account.

The increase of our bonded debt involved in this plan would be amply compensated by renewed activity and enterprise in all business circles, the restored confidence at home, the reinstated faith in our monetary strength abroad, and the stimulation of every interest and industry that would follow the cancellation of the gold-demand obligations now afflicting us. In any event, the bonds proposed would stand for the extinguishment of a troublesome indebtedness, while in the path we now follow there lurks the menace of unending bonds, with our indebtedness still undischarged and aggravated in every feature. The obligations necessary to fund this indebtedness would not equal in amount those from which we have been relieved since 1884 by anticipation and payment beyond the requirements of the sinking fund out of our surplus revenues.

The currency withdrawn by the retirement of the United States notes and Treasury notes, amounting to probably less than $486,000,000, might be supplied by such gold as would be used on their retirement or by an increase in the circulation of our national banks. Though the aggregate capital of those now in existence amounts to more than $664,000,000, their outstanding circulation based on bond security amounts to only about $190,000,000. They are authorized to issue notes amounting to 90 per cent of the bonds deposited to secure their circulation, but in no event beyond the amount of their capital stock, and they are obliged to pay 1 per cent tax on the circulation they issue.

I think they should be allowed to issue circulation equal to the par value of the bonds they deposit to secure it, and that the tax on their circulation should be reduced to one-fourth of 1 per cent, which would undoubtedly meet all the expense the Government incurs on their account. In addition they should be allowed to substitute or deposit in lieu of the bonds now required as security for their circulation those which would be issued for the purpose of retiring the United States notes and Treasury notes.

The banks already existing, if they desired to avail themselves of the provisions of law thus modified, could issue circulation, in addition to that already outstanding, amounting to $478,000,000, which would nearly or quite equal the currency proposed to be canceled. At any rate, I should confidently expect to see the existing national banks or others to be organized avail themselves of the proposed encouragements to issue circulation and promptly fill any vacuum and supply every currency need.

It has always seemed to me that the provisions of law regarding the capital of national banks, which operate as a limitation to their location, fail to make proper compensation for the suppression of State banks, which came near to the people in all sections of the country and readily furnished them with banking accommodations and facilities. Any inconvenience or embarrassment arising from these restrictions on the location of national banks might well be remedied by better adapting the present system to the creation of banks in smaller communities or by permitting banks of large capital to establish branches in such localities as would serve the people, so regulated and restrained as to secure their safe and conservative control and management.

But there might not be the necessity for such an addition to the currency by new issues of bank circulation as at first glance is indicated. If we should be relieved from maintaining a gold reserve under conditions that constitute it the barometer of our solvency, and if our Treasury should no longer be the foolish purveyor of gold for nations abroad or for speculation and hoarding by our citizens at home, I should expect to see gold resume its natural and normal functions in the business affairs of the country and cease to be an object attracting the timid watch of our people and exciting their sensitive imaginations.

I do not overlook the fact that the cancellation of the Treasury notes issued under the silver-purchasing act of 1890 would leave the Treasury in the actual ownership of sufficient silver, including seigniorage, to coin nearly $178,000,000 in standard dollars. It is worthy of consideration whether this might not from time to time be converted into dollars or fractional coin and slowly put into circulation, as in the judgment of the Secretary of the Treasury the necessities of the country should require.

Whatever is attempted should be entered upon fully appreciating the fact that by careless, easy descent we have reached a dangerous depth, and that our ascent will not be accomplished without laborious toil and struggle. We shall be wise if we realize that we are financially ill and that our restoration to health may require heroic treatment and unpleasant remedies.

In the present stage of our difficulty it is not easy to understand how the amount of our revenue receipts directly affects it. The important question is not the quantity of money received in revenue payments, but the kind of money we maintain and our ability to continue in sound financial condition. We are considering the Government's holdings of gold as related to the soundness of our money and as affecting our national credit and monetary strength.

If our gold reserve had never been impaired; if no bonds had ever been issued to replenish it; if there had been no fear and timidity concerning our ability to continue gold payments; if any part of our revenues were now paid in gold, and if we could look to our gold receipts as a means of maintaining a safe reserve, the amount of our revenues would be an influential factor in the problem. But, unfortunately, all the circumstances that might lend weight to this consideration are entirely lacking.

In our present predicament no gold is received by the Government in payment of revenue charges, nor would there be if the revenues were increased. The receipts of the Treasury, when not in silver certificates, consist of United States notes and Treasury notes issued for silver purchases. These forms of money are only useful to the Government in paying its current ordinary expenses, and its quantity in Government possession does not in the least contribute toward giving us that kind of safe financial standing or condition which is built on gold alone.

If it is said that these notes if held by the Government can be used to obtain gold for our reserve, the answer is easy. The people draw gold from the Treasury on demand upon United States notes and Treasury notes, but the proposition that the Treasury can on demand draw gold from the people upon them would be regarded in these days with wonder and amusement; and even if this could be done there is nothing to prevent those thus parting with their gold from regaining it the next day or the next hour by the presentation of the notes they received in exchange for it.

The Secretary of the Treasury might use such notes taken from a surplus revenue to buy gold in the market. Of course he could not do this without paying a premium. Private holders of gold, unlike the Government, having no parity to maintain, would not be restrained from making the best bargain possible when they furnished gold to the Treasury; but the moment the Secretary of the Treasury bought gold on any terms above par he would establish a general and universal premium upon it, thus breaking down the parity between gold and silver, which the Government is pledged to maintain, and opening the way to new and serious complications. In the meantime the premium would not remain stationary, and the absurd spectacle might be presented of a dealer selling gold to the Government and with United States notes or Treasury notes in his hand immediately clamoring for its return and a resale at a higher premium.

It may be claimed that a large revenue and redundant receipts might favorably affect the situation under discussion by affording an opportunity of retaining these notes in the Treasury when received, and thus preventing their presentation for gold. Such retention to be useful ought to be at least measurably permanent; and this is precisely what is prohibited, so far as United States notes are concerned, by the law of 1878, forbidding their further retirement. That statute in so many words provides that these notes when received into the Treasury and belonging to the United States shall be "paid out again and kept in circulation."

It will, moreover, be readily seen that the Government could not refuse to pay out United States notes and Treasury notes in current transactions when demanded, and insist on paying out silver alone, and still maintain the parity between that metal and the currency representing gold. Besides, the accumulation in the Treasury of currency of any kind exacted from the people through taxation is justly regarded as an evil, and it can not proceed far without vigorous protest against an unjustifiable retention of money from the business of the country and a denunciation of a scheme of taxation which proves itself to be unjust when it takes from the earnings and income of the citizen money so much in excess of the needs of Government support that large sums can be gathered and kept in the Treasury. Such a condition has heretofore in times of surplus revenue led the Government to restore currency to the people by the purchase of its unmatured bonds at a large premium and by a large increase of its deposits in national banks, and we easily remember that the abuse of Treasury accumulation has furnished a most persuasive argument in favor of legislation radically reducing our tariff taxation.

Perhaps it is supposed that sufficient revenue receipts would in a sentimental way improve the situation by inspiring confidence in our solvency and allaying the fear of pecuniary exhaustion. And yet through all our struggles to maintain our gold reserve there never has been any apprehension as to our ready ability to pay our way with such money as we had, and the question whether or not our current receipts met our current expenses has not entered into the estimate of our solvency. Of course the general state of our funds, exclusive of gold, was entirely immaterial to the foreign creditor and investor. His debt could only be paid in gold, and his only concern was our ability to keep on hand that kind of money.

On July 1, 1892, more than a year and a half before the first bonds were issued to replenish the gold reserve, there was a net balance in the Treasury, exclusive of such reserve, of less than $13,000,000, but the gold reserve amounted to more than $114,000,000, which was the quieting feature of the situation. It was when the stock of gold began rapidly to fall that fright supervened and our securities held abroad were returned for sale and debts owed abroad were pressed for payment. In the meantime extensive shipments of gold and other unfavorable indications caused restlessness and fright among our people at home. Thereupon the general state of our funds, exclusive of gold, became also immaterial to them, and they too drew gold from the Treasury for hoarding against all contingencies. This is plainly shown by the large increase in the proportion of gold withdrawn which was retained by our own people as time and threatening incidents progressed. During the fiscal year ending June 30, 1894, nearly $85,000,000 in gold was withdrawn from the Treasury and about $77,000,000 was sent abroad, while during the fiscal year ending June 30, 1895, over $117,000,000 was drawn out, of which only about $66,000,000 was shipped, leaving the large balance of such withdrawals to be accounted for by domestic hoarding.

Inasmuch as the withdrawal of our gold has resulted largely from fright, there is nothing apparent that will prevent its continuance or recurrence, with its natural consequences, except such a change in our financial methods as will reassure the frightened and make the desire for gold less intense. It is not clear how an increase fix revenue, unless it be in gold, can satisfy those whose only anxiety is to gain gold from the Government's store.

It can not, therefore, be safe to rely upon increased revenues as a cure for our present troubles.

It is possible that the suggestion of increased revenue as a remedy for the difficulties we are considering may have originated in an intimation or distinct allegation that the bonds which have been issued ostensibly to replenish our gold reserve were really issued to supply insufficient revenue. Nothing can be further from the truth. Bonds were issued to obtain gold for the maintenance of our national credit. As has been shown, the gold thus obtained has been drawn again from the Treasury upon United States notes and Treasury notes. This operation would have been promptly prevented if possible; but these notes having thus been passed to the Treasury, they became the money of the Government, like any other ordinary Government funds, and there was nothing to do but to use them in paying Government expenses when needed.

At no time when bonds have been issued has there been any consideration of the question of paying the expenses of Government with their proceeds. There was no necessity to consider that question. At the time of each bond issue we had a safe surplus in the Treasury for ordinary operations, exclusive of the gold in our reserve. In February, 1894, when the first issue of bonds was made, such surplus amounted to over $18,000,000; in November, when the second issue was made, it amounted to more than $42,000,000, and in February, 1895, when bonds for the third time were issued, such surplus amounted to more than $100,000,000. It now amounts to $98,072,420.30.

Besides all this, the Secretary of the Treasury had no authority whatever to issue bonds to increase the ordinary revenues or pay current expenses.

I can not but think there has been some confusion of ideas regarding the effects of the issue of bonds and the results of the withdrawal of gold. It was the latter process, and not the former, that, by substituting in the Treasury United States notes and Treasury notes for gold, increased by their amount the money which was in the first instance subject to ordinary Government expenditure.

Although the law compelling an increased purchase of silver by the Government was passed on the 14th day of July, 1890, withdrawals of gold from the Treasury upon the notes given in payment on such purchases did not begin until October, 1891. Immediately following that date the withdrawals upon both these notes and United States notes increased very largely, and have continued to such an extent that since the passage of that law there has been more than thirteen times as much gold taken out of the Treasury upon United States notes and Treasury notes issued for silver purchases as was thus withdrawn during the eleven and a half years immediately prior thereto and after the 1st day of January, 1879, when specie payments were resumed.

It is neither unfair nor unjust to charge a large share of our present financial perplexities and dangers to the operation of the laws of 1878 and 1890 compelling the purchase of silver by the Government, which not only furnished a new Treasury obligation upon which its gold could be withdrawn, but so increased the fear of an overwhelming flood of silver and a forced descent to silver payments that even the repeal of these laws did not entirely cure the evils of their existence.

While I have endeavored to make a plain statement of the disordered condition of our currency and the present dangers menacing our prosperity and to suggest a way which leads to a safer financial system, I have constantly had in mind the fact that many of my countrymen, whose sincerity I do not doubt, insist that the cure for the ills now threatening us may be found in the single and simple remedy of the free coinage of silver. They contend that our mints shall be at once thrown open to the free, unlimited, and independent coinage of both gold and silver dollars of full legal-tender quality, regardless of the action of any other government and in full view of the fact that the ratio between the metals which they suggest calls for 100 cents' worth of gold in the gold dollar at the present standard and only 50 cents in intrinsic worth of silver in the silver dollar.

Were there infinitely stronger reasons than can be adduced for hoping that such action would secure for us a bimetallic currency moving on lines of parity, an experiment so novel and hazardous as that proposed might well stagger those who believe that stability is an imperative condition of sound money.

No government, no human contrivance or act of legislation, has ever been able to hold the two metals together in free coinage at a ratio appreciably different from that which is established in the markets of the world.

Those who believe that our independent free coinage of silver at an artificial ratio with gold of 16 to 1 would restore the parity between the metals, and consequently between the coins, oppose an unsupported and improbable theory to the general belief and practice of other nations; and to the teaching of the wisest statesmen and economists of the world, both in the past and present, and, what is far more conclusive, they run counter to our own actual experiences.

Twice in our earlier history our lawmakers, in attempting to establish a bimetallic currency, undertook free coinage upon a ratio which accidentally varied from the actual relative values of the two metals not more than 3 per cent. In both cases, notwithstanding greater difficulties and cost of transportation than now exist, the coins whose intrinsic worth was undervalued. in the ratio gradually and surely disappeared from our circulation and went to other countries where their real value was better recognized.

Acts of Congress were impotent to create equality where natural causes decreed even a slight inequality.

Twice in our recent history we have signally failed to raise by legislation the value of silver. Under an act of Congress passed in 1878 the Government was required for more than twelve years to expend annually at least $24,000,000 in the purchase of silver bullion for coinage. The act of July 14, 1890, in a still bolder effort, increased the amount of silver the Government was compelled to purchase and forced it to become the buyer annually of 54,000,000 ounces, or practically the entire product of our mines. Under both laws silver rapidly and steadily declined in value. The prophecy and the expressed hope and expectation of those in the Congress who led in the passage of the last-mentioned act that it would reestablish and maintain the former parity between the two metals are still fresh in our memory.

In the light of these experiences, which accord with the experiences of other nations, there is certainly no secure ground for the belief that an act of Congress could now bridge an inequality of 50 per cent between gold and silver at our present ratio, nor is there the least possibility that our country, which has less than one-seventh of the silver money in the world, could by its action alone raise not only our own but all silver to its lost ratio with gold. Our attempt to accomplish this by the free coinage of silver at a ratio differing widely from actual relative values would be the signal for the complete departure of gold from our circulation, the immediate and large contraction of our circulating medium, and a shrinkage in the real value and monetary efficiency of all other forms of currency as they settled to the level of silver monometallism. Everyone who receives a fixed salary and every worker for wages would find the dollar in his hand ruthlessly scaled down to the point of bitter disappointment, if not to pinching privation.

A change in our standard to silver monometallism would also bring on a collapse of the entire system of credit, which, when based on a standard which is recognized and adopted by the world of business, is many times more potent and useful than the entire volume of currency and is safely capable of almost indefinite expansion to meet the growth of trade and enterprise. In a self-invited struggle through darkness and uncertainty our humiliation would be increased by the consciousness that we had parted company with all the enlightened and progressive nations of the world and were desperately and hopelessly striving to meet the stress of modern commerce and competition with a debased and unsuitable currency and in association with the few weak and laggard nations which have silver alone as their standard of value.

All history warns us against rash experiments which threaten violent changes in our monetary standard and the degradation of our currency. The past is full of lessons teaching not only the economic dangers but the national immorality that follow in the train of such experiments. I will not believe that the American people can be persuaded after sober deliberation to jeopardize their nation's prestige and proud standing by encouraging financial nostrums, nor that they will yield to the false allurements of cheap money when they realize that it must result in the weakening of that financial integrity and rectitude which thus far in our history has been so devotedly cherished as one of the traits of true Americanism.

Our country's indebtedness, whether owing by the Government or existing between individuals, has been contracted with reference to our present standard. To decree by act of Congress that these debts shall be payable in less valuable dollars than those within the contemplation and intention of the parties when contracted would operate to transfer by the fiat of law and without compensation an amount of property and a volume of rights and interests almost incalculable.

Those who advocate a blind and headlong plunge to free coinage in the name of bimetallism, and professing the belief, contrary to all experience, that we could thus establish a double standard and a concurrent circulation of both metals in our coinage, are certainly reckoning from a cloudy standpoint. Our present standard of value is the standard of the civilized world and permits the only bimetallism now possible, or at least that is within the independent reach of any single nation, however powerful that nation may be. While the value of gold as a standard is steadied by almost universal commercial and business use, it does not despise silver nor seek its banishment. Wherever this standard is maintained there is at its side in free and unquestioned circulation a volume of silver currency sometimes equaling and sometimes even exceeding it in amount both maintained at a parity notwithstanding a depreciation or fluctuation in the intrinsic value of silver.

There is a vast difference between a standard of value and a currency for monetary use. The standard must necessarily be fixed and certain. The currency may be in divers forms and of various kinds. No silver-standard country has a gold currency in circulation, but an enlightened and wise system of finance secures the benefits of both gold and silver as currency and circulating medium by keeping the standard stable and all other currency at par with it. Such a system and such a standard also give free scope for the use and expansion of safe and conservative credit, so indispensable to broad and growing commercial transactions and so well substituted for the actual use of money. If a fixed and stable standard is maintained, such as the magnitude and safety of our commercial transactions and business require, the use of money itself is conveniently minimized.

Every dollar of fixed and stable value has through the agency of confident credit an astonishing capacity of multiplying itself in financial work. Every unstable and fluctuating dollar fails as a basis of credit, and in its use begets gambling speculation and undermines the foundations of honest enterprise.

I have ventured to express myself on this subject with earnestness and plainness of speech because I can not rid myself of the belief that there lurk in the proposition for the free coinage of silver, so strongly approved and so enthusiastically advocated by a multitude of my countrymen, a serious menace to our prosperity and an insidious temptation of our people to wander from the allegiance they owe to public and private integrity. It is because I do not distrust the good faith and sincerity of those who press this scheme that I have imperfectly but with zeal submitted my thoughts upon this momentous subject. I can not refrain from begging them to reexamine their views and beliefs in the light of patriotic reason and familiar experience and to weigh again and again the consequences of such legislation as their efforts have invited. Even the continued agitation of the subject adds greatly to the difficulties of a dangerous financial situation already forced upon us.

In conclusion I especially entreat the people's representatives in the Congress, who are charged with the responsibility of inaugurating measures for the safety and prosperity of our common country, to promptly and effectively consider the ills of our critical financial plight. I have suggested a remedy which my judgment approves. I desire, however, to assure the Congress that I am prepared to cooperate with them in perfecting any other measure promising thorough and practical relief, and that I will gladly labor with them in every patriotic endeavor to further the interests and guard the welfare of our countrymen, whom in our respective places of duty we have undertaken to serve.

GROVER CLEVELAND

***

The number of national banks organized from the time the law authorizing their creation was passed up to October 31, 1896, was 5,051, and of this number 3,679 were at the date last mentioned in active operation, having authorized capital stock of $650,014,895, held by 288,902 shareholders, and circulating notes amounting to $211,412,620.

The total outstanding circulating notes of all national banks on the 31st day of October, 1896, amounted to $234,553,807, including unredeemed but fully secured notes of banks insolvent and in process of liquidation. The increase in national-bank circulation during the year ending on that day was $21,099,429. On October 6, 1896, when the condition of national banks was last reported, the total resources of the 3,679 active institutions were $3,263,685,313.83, which included $1,893,268,839.31 in loans and discounts and $362,165,733.85 in money of all kinds on hand. Of their liabilities $1,597,891,058.03 was due to individual depositors and $209,944,019 consisted of outstanding circulating notes.

There were organized during the year preceding the date last mentioned 28 national banks, located in 15 States, of which 12 were organized in the Eastern States, with a capital of $1,180,000, 6 in the Western States, with a capital of $875,000, and 10 in the Southern States, with a capital of $1,190,000. During the year, however, 37 banks voluntarily abandoned their franchises under the national law, and in the case of 27 others it was found necessary to appoint receivers. Therefore, as compared with the year preceding, there was a decrease of 36 in the number of active banks.

The number of existing banks organized under State laws is 5,708. The number of immigrants arriving in the United States during the fiscal year was 343,267, of whom 340,468 were permitted to land and 2,799 were debarred on various grounds prescribed by law and returned to the countries whence they came at the expense of the steamship companies by which they were brought in. The increase in immigration over the preceding year amounted to 84,731. It is reported that with some exceptions the immigrants of the past year were of a hardy laboring class, accustomed and able to earn a support for themselves, and it is estimated that the money brought with them amounted to at least $5,000,000, though it was probably much in excess of that sum, since only those having less than $30 are required to disclose the exact amount, and it is known that many brought considerable sums of money to buy land and build homes. Including all the immigrants arriving who were over 14 years of age, 28.63 per cent were illiterate, as against 20.37 per cent of those of that age arriving during the preceding fiscal year. The number of immigrants over 14 years old, the countries from which they came, and the percentage of illiterates among them were as follows: Italy, 57,515, with 54.59 per cent; Ireland, 37,496, with 7 per cent; Russia, 35,188, with 41.14 per cent; Austria-Hungary and provinces, 57,053, with 38.92 per cent; Germany, 25,334, with 2.96 per cent; Sweden, 18,821, with 1.16 per cent; while from Portugal there came 2,067, of whom 77.69 per cent were illiterate. There arrived from Japan during the year only 1,110 immigrants, and it is the opinion of the immigration authorities that the apprehension heretofore existing to some extent of a large immigration from Japan to the United States is without any substantial foundation.

From the Life-Saving Service it is reported that the number of disasters to documented vessels within the limits of its operations during the year was 437. These vessels had on board 4,608 persons, of whom 4,595 were saved and 13 lost. The value of such vessels is estimated at $8,880,140 and of their cargoes $3,846,380, making the total value of property imperiled $12,726,520. Of this amount $11,292,707 was saved and $1,432,750 was lost. Sixty-seven of the vessels were totally wrecked. There were besides 243 casualties to small undocumented craft, on board of which there were 594 persons, of whom 587 were saved and 7 were lost. The value of the property involved in these latter casualties is estimated at $119,265, of which $114,915 was saved and $4,350 was lost. The life-saving crews during the year also rescued or assisted numerous other vessels and warned many from danger by signals, both by day and night. The number of disasters during the year exceeded that of any previous year in the history of the service, but the saving of both life and property was greater than ever before in proportion to the value of the property involved and to the number of persons imperiled.

The operations of the Marine-Hospital Service, the Revenue-Cutter Service, the Steamboat-Inspection Service, the Light-House Service, the Bureau of Navigation, and other branches of public work attached to the Treasury Department, together with various recommendations concerning their support and improvement, are fully stated in the report of the Secretary of the Treasury, to which the attention of the Congress is especially invited.

The report of the Secretary of War exhibits satisfactory conditions in the several branches of the public service intrusted to his charge.

The limit of our military force as fixed by law is constantly and readily maintained. The present discipline and morale of our Army are excellent, and marked progress and efficiency are apparent throughout its entire organization.

With the exception of delicate duties in the suppression of slight Indian disturbances along our southwestern boundary, in which the Mexican troops cooperated, and the compulsory but peaceful return, with the consent of Great Britain, of a band of Cree Indians from Montana to the British possessions, no active operations have been required of the Army during the year past.

Changes in methods of administration, the abandonment of unnecessary posts and consequent concentration of troops, and the exercise of care and vigilance by the various officers charged with the responsibility in the expenditure of the appropriations have resulted in reducing to a minimum the cost of maintenance of our military establishment.

During the past year the work of constructing permanent infantry and cavalry posts has been continued at the places heretofore designated. The Secretary of War repeats his recommendation that appropriations for barracks and quarters should more strictly conform to the needs of the service as judged by the Department rather than respond to the wishes and importunities of localities. It is imperative that much of the money provided for such construction should now be allotted to the erection of necessary quarters for the garrisons assigned to the coast defenses, where many men will be needed to properly care for and operate modern guns. It is essential, too, that early provision be made to supply the necessary force of artillery to meet the demands of this service.

The entire Army has now been equipped with the new magazine arms, and wise policy demands that all available public and private resources should be so employed as to provide within a reasonable time a sufficient number to supply the State militia with these modern weapons and provide an ample reserve for any emergency.

The organized militia numbers 112,879 men. The appropriations for its support by the several States approximate $2,800,000 annually, and $400,000 is contributed by the General Government. Investigation shows these troops to be usually well drilled and inspired with much military interest, but in many instances they are so deficient in proper arms and equipment that a sudden call to active duty would find them inadequately prepared for field service. I therefore recommend that prompt measures be taken to remedy this condition and that every encouragement be given to this deserving body of unpaid and voluntary citizen soldiers, upon whose assistance we must largely rely in time of trouble.

During the past year rapid progress has been made toward the completion of the scheme adopted for the erection and armament of fortifications along our seacoast, while equal progress has been made in providing the material for submarine defense in connection with these works.

It is peculiarly gratifying at this time to note the great advance that has been made in this important undertaking since the date of my annual message to the Fifty-third Congress at the opening of its second session, in December, 1893. At that time I informed the Congress of the approaching completion of nine 12-inch, twenty 10-inch, and thirty-four 8-inch high-power steel guns and seventy-five 12-inch rifled mortars.

This total then seemed insignificant when compared with the great work remaining to be done. Yet it was none the less a source of satisfaction to every citizen when he reflected that it represented the first installment of the new ordnance of American design and American manufacture and demonstrated our ability to supply from our own resources guns of unexcelled power and accuracy.

At that date, however, there were practically no carriages upon which to mount these guns and only thirty-one emplacements for guns and sixty-four for mortars. Nor were all these emplacements in condition to receive their armament. Only one high-power gun was at that time in position for the defense of the entire coast.

Since that time the number of guns actually completed has been increased to a total of twenty-one 12-inch, fifty-six 10-inch, sixty-one 8-inch high-power breech-loading steel guns, ten rapid-fire guns, and eighty 12-inch rifled mortars. In addition there are in process of construction one 16-inch-type gun, fifty 12-inch, fifty-six 10-inch, twenty-seven 8-inch high-power guns, and sixty-six 12-inch rifled mortars; in all, four hundred and twenty-eight guns and mortars.

During the same year, immediately preceding the message referred to, the first modern gun carriage had been completed and eleven more were in process of construction. All but one were of the nondisappearing type. These, however, were not such as to secure necessary cover for the artillery gunners against the intense fire of modern machine rapid-fire and high-power guns.

The inventive genius of ordnance and civilian experts has been taxed in designing carriages that would obviate this fault, resulting, it is believed, in the solution of this difficult problem. Since 1893 the number of gun carriages constructed or building has been raised to a total of 129, of which 90 are on the disappearing principle, and the number of mortar carriages to 152, while the 95 emplacements which were provided for prior to that time have been increased to 280 built and building.

This improved situation is largely due to the recent generous response of Congress to the recommendations of the War Department.

Thus we shall soon have complete about one-fifth of the comprehensive system the first step in which was noted in my message to the Congress of December 4, 1893.

When it is understood that a masonry emplacement not only furnishes a platform for the heavy modern high-power gun, but also in every particular serves the purpose and takes the place of the fort of former days, the importance of the work accomplished is better comprehended.

In the hope that the work will be prosecuted with no less vigor in the future, the Secretary of War has submitted an estimate by which, if allowed, there will be provided and either built or building by the end of the next fiscal year such additional guns, mortars, gun carriages, and emplacements as will represent not far from one-third of the total work to be done under the plan adopted for our coast defenses, thus affording a prospect that the entire work will be substantially completed within six years. In less time than that, however, we shall have attained a marked degree of security.

The experience and results of the past year demonstrate that with a continuation of present careful methods the cost of the remaining work will be much less than the original estimate.

We should always keep in mind that of all forms of military preparation coast defense alone is essentially pacific in its nature. While it gives the sense of security due to a consciousness of strength, it is neither the purpose nor the effect of such permanent fortifications to involve us in foreign complications, but rather to guarantee us against them. They are not temptation to war, but security against it. Thus they are thoroughly in accord with all the traditions of our national diplomacy.

The Attorney-General presents a detailed and interesting statement of the important work done under his supervision during the last fiscal year.

The ownership and management by the Government of penitentiaries for the confinement of those convicted in United States courts of violations of Federal laws, which for many years has been a subject of Executive recommendation, have at last to a slight extent been realized by the utilization of the abandoned military prison at Fort Leavenworth as a United States penitentiary.

This is certainly a movement in the right direction, but it ought to be at once supplemented by the rebuilding or extensive enlargement of this improvised prison and the construction of at least one more, to be located in the Southern States. The capacity of the Leavenworth penitentiary is so limited that the expense of its maintenance, calculated at a per capita rate upon the number of prisoners it can accommodate, does not make as economical an exhibit as it would if it were larger and better adapted to prison purposes; but I am thoroughly convinced that economy, humanity, and a proper sense of responsibility and duty toward those whom we punish for violations of Federal law dictate that the Federal Government should have the entire control and management of the penitentiaries where convicted violators are confined.

It appears that since the transfer of the Fort Leavenworth Military Prison to its new uses the work previously done by prisoners confined there, and for which expensive machinery has been provided, has been discontinued. This work consisted of the manufacture of articles for army use, now done elsewhere. On all grounds it is exceedingly desirable that the convicts confined in this penitentiary be allowed to resume work of this description.

It is most gratifying to note the satisfactory results that have followed the inauguration of the new system provided for by the act of May 28, 1896, under which certain Federal officials are compensated by salaries instead of fees. The new plan was put in operation on the 1st day of July, 1896, and already the great economy it enforces, its prevention of abuses, and its tendency to a better enforcement of the laws are strikingly apparent. Detailed evidence of the usefulness of this long-delayed but now happily accomplished reform will be found clearly set forth in the Attorney-General's report.

Our Post-Office Department is in good condition, and the exhibit made of its operations during the fiscal year ended June 30, 1896, if allowance is made for imperfections in the laws applicable to it, is very satisfactory. The total receipts during the year were $82,499,208.40. The total expenditures were $90,626,296.84, exclusive of the $1,559,898.27 which was earned by the Pacific Railroad for transportation and credited on their debt to the Government. There was an increase of receipts over the previous year of $5,516,080.21, or 7.1 per cent, and an increase of expenditures of $3,836,124.02, or 4.42 per cent. The deficit was $1,679,956.19 less than that of the preceding year. The chief expenditures of the postal service are regulated by law and are not in the control of the Postmaster-General. All that he can accomplish by the most watchful administration and economy is to enforce prompt and thorough collection and accounting for public moneys and such minor savings in small expenditures and in letting those contracts, for post-office supplies and star service, which are not regulated by statute.

An effective cooperation between the Auditor's Office and the Post-Office Department and the making and enforcement of orders by the Department requiring immediate notification to their sureties of all delinquencies on the part of postmasters, and compelling such postmasters to make more frequent deposits of postal funds, have resulted in a prompter auditing of their accounts and much less default to the Government than heretofore.

The year's report shows large extensions of both star-route service and railway mail service, with increased postal facilities. Much higher accuracy in handling mails has also been reached, as appears by the decrease of errors in the railway mail service and the reduction of mail matter returned to the Dead-Letter Office.

The deficit for the last year, although much less than that of the last and preceding years, emphasizes the necessity for legislation to correct the growing abuse of second-class rates, to which the deficiency is mainly attributable. The transmission at the rate of 1 cent a pound of serial libraries, advertising sheets," house organs" (periodicals advertising some particular "house" or institution), sample copies, and the like ought certainly to be discontinued. A glance at the revenues received for the work done last year will show more plainly than any other statement the gross abuse of the postal service and the growing waste of its earnings.

The free matter carried in the mails for the Departments, offices, etc., of the Government and for Congress, in pounds, amounted to 94,480,189.

If this is offset against buildings for post-offices and stations, the rental of which would more than compensate for such free postal service, we have this exhibit:

The remainder of our postal revenue, amounting to something more than $5,000,000, was derived from box rents, registry fees, money-order business, and other similar items.

The entire expenditures of the Department, including pay for transportation credited to the Pacific railroads, were $92,186,195.11, which may be considered as the cost of receiving, carrying, and delivering the above mail matter. It thus appears that though the second-class matter constituted more than two-thirds of the total that was carried, the revenue derived from it was less than one-thirtieth of the total expense.

The growth in weight of second-class matter has been from 299,000,000 pounds in 1894 to 312,000,000 in 1895 and to almost 349,000,000 in 1896, and it is quite evident this increasing drawback is far outstripping any possible growth of postal revenues.

Our mail service should of course be such as to meet the wants and even the conveniences of our people at a direct charge upon them so light as perhaps to exclude the idea of our Post-Office Department being a money-making concern; but in the face of a constantly recurring deficiency in its revenues and in view of the fact that we supply the best mail service in the world it seems to me it is quite time to correct the abuses that swell enormously our annual deficit. If we concede the public policy of carrying weekly newspapers free in the county of publication, and even the policy of carrying at less than one-tenth of their cost other bona fide newspapers and periodicals, there can be no excuse for subjecting the service to the further immense and increasing loss involved in carrying at the nominal rate of 1 cent a pound the serial libraries, sometimes including trashy and even harmful literature, and other matter which under the loose interpretation of a loose statute have been gradually given second-class rates, thus absorbing all profitable returns derived from first-class matter, which pays three or four times more than its cost, and producing a large annual loss to be paid by general taxation. If such second-class matter paid merely the cost of its handling, our deficit would disappear and a surplus result which might be used to give the people still better mail facilities or cheaper rates of letter postage. I recommend that legislation be at once enacted to correct these abuses and introduce better business ideas in the regulation of our postal rates.

Experience and observation have demonstrated that certain improvements in the organization of the Post-Office Department must be secured before we can gain the full benefit of the immense sums expended in its administration. This involves the following reforms, which I earnestly recommend:

There should be a small addition to the existing inspector service, to be employed in the supervision of the carrier force, which now numbers 13,000 men and performs its service practically without the surveillance exercised over all other branches of the postal or public service. Of course such a lack of supervision and freedom from wholesome disciplinary restraints must inevitably lead to imperfect service. There should also be appointed a few inspectors who could assist the central office in necessary investigation concerning matters of post-office leases, post-office sites, allowances for rent, fuel, and lights, and in organizing and securing the best results from the work of the 14,000 clerks now employed in first and second class offices.

I am convinced that the small expense attending the inauguration of these reforms would actually be a profitable investment.

I especially recommend such a recasting of the appropriations by Congress for the Post-Office Department as will permit the Postmaster-General to proceed with the work of consolidating post-offices. This work has already been entered upon sufficiently to fully demonstrate by experiment and experience that such consolidation is productive of better service, larger revenues, and less expenditures, to say nothing of the further advantage of gradually withdrawing post-offices from the spoils system.

The Universal Postal Union, which now embraces all the civilized world and whose delegates will represent 1,000,000,000 people, will hold its fifth congress in the city of Washington in May, 1897. The United States may be said to have taken the initiative which led to the first meeting of this congress, at Berne in 1874, and the formation of the Universal Postal Union, which brings the postal service of all countries to every man's neighborhood and has wrought marvels in cheapening postal rates and securing absolutely safe mail communication throughout the world. Previous congresses have met in Berne, Paris, Lisbon, and Vienna, and the respective countries in which they have assembled have made generous provision for their accommodation and for the reception and entertainment of the delegates.

In view of the importance of this assemblage and of its deliberations and of the honors and hospitalities accorded to our representatives by other countries on similar occasions, I earnestly hope that such an appropriation will be made for the expenses necessarily attendant upon the coming meeting in our capital city as will be worthy of our national hospitality and indicative of our appreciation of the event.

The work of the Navy Department and its present condition are fully exhibited in the report of the Secretary.

The construction of vessels for our new Navy has been energetically prosecuted by the present Administration upon the general lines previously adopted, the Department having seen no necessity for radical changes in prior methods, under which the work was found to be progressing in a manner highly satisfactory. It has been decided, however, to provide in every shipbuilding contract that the builder should pay all trial expenses, and it has also been determined to pay no speed premiums in future contracts. The premiums recently earned and some yet to be decided are features of the contracts made before this conclusion was reached.

On March 4, 1893, there were in commission but two armored vessels--the double-turreted monitors Miantonomoh and Monterey. Since that date, of vessels theretofore authorized, there have been placed in their first commission 3 first-class and 2 second-class battle ships, 2 armored cruisers, 1 harbor-defense ram, and 5 double-turreted monitors, including the Maine and the Puritan, just completed. Eight new unarmored cruisers and 2 new gunboats have also been commissioned. The Iowa, another battle ship, will be completed about March 1, and at least 4 more gunboats will be ready for sea in the early spring.

It is gratifying to state that our ships and their outfits are believed to be equal to the best that can be manufactured elsewhere, and that such notable reductions have been made in their cost as to justify the statement that quite a number of vessels are now being constructed at rates as low as those that prevail in European shipyards.

Our manufacturing facilities are at this time ample for all possible naval contingencies. Three of our Government navy-yards--those at Mare Island, Cal., Norfolk, Va., and Brooklyn, N. Y.--are equipped for shipbuilding, our ordnance plant in Washington is equal to any in the world, and at the torpedo station we are successfully making the highest grades of smokeless powder. The first-class private shipyards at Newport News, Philadelphia, and San Francisco are building battle ships; eleven contractors, situated in the States of Maine, Rhode Island, Pennsylvania, New Jersey, Maryland, Virginia, and the State of Washington, are constructing gunboats or torpedo boats; two plants are manufacturing large quantities of first-class armor, and American factories are producing automobile torpedoes, powder, projectiles, rapid-fire guns, and everything else necessary for the complete outfit of naval vessels.

There have been authorized by Congress since March, 1893, 5 battle ships, 6 light-draft gunboats, 16 torpedo boats, and 1 submarine torpedo boat. Contracts for the building of all of them have been let. The Secretary expresses the opinion that we have for the present a sufficient supply of cruisers and gunboats, and that hereafter the construction of battle ships and torpedo boats will supply our needs.

Much attention has been given to the methods of carrying on departmental business. Important modifications in the regulations have been made, tending to unify the control of shipbuilding as far as may be under the Bureau of Construction and Repair, and also to improve the mode of purchasing supplies for the Navy by the Bureau of Supplies and Accounts. The establishment under recent acts of Congress of a supply fund with which to purchase these supplies in large quantities and other modifications of methods have tended materially to their cheapening and better quality.

The War College has developed into an institution which it is believed will be of great value to the Navy in teaching the science of war, as well as in stimulating professional zeal in the Navy, and it will be especially useful in the devising of plans for the utilization in case of necessity of all the naval resources of the United States.

The Secretary has persistently adhered to the plan he found in operation for securing labor at navy-yards through boards of labor employment, and has done much to make it more complete and efficient. The naval officers who are familiar with this system and its operation express the decided opinion that its results have been to vastly improve the character of the work done at our yards and greatly reduce its cost.

Discipline among the officers and men of the Navy has been maintained to a high standard and the percentage of American citizens enlisted has been very much increased.

The Secretary is considering and will formulate during the coming winter a plan for laying up ships in reserve, thereby largely reducing the cost of maintaining our vessels afloat. This plan contemplates that battle ships, torpedo boats, and such of the cruisers as are not needed for active service at sea shall be kept in reserve with skeleton crews on board to keep them in condition, cruising only enough to insure the efficiency of the ships and their crews in time of activity.

The economy to result from this system is too obvious to need comment.

The Naval Militia, which was authorized a few years ago as an experiment, has now developed into a body of enterprising young men, active and energetic in the discharge of their duties and promising great usefulness. This establishment has nearly the same relation to our Navy as the National Guard in the different States bears to our Army, and it constitutes a source of supply for our naval forces the importance of which is immediately apparent.

The report of the Secretary of the Interior presents a comprehensive and interesting exhibit of the numerous and important affairs committed to his supervision. It is impossible in this communication to do more than briefly refer to a few of the subjects concerning which the Secretary gives full and instructive information.

The money appropriated on account of this Department and for its disbursement for the fiscal year ended June 30, 1896, amounted to more than $157,000,000, or a greater sum than was appropriated for the entire maintenance of the Government for the two fiscal years ended June 30, 1861.

Our public lands, originally amounting to 1,840,000,000 acres, have been so reduced that only about 600,000,000 acres still remain in Government control, excluding Alaska. The balance, being by far the most valuable portion, has been given away to settlers, to new States, and to railroads or sold at a comparatively nominal sum. The patenting of land in execution of railroad grants has progressed rapidly during the year, and since the 4th day of March, 1893, about 25,000,000 acres have thus been conveyed to these corporations.

I agree with the Secretary that the remainder of our public lands should be more carefully dealt with and their alienation guarded by better economy and greater prudence.

The commission appointed from the membership of the National Academy of Sciences, provided for by an act of Congress, to formulate plans for a national forestry system will, it is hoped, soon be prepared to present the result of thorough and intelligent examination of this important subject.

The total Indian population of the United States is 177,235, according to a census made in 1895, exclusive of those within the State of New York and those comprising the Five Civilized Tribes. Of this number there are approximately 38,000 children of school age. During the year 23,393 of these were enrolled in schools. The progress which has attended recent efforts to extend Indian-school facilities and the anticipation of continued liberal appropriations to that end can not fail to afford the utmost satisfaction to those who believe that the education of Indian children is a prime factor in the accomplishment of Indian civilization.

It may be said in general terms that in every particular the improvement of the Indians under Government care has been most marked and encouraging.

The Secretary, the Commissioner of Indian Affairs, and the agents having charge of Indians to whom allotments have been made strongly urge the passage of a law prohibiting the sale of liquor to allottees who have taken their lands in severalty. I earnestly join in this recommendation and venture to express the hope that the Indian may be speedily protected against this greatest of all obstacles to his well-being and advancement.

The condition of affairs among the Five Civilized Tribes, who occupy large tracts of land in the Indian Territory and who have governments of their own, has assumed such an aspect as to render it almost indispensable that there should be an entire change in the relations of these Indians to the General Government. This seems to be necessary in furtherance of their own interests, as well as for the protection of non-Indian residents in their territory. A commission organized and empowered under several recent laws is now negotiating with these Indians for the relinquishment of their courts and the division of their common lands in severalty and are aiding in the settlement of the troublesome question of tribal membership. The reception of their first proffers of negotiation was not encouraging, but through patience and such conduct on their part as demonstrated that their intentions were friendly and in the interest of the tribes the prospect of success has become more promising. The effort should be to save these Indians from the consequences of their own mistakes and improvidence and to secure to the real Indian his rights as against intruders and professed friends who profit by his retrogression. A change is also needed to protect life and property through the operation of courts conducted according to strict justice and strong enough to enforce their mandates.

As a sincere friend of the Indian, I am exceedingly anxious that these reforms should be accomplished with the consent and aid of the tribes and that no necessity may be presented for radical or drastic legislation I hope, therefore, that the commission now conducting negotiations will soon be able to report that progress has been made toward a friendly adjustment of existing difficulties.

It appears that a very valuable deposit of gilsonite or asphaltum has been found on the reservation in Utah occupied by the Uncompahgre Ute Indians. Every consideration of care for the public interest and every sensible business reason dictate such management or disposal of this important source of public revenue as will except it from the general rules and incidents attending the ordinary disposition of public lands and secure to the Government a fair share at least of its advantages in place of its transfer for a nominal sum to interested individuals.

I indorse the recommendation made by the present Secretary of the Interior, as well as his predecessor, that a permanent commission, consisting of three members, one of whom shall be an army officer, be created to perform the duties now devolving upon the Commissioner and Assistant Commissioner of Indian Affairs. The management of the Bureau involves such numerous and diverse details and the advantages of an uninterrupted policy are so apparent that I hope the change suggested will meet the approval of the Congress.

The diminution of our enormous pension roll and the decrease of pension expenditure, which have been so often confidently for told, still fail in material realization. The number of pensioners on the polls at the close of the fiscal year ended June 30, 1896, was 970,678. This is the largest number ever reported. The amount paid exclusively for pensions during the year was $138,214,761.94, a slight decrease from that of the preceding year, while the total expenditures on account of pensions, including the cost of maintaining the Department and expenses attending pension distribution, amounted to $142,206,550.59, or within every small fraction of one-third of the entire expense of supporting the Government during the same year. The number of new pension certificates issued was 90,640. Of these, 40,374 represent original allowances of claims and 15,878 increases of existing pensions.

The number of persons receiving pensions from the United States, but residing in foreign countries, at the close of the last fiscal year was 3,781, and the amount paid to them during the year was $582,735.38.

The sum appropriated for the payment of pensions for the current fiscal year, ending June 30, 1897, is $140,000,000, and for the succeeding year it is estimated that the same amount will be necessary.

The Commissioner of Pensions reports that during the last fiscal year 339 indictments were found against violators of the pension laws. Upon these indictments 167 convictions resulted.

In my opinion, based upon such statements as these and much other information and observation, the abuses which have been allowed to creep into our pension system have done incalculable harm in demoralizing our people and undermining good citizenship. I have endeavored within my sphere of official duty to protect our pension roll and make it what it should be, a roll of honor, containing the names of those disabled in their country's service and worthy of their country's affectionate remembrance. When I have seen those who pose as the soldiers' friends active and alert in urging greater laxity and more reckless pension expenditure, while nursing selfish schemes, I have deprecated the approach of a situation when necessary retrenchment and enforced economy may lead to an attack upon pension abuses so determined as to overlook the discrimination due to those who, worthy of a nation's care, ought to live and die under the protection of a nation's gratitude.

The Secretary calls attention to the public interests involved in an adjustment of the obligations of the Pacific railroads to the Government. I deem it to be an important duty to especially present this subject to the consideration of the Congress.

On January 1, 1897, with the amount already matured, more than $13,000,000 of the principal of the subsidy bonds issued by the United States in aid of the construction of the Union Pacific Railway, including its Kansas line, and more than $6,000,000 of like bonds issued in aid of the Central Pacific Railroad, including those issued to the Western Pacific Railroad Company, will have fallen due and been paid or must on that day be paid by the Government. Without any reference to the application of the sinking fund now in the Treasury, this will create such a default on the part of these companies to the Government as will give it the right to at once institute proceedings to foreclose its mortgage lien. In addition to this indebtedness, which will be due January 1, 1897, there will mature between that date and January 1, 1899, the remaining principal of such subsidy bonds, which must also be met by the Government. These amount to more than $20,000,000 on account of the Union Pacific lines and exceed $21,000,000 on account of the Central Pacific lines.

The situation of these roads and the condition of their indebtedness to the Government have been fully set forth in the reports of various committees to the present and prior Congresses, and as early as 1887 they were thoroughly examined by a special commission appointed pursuant to an act of Congress. The considerations requiring an adjustment of the Government's relations to the companies have been clearly presented and the conclusion reached with practical uniformity that if these relations are not terminated they should be revised upon a basis securing their safe continuance.

Under section 4 of the act of Congress passed March 3, 1887, the President is charged with the duty, in the event that any mortgage or other incumbrance paramount to the interest of the United States in the property of the Pacific railroads should exist and be lawfully liable to be enforced, to direct the action of the Departments of Treasury and of justice in the protection of the interest of the United States by redemption or through judicial proceedings, including foreclosures of the Government liens.

In view of the fact that the Congress has for a number of years almost constantly had under consideration various plans for dealing with the conditions existing between these roads and the Government, I have thus far felt justified in withholding action under the statute above mentioned.

In the case of the Union Pacific Company, however, the situation has become especially and immediately urgent. Proceedings have been instituted to foreclose a first mortgage upon those aided parts of the main lines upon which the Government holds a second and subordinate mortgage lien. In consequence of those proceedings and increasing complications, added to the default occurring on the 1st day of January, 1897, a condition will be presented at that date, so far as this company is concerned, that must emphasize the mandate of the act of 1887 and give to Executive duty under its provisions a more imperative aspect. Therefore, unless Congress shall otherwise direct or shall have previously determined upon a different solution of the problem, there will hardly appear to exist any reason for delaying beyond the date of the default above mentioned such Executive action as will promise to subserve the public interests and save the Government from the loss threatened by further inaction.

The Department of Agriculture is so intimately related to the welfare of our people and the prosperity of our nation that it should constantly receive the care and encouragement of the Government. From small beginnings it has grown to be the center of agricultural intelligence and the source of aid and encouragement to agricultural efforts. Large sums of money are annually appropriated for the maintenance of this Department, and it must be confessed that the legislation relating to it has not always been directly in the interest of practical farming or properly guarded against waste and extravagance. So far, however, as public money has been appropriated fairly and sensibly to help those who actually till the soil, no expenditure has been more profitably made or more generally approved by the people.

Under the present management of the Department its usefulness has been enhanced in every direction, and at the same time strict economy has been enforced to the utmost extent permitted by Congressional action. From the report of the Secretary it appears that through careful and prudent financial management he has annually saved a large sum from his appropriations, aggregating during his incumbency and up to the close of the present fiscal year nearly one-fifth of the entire amount appropriated. These results have been accomplished by a conscientious study of the real needs of the farmer and such a regard for economy as the genuine farmer ought to appreciate, supplemented by a rigid adherence to civil-service methods in a Department which should be conducted in the interest of agriculture instead of partisan politics.

The Secretary reports that the value of our exports of farm products during the last fiscal year amounted to $570,000,000, an increase of $17,000,000 over those of the year immediately preceding. This statement is not the less welcome because of the fact that, notwithstanding such increase, the proportion of exported agricultural products to our total exports of all descriptions fell off during the year. The benefits of an increase in agricultural exports being assured, the decrease in its proportion to our total exports is the more gratifying when we consider that it is owing to the fact that such total exports for the year increased more than $75,000,000.

The large and increasing exportation of our agricultural products suggests the great usefulness of the organization lately established in the Department for the purpose of giving to those engaged in farming pursuits reliable information concerning the condition, needs, and advantages of different foreign markets. Inasmuch as the success of the farmer depends upon the advantageous sale of his products, and inasmuch as foreign markets must largely be the destination of such products, it is quite apparent that a knowledge of the conditions and wants that affect those markets ought to result in sowing more intelligently and reaping with a better promise of profit. Such information points out the way to a prudent foresight in the selection and cultivation of crops and to a release from the bondage of unreasoning monotony of production, a glutted and depressed market, and constantly recurring unprofitable toil.

In my opinion the gratuitous distribution of seeds by the Department as at present conducted ought to be discontinued. No one can read the statement of the Secretary on this subject and doubt the extravagance and questionable results of this practice. The professed friends of the farmer, and certainly the farmers themselves, are naturally expected to be willing to rid a Department devoted to the promotion of farming interests of a feature which tends so much to its discredit.

The Weather Bureau, now attached to the Department of Agriculture, has continued to extend its sphere of usefulness, and by an uninterrupted improvement in the accuracy of its forecasts has greatly increased its efficiency as an aid and protection to all whose occupations are related to weather conditions.

Omitting further reference to the operations of the Department, I commend the Secretary's report and the suggestions it contains to the careful consideration of the Congress.

The progress made in civil-service reform furnishes a cause for the utmost congratulation. It has survived the doubts of its friends as well as the rancor of its enemies and has gained a permanent place among the agencies destined to cleanse our politics and to improve, economize, and elevate the public service.

There are now in the competitive classified service upward of 84,000 places, more than half of these having been included from time to time since March 4, 1893. A most radical and sweeping extension was made by Executive order dated the 6th day of May, 1896, and if fourth-class postmasterships are not included in the statement it may be said that practically all positions contemplated by the civil-service law are now classified. Abundant reasons exist for including these postmaster-ships, based upon economy, improved service, and the peace and quiet of neighborhoods. If, however, obstacles prevent such action at present, I earnestly hope that Congress will, without increasing post-office appropriations, so adjust them as to permit in proper eases a consolidation of these post-offices, to the end that through this process the result desired may to a limited extent be accomplished.

The civil-service rules as amended during the last year provide for a sensible and uniform method of promotion, basing eligibility to better positions upon demonstrated efficiency and faithfulness. The absence of fixed rules on this subject has been an infirmity in the system more and more apparent as its other benefits have been better appreciated.

The advantages of civil-service methods in their business aspects are too well understood to require argument. Their application has become a necessity to the executive work of the Government. But those who gain positions through the operation of these methods should be made to understand that the nonpartisan scheme through which they receive their appointments demands from them by way of reciprocity nonpartisan and faithful performance of duty under every Administration and cheerful fidelity to every chief. While they should be encouraged to decently exercise their rights of citizenship and to support through their suffrages the political beliefs they honestly profess, the noisy, pestilent, and partisan employee, who loves political turmoil and contention or who renders lax and grudging service to an Administration not representing his political views, should be promptly and fearlessly dealt with in such a way as to furnish a warning to others who may be likewise disposed.

The annual report of the Commissioners will be duly transmitted, and I commend the important matter they have in charge to the careful consideration of the Congress.

The Interstate Commerce Commission has during the last year supplied abundant evidence of its usefulness and the importance of the work committed to its charge.

Public transportation is a universal necessity, and the question of just and reasonable charges therefor has become of vital importance not only to shippers and carriers, but also to the vast multitude of producers and consumers. The justice and equity of the principles embodied in the existing law passed for the purpose of regulating these charges are everywhere conceded, and there appears to be no question that the policy thus entered upon has a permanent place in our legislation.

As the present statute when enacted was in the nature of the case more or less tentative and experimental, it was hardly expected to supply a complete and adequate system. While its wholesome effects are manifest and have amply justified its enactment, it is evident that all desired reforms in transportation methods have not been fully accomplished. In view of the judicial interpretation which some provisions of this statute have received and the defects disclosed by the efforts made for its enforcement, its revision and amendment appear to be essential, to the end that it may more effectually reach the evils designed to be corrected. I hope the recommendations of the Commission upon this subject will be promptly and favorably considered by the Congress.

I desire to recur to the statements elsewhere made concerning the Government's receipts and expenditures for the purpose of venturing upon some suggestions touching our present tariff law and its operation.

This statute took effect on the 28th day of August, 1894. Whatever may be its shortcomings as a complete measure of tariff reform, it must be conceded that it has opened the way to a freer and greater exchange of commodities between us and other countries, and thus furnished a wider market for our products and manufactures.

The only entire fiscal year during which this law has been in force ended on the 30th day of June, 1896. In that year our imports increased over those of the previous year more than $6,500,000, while the value of the domestic products we exported and which found markets abroad was nearly $70,000,000 more than during the preceding year.

Those who insist that the cost to our people of articles coming to them from abroad for their needful use should only be increased through tariff charges to an extent necessary to meet the expenses of the Government, as well as those who claim that tariff charges may be laid upon such articles beyond the necessities of Government revenue and with the additional purpose of so increasing their price in our markets as to give American manufacturers and producers better and more profitable opportunities, must agree that our tariff laws are only primarily justified as sources of revenue to enable the Government to meet the necessary expenses of its maintenance. Considered as to its efficiency in this aspect, the present law can by no means fall under just condemnation. During the only complete fiscal year of its operation it has yielded nearly $8,000,000 more revenue than was received from tariff duties in the preceding year. There was, nevertheless, a deficit between our receipts and expenditures of a little more than $25,000,000 This, however, was not unexpected.

The situation was such in December last, seven months before the close of the fiscal year, that the Secretary of the Treasury foretold a deficiency of $17,000,000. The great and increasing apprehension and timidity in business circles and the depression in all activities intervening since that time, resulting from causes perfectly well understood and entirely disconnected with our tariff law or its operation, seriously checked the imports we would have otherwise received and readily account for the difference between this estimate of the Secretary and the actual deficiency, as well as for a continued deficit. Indeed, it must be confessed that we could hardly have had a more unfavorable period than the last two years for the collection of tariff revenue. We can not reasonably hope that our recuperation from this business depression will be sudden, but it has already set in with a promise of acceleration and continuance.

I believe our present tariff law, if allowed a fair opportunity, will in the near future yield a revenue which, with reasonably economical expenditures, will overcome all deficiencies. In the meantime no deficit that has occurred or may occur need excite or disturb us. To meet any such deficit we have in the Treasury in addition to a gold reserve of one hundred millions a surplus of more than $128,000,000 applicable to the payment of the expenses of the Government, and which must, unless expended for that purpose, remain a useless hoard, or, if not extravagantly wasted, must in any event be perverted from the purpose of its exaction from our people. The payment, therefore, of any deficiency in the revenue from this fund is nothing more than its proper and legitimate use. The Government thus applying a surplus fortunately in its Treasury to the payment of expenses not met by its current revenues is not at all to be likened to a man living beyond his income and thus incurring debt or encroaching on his principal.

It is not one of the functions of our Government to accumulate and make additions to a fund not needed for immediate expenditure. With individuals it is the chief object of struggle and effort. The application of an accumulated fund by the Government to the payment of its running expenses is a duty. An individual living beyond his income and embarrassing himself with debt or drawing upon his accumulated fund of principal is either unfortunate or improvident. The distinction is between a government charged with the duty of expending for the benefit of the people and for proper purposes all the money it receives from any source, and the individual, who is expected to manifest a natural desire to avoid debt or to accumulate as much as possible and to live within the income derived from such accumulations, to the end that they may be increased or at least remain unimpaired for the future use and enjoyment of himself or the objects of his love and affection who may survive him.

It is immeasurably better to appropriate our surplus to the payment of justifiable expenses than to allow it to become an invitation to reckless appropriations and extravagant expenditures.

I suppose it will not be denied that under the present law our people obtain the necessaries of a comfortable existence at a cheaper rate than formerly. This is a matter of supreme importance, since it is the palpable duty of every just government to make the burdens of taxation as light as possible. The people should not be required to relinquish this privilege of cheaper living except under the stress of their Government's necessity made plainly manifest.

This reference to the condition and prospects of our revenues naturally suggests an allusion to the weakness and vices of our financial methods. They have been frequently pressed upon the attention of Congress in previous Executive communications and the inevitable danger of their continued toleration pointed out. Without now repeating these details, I can not refrain from again earnestly presenting the necessity of the prompt reform of a system opposed to every rule of sound finance and shown by experience to be fraught with the gravest peril and perplexity. The terrible Civil War, which shook the foundations of our Government more than thirty years ago, brought in its train the destruction of property, the wasting of our country's substance, and the estrangement of brethren. These are now past and forgotten. Even the distressing loss of life the conflict entailed is but a sacred memory which fosters patriotic sentiment and keeps alive a tender regard for those who nobly died. And yet there remains with us to-day in full strength and activity, as an incident of that tremendous struggle, a feature of its financial necessities not only unsuited to our present circumstances, but manifestly a disturbing menace to business security and an ever-present agent of monetary distress.

Because we may be enjoying a temporary relief from its depressing influence, this should not lull us into a false security nor lead us to forget the suddenness of past visitations.

I am more convinced than ever that we can have no assured financial peace and safety until the Government currency obligations upon which gold may be demanded from the Treasury are withdrawn from circulation and canceled. This might be done, as has been heretofore recommended, by their exchange for long-term bonds bearing a low rate of interest or by their redemption with the proceeds of such bonds. Even if only the United States notes known as greenbacks were thus retired it is probable that the Treasury notes issued in payment of silver purchases under the act of July 14, 1890, now paid in gold when demanded, would not create much disturbance, as they might from time to time, when received in the Treasury by redemption in gold or otherwise, be gradually and prudently replaced by silver coin.

This plan of issuing bonds for the purpose of redemption certainly appears to be the most effective and direct path to the needed reform. In default of this, however, it would be a step in the right direction if currency obligations redeemable in gold whenever so redeemed should be canceled instead of being reissued. This operation would be a slow remedy, but it would improve present conditions.

National banks should redeem their own notes. They should be allowed to issue circulation to the par value of bonds deposited as security for its redemption and the tax on their circulation should be reduced to one-fourth of 1 per cent.

In considering projects for the retirement of United States notes and Treasury notes issued under the law of 1890, I am of the opinion that we have placed too much stress upon the danger of contracting the currency and have calculated too little upon the gold that would be added to our circulation if invited to us by better and safer financial methods. It is not so much a contraction of our currency that should be avoided as its unequal distribution.

This might be obviated and any fear of harmful contraction at the same time removed by allowing the organization of smaller banks and in less populous communities than are now permitted, and also authorizing existing banks to establish branches in small communities under proper restrictions.

The entire case may be presented by the statement that the day of sensible and sound financial methods will not dawn upon us until our Government abandons the banking business and the accumulation of funds and confines its monetary operations to the receipt of the money contributed by the people for its support and to the expenditure of such money for the people's benefit.

Our business interests and all good citizens long for rest from feverish agitation and the inauguration by the Government of a reformed financial policy which will encourage enterprise and make certain the rewards of labor and industry.

Another topic in which our people rightfully take a deep interest may be here briefly considered. I refer to the existence of trusts and other huge aggregations of capital the object of which is to secure the monopoly of some particular branch of trade, industry, or commerce and to stifle wholesome competition. When these are defended, it is usually on the ground that though they increase profits they also reduce prices, and thus may benefit the public. It must be remembered, however, that a reduction of prices to the people is not one of the real objects of these organizations, nor is their tendency necessarily in that direction. If it occurs in a particular case it is only because it accords with the purposes or interests of those managing the scheme.

Such occasional results fall far short of compensating the palpable evils charged to the account of trusts and monopolies. Their tendency is to crush out individual independence and to hinder or prevent the free use of human faculties and the full development of human character. Through them the farmer, the artisan, and the small trader is in danger of dislodgment from the proud position of being his own master, watchful of all that touches his country's prosperity, in which he has an individual lot, and interested in all that affects the advantages of business of which he is a factor, to be relegated to the level of a mere appurtenance to a great machine, with little free will, with no duty but that of passive obedience, and with little hope or opportunity of rising in the scale of responsible and helpful citizenship.

To the instinctive belief that such is the inevitable trend of trusts and monopolies is due the widespread and deep-seated popular aversion in which they are held and the not unreasonable insistence that, whatever may be their incidental economic advantages, their general effect upon personal character, prospects, and usefulness can not be otherwise than injurious.

Though Congress has attempted to deal with this matter by legislation, the laws passed for that purpose thus far have proved ineffective, not because of any lack of disposition or attempt to enforce them, but simply because the laws themselves as interpreted by the courts do not reach the difficulty. If the insufficiencies of existing laws can be remedied by further legislation, it should be done. The fact must be recognized, however, that all Federal legislation on this subject may fall short of its purpose because of inherent obstacles and also because of the complex character of our governmental system, which, while making the Federal authority supreme within its sphere, has carefully limited that sphere by metes and bounds that can not be transgressed. The decision of our highest court on this precise question renders it quite doubtful whether the evils of trusts and monopolies can be adequately treated through Federal action unless they seek directly and purposely to include in their objects transportation or intercourse between States or between the United States and foreign countries.

It does not follow, however, that this is the limit of the remedy that may be applied. Even though it may be found that Federal authority is not broad enough to fully reach the case, there can be no doubt of the power of the several States to act effectively in the premises, and there should be no reason to doubt their willingness to judiciously exercise such power.

In concluding this communication its last words shall be an appeal to the Congress for the most rigid economy in the expenditure of the money it holds in trust for the people. The way to perplexing extravagance is easy, but a return to frugality is difficult. When, however, it is considered that those who bear the burdens of taxation have no guaranty of honest care save in the fidelity of their public servants, the duty of all possible retrenchment is plainly manifest.

When our differences are forgotten and our contests of political opinion are no longer remembered, nothing in the retrospect of our public service will be as fortunate and comforting as the recollection of official duty well performed and the memory of a constant devotion to the interests of our confiding fellow-countrymen.

GROVER CLEVELAND