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President[ Rutherford B. Hayes

         Date[ December 3, 1877

Fellow-Citizens of the Senate and House of Representatives:

With devout gratitude to the bountiful Giver of All Good, I congratulate

you that at the beginning of your first regular session you find our

country blessed with health and peace and abundant harvests, and with

encouraging prospects of an early return of general prosperity.

To complete and make permanent the pacification of the country continues to

be, and until it is fully accomplished must remain, the most important of

all our national interests. The earnest purpose of good citizens generally

to unite their efforts in this endeavor is evident. It found decided

expression in the resolutions announced in 1876 by the national conventions

of the leading political parties of the country. There was a widespread

apprehension that the momentous results in our progress as a nation marked

by the recent amendments to the Constitution were in imminent jeopardy;

that the good understanding which prompted their adoption, in the interest

of a loyal devotion to the general welfare, might prove a barren truce, and

that the two sections of the country, once engaged in civil strife, might

be again almost as widely severed and disunited as they were when arrayed

in arms against each other.

The course to be pursued, which, in my judgment, seemed wisest in the

presence of this emergency, was plainly indicated in my inaugural address.

It pointed to the time, which all our people desire to see, when a genuine

love of our whole country and of all that concerns its true welfare shall

supplant the destructive forces of the mutual animosity of races and of

sectional hostility. Opinions have differed widely as to the measures best

calculated to secure this great end. This was to be expected. The measures

adopted by the Administration have been subjected to severe and varied

criticism. Any course whatever which might have been entered upon would

certainly have encountered distrust and opposition. These measures were, in

my judgment, such as were most in harmony with the Constitution and with

the genius of our people, and best adapted, under all the circumstances, to

attain the end in view. Beneficent results, already apparent, prove that

these endeavors are not to be regarded as a mere experiment, and should

sustain and encourage us in our efforts. Already, in the brief period which

has elapsed, the immediate effectiveness, no less than the justice, of the

course pursued is demonstrated, and I have an abiding faith that time will

furnish its ample vindication in the minds of the great majority of my

fellow-citizens. The discontinuance of the use of the Army for the purpose

of upholding local governments in two States of the Union was no less a

constitutional duty and requirement, under the circumstances existing at

the time, than it was a much-needed measure for the restoration of local

self-government and the promotion of national harmony. The withdrawal of

the troops from such employment was effected deliberately, and with

solicitous care for the peace and good order of society and the protection

of the property and persons and every right of all classes of citizens.

The results that have followed are indeed significant and encouraging. All

apprehension of danger from remitting those States to local self-government

is dispelled, and a most salutary change in the minds of the people has

begun and is in progress in every part of that section of the country once

the theater of unhappy civil strife, substituting for suspicion, distrust,

and aversion, concord, friendship, and patriotic attachment to the Union.

No unprejudiced mind will deny that the terrible and often fatal collisions

which for several years have been of frequent occurrence and have agitated

and alarmed the public mind have almost entirely ceased, and that a spirit

of mutual forbearance and hearty national interest has succeeded. There has

been a general reestablishment of order and of the orderly administration

of justice. Instances of remaining lawlessness have become of rare

occurrence; political turmoil and turbulence have disappeared; useful

industries have been resumed; public credit in the Southern States has been

greatly strengthened, and the encouraging benefits of a revival of commerce

between the sections of the country lately embroiled in civil war are fully

enjoyed. Such are some of the results already attained, upon which the

country is to be congratulated. They are of such importance that we may

with confidence patiently await the desired consummation that will surely

come with the natural progress of events.

It may not be improper here to say that it should be our fixed and

unalterable determination to protect by all available and proper means

under the Constitution and the laws the lately emancipated race in the

enjoyment of their rights and privileges; and I urge upon those to whom

heretofore the colored people have sustained the relation of bondmen the

wisdom and justice of humane and liberal local legislation with respect to

their education and general welfare. A firm adherence to the laws, both

national and State, as to the civil and political rights of the colored

people, now advanced to full and equal citizenship; the immediate

repression and sure punishment by the national and local authorities,

within their respective jurisdictions, of every instance of lawlessness and

violence toward them, is required for the security alike of both races, and

is justly demanded by the public opinion of the country and the age. In

this way the restoration of harmony and good will and the complete

protection of every citizen in the full enjoyment of every constitutional

right will surely be attained. Whatever authority rests with me to this end

I shall not hesitate to put forth.

Whatever belongs to the power of Congress and the jurisdiction of the

courts of the Union, they may confidently be relied upon to provide and

perform; and to the legislatures, the courts, and the executive authorities

of the several States I earnestly appeal to secure, by adequate,

appropriate, and seasonable means, Within their borders, these common and

uniform rights of a united people which loves liberty, abhors oppression,

and reveres justice. These objects are very dear to my heart. I shall

continue most earnestly to strive for their attainment. The cordial

cooperation of all classes, of all sections of the country and of both

races, is required for this purpose; and with these blessings assured, and

not otherwise, we may safely hope to hand down our free institutions of

government unimpaired to the generations that will succeed us.

Among the other subjects of great and general importance to the people of

this country, I can not be mistaken, I think, in regarding as preeminent

the policy and measures which are designed to secure the restoration of the

currency to that normal and healthful condition in which, by the resumption

of specie payments, our internal trade and foreign commerce may be brought

into harmony with the system of exchanges which is based upon the precious

metals as the intrinsic money of the world. In the public judgment that

this end should be sought and compassed as speedily and securely as the

resources of the people and the wisdom of their Government can accomplish,

there is a much greater degree of unanimity than is found to concur in the

specific measures which will bring the country to this desired end or the

rapidity of the steps by which it can be safely reached.

Upon a most anxious and deliberate examination, which I have felt it my

duty to give to the subject, I am but the more confirmed in the opinion

which I expressed in accepting the nomination for the Presidency, and again

upon my inauguration, that the policy of resumption should be pursued by

every suitable means, and that no legislation would be wise that should

disparage the importance or retard the attainment of that result. I have no

disposition, and certainly no right, to question the sincerity or the

intelligence of opposing opinions, and would neither conceal nor undervalue

the considerable difficulties, and even occasional distresses, which may

attend the progress of the nation toward this primary condition to its

general and permanent prosperity. I must, however, adhere to my most

earnest conviction that any wavering in purpose or unsteadiness in methods,

so far from avoiding or reducing the inconvenience inseparable from the

transition from an irredeemable to a redeemable paper currency, would only

tend to increased and prolonged disturbance in values, and unless retrieved

must end in serious disorder, dishonor, and disaster in the financial

affairs of the Government and of the people.

The mischiefs which I apprehend and urgently deprecate are confined to no

class of the people, indeed, but seem to me most certainly to threaten the

industrious masses, whether their occupations are of skilled or common

labor. To them, it seems to me, it is of prime importance that their labor

should be compensated in money which is itself fixed in exchangeable value

by being irrevocably measured by the labor necessary to its production.

This permanent quality of the money of the people is sought for, and can

only be gained by the resumption of specie payments. The rich, the

speculative, the operating, the money-dealing classes may not always feel

the mischiefs of, or may find casual profits in, a variable currency, but

the misfortunes of such a currency to those who are paid salaries or wages

are inevitable and remediless.

Closely connected with this general subject of the resumption of specie

payments is one of subordinate, but still of grave, importance; I mean the

readjustment of our coinage system by the renewal of the silver dollar as

an element in our specie currency, endowed by legislation with the quality

of legal tender to a greater or less extent.

As there is no doubt of the power of Congress under the Constitution "to

coin money and regulate the value thereof," and as this power covers the

whole range of authority applicable to the metal, the rated value and the

legal-tender quality which shall be adopted for the coinage, the

considerations which should induce or discourage a particular measure

connected with the coinage, belong clearly to the province of legislative

discretion and of public expediency. Without intruding upon this province

of legislation in the least, I have yet thought the subject of such

critical importance, in the actual condition of our affairs, as to present

an occasion for the exercise of the duty imposed by the Constitution on the

President of recommending to the consideration of Congress "such measures

as he shall judge necessary and expedient."

Holding the opinion, as I do, that neither the interests of the Government

nor of the people of the United States would be promoted by disparaging

silver as one of the two precious metals which furnish the coinage of the

world, and that legislation which looks to maintaining the volume of

intrinsic money to as full a measure of both metals as their relative

commercial values will permit would be neither unjust nor inexpedient, I

must ask your indulgence to a brief and definite statement of certain

essential features in any such legislative measure which I feel it my duty

to recommend.

I do not propose to enter the debate, represented on both sides by such

able disputants in Congress and before the people and in the press, as to

the extent to which the legislation of any one nation can control this

question, even within its own borders, against the unwritten laws of trade

or the positive laws of other governments. The wisdom of Congress in

shaping any particular law that may be presented for my approval may wholly

supersede the necessity of my entering into these considerations, and I

willingly avoid either vague or intricate inquiries. It is only certain

plain and practical traits of such legislation that I desire to recommend

to your attention.

In any legislation providing for a silver coinage, regulating its value,

and imparting to it the quality of legal tender, it seems to me of great

importance that Congress should not lose sight of its action as operating

in a twofold capacity and in two distinct directions. If the United States

Government were free from a public debt, its legislative dealing with the

question of silver coinage would be purely sovereign and governmental,

under no restraints but those of constitutional power and the public good

as affected by the proposed legislation. But in the actual circumstances of

the nation, with a vast public debt distributed very widely among our own

citizens and held in great amounts also abroad, the nature of the

silver-coinage measure, as affecting this relation of the Government to the

holders of the public debt, becomes an element, in any proposed

legislation, of the highest concern. The obligation of the public faith

transcends all questions of profit or public advantage otherwise. Its

unquestionable maintenance is the dictate as well of the highest expediency

as of the most necessary duty, and will ever be carefully guarded by

Congress and people alike.

The public debt of the United States to the amount of $729,000,000 bears

interest at the rate of 6 per cent, and $708,000,000 at the rate of 5 per

cent, and the only way in which the country can be relieved from the

payment of these high rates of interest is by advantageously refunding the

indebtedness. Whether the debt is ultimately paid in gold or in silver coin

is of but little moment compared with the possible reduction of interest

one-third by refunding it at such reduced rate. If the United States had

the unquestioned right to pay its bonds in silver coin, the little benefit

from that process would be greatly overbalanced by the injurious effect of

such payment if made or proposed against the honest convictions of the

public creditors.

All the bonds that have been issued since February 12, 1873, when gold

became the only unlimited legal-tender metallic currency of the country,

are justly payable in gold coin or in coin of equal value. During the time

of these issues the only dollar that could be or was received by the

Government in exchange for bonds was the gold dollar. To require the public

creditors to take in repayment any dollar of less commercial value would be

regarded by them as a repudiation of the full obligation assumed. The bonds

issued prior to 1873 were issued at a time when the gold dollar was the

only coin in circulation or contemplated by either the Government or the

holders of the bonds as the coin in which they were to be paid. It is far

better to pay these bonds in that coin than to seem to take advantage of

the unforeseen fall in silver bullion to pay in a new issue of silver coin

thus made so much less valuable. The power of the United States to coin

money and to regulate the value thereof ought never to be exercised for the

purpose of enabling the Government to pay its obligations in a coin of less

value than that contemplated by the parties when the bonds were issued. Any

attempt to pay the national indebtedness in a coinage of less commercial

value than the money of the world would involve a violation of the public

faith and work irreparable injury to the public credit.

It was the great merit of the act of March, 1869, in strengthening the

public credit, that it removed all doubt as to the purpose of the United

States to pay their bonded debt in coin. That act was accepted as a pledge

of public faith. The Government has derived great benefit from it in the

progress thus far made in refunding the public debt at low rates of

interest. An adherence to the wise and just policy of an exact observance

of the public faith will enable the Government rapidly to reduce the burden

of interest on the national debt to an amount exceeding $20,000,000 per

annum, and effect an aggregate saving to the United States of more than

$300,000,000 before the bonds can be fully paid.

In adapting the new silver coinage to the ordinary uses of currency in the

everyday transactions of life and prescribing the quality of legal tender

to be assigned to it, a consideration of the first importance should be so

to adjust the ratio between the silver and the gold coinage, which now

constitutes our specie currency, as to accomplish the desired end of

maintaining the circulation of the two metallic currencies and keeping up

the volume of the two precious metals as our intrinsic money. It is a mixed

question, for scientific reasoning and historical experience to determine,

how far and by what methods a practical equilibrium can be maintained which

will keep both metals in circulation in their appropriate spheres of common

use.

An absolute equality of commercial value, free from disturbing

fluctuations, is hardly attainable, and without it an unlimited legal

tender for private transactions assigned to both metals would irresistibly

tend to drive out of circulation the clearer coinage and disappoint the

principal object proposed by the legislation in view. I apprehend,

therefore, that the two conditions of a near approach to equality of

commercial value between the gold and silver coinage of the same

denomination and of a limitation of the amounts for which the silver

coinage is to be a legal tender are essential to maintaining both in

circulation. If these conditions can be successfully observed, the issue

from the mint of silver dollars would afford material assistance to the

community in the transition to redeemable paper money, and would facilitate

the resumption of specie payment and its permanent establishment. Without

these conditions I fear that only mischief and misfortune would flow from a

coinage of silver dollars with the quality of unlimited legal tender, even

in private transactions.

Any expectation of temporary ease from an issue of silver coinage to pass

as a legal tender at a rate materially above its commercial value is, I am

persuaded, a delusion. Nor can I think that there is any substantial

distinction between an original issue of silver dollars at a nominal value

materially above their commercial value and the restoration of the silver

dollar at a rate which once was, but has ceased to be, its commercial

value. Certainly the issue of our gold coinage, reduced in weight

materially below its legal-tender value, would not be any the less a

present debasement of the coinage by reason of its equaling, or even

exceeding, in weight a gold coinage which at some past time had been

commercially equal to the legal-tender value assigned to the new issue.

In recommending that the regulation of any silver coinage which may be

authorized by Congress should observe these conditions of commercial value

and limited legal tender, I am governed by the feeling that every possible

increase should be given to the volume of metallic money which can be kept

in circulation, and thereby every possible aid afforded to the people in

the process of resuming specie payments. It is because of my firm

conviction that a disregard of these conditions would frustrate the good

results which are desired from the proposed coinage, and embarrass with new

elements of confusion and uncertainty the business of the country, that I

urge upon your attention these considerations.

I respectfully recommend to Congress that in any legislation providing for

a silver coinage and imparting to it the quality of legal tender there be

impressed upon the measure a firm provision exempting the public debt

heretofore issued and now outstanding from payment, either of principal or

interest, in any coinage of less commercial value than the present gold

coinage of the country.

The organization of the civil service of the country has for a number of

years attracted more and more of the public attention. So general has

become the opinion that the methods of admission to it and the conditions

of remaining in it are unsound that both the great political parties have

agreed in the most explicit declarations of the necessity of reform and in

the most emphatic demands for it. I have fully believed these declarations

and demands to be the expression of a sincere conviction of the intelligent

masses of the people upon the subject, and that they should be recognized

and followed by earnest and prompt action on the part of the legislative

and executive departments of the Government, in pursuance of the purpose

indicated.

Before my accession to office I endeavored to have my own views distinctly

understood, and upon my inauguration my accord with the public opinion was

stated in terms believed to be plain and unambiguous. My experience in the

executive duties has strongly confirmed the belief in the great advantage

the country would find in observing strictly the plan of the Constitution,

which imposes upon the Executive the sole duty and responsibility of the

selection of those Federal officers who by law are appointed, not elected,

and which in like manner assigns to the Senate the complete right to advise

and consent to or to reject the nominations so made, whilst the House of

Representatives stands as the public censor of the performance of official

duties, with the prerogative of investigation and prosecution in all cases

of dereliction. The blemishes and imperfections in the civil service may,

as I think, be traced in most cases to a practical confusion of the duties

assigned to the several Departments of the Government. My purpose in this

respect has been to return to the system established by the fundamental

law, and to do this with the heartiest cooperation and most cordial

understanding with the Senate and House of Representatives.

The practical difficulties in the selection of numerous officers for posts

of widely varying responsibilities and duties are acknowledged to be very

great. No system can be expected to secure absolute freedom from mistakes,

and the beginning of any attempted change of custom is quite likely to be

more embarrassed in this respect than any subsequent period. It is here

that the Constitution seems to me to prove its claim to the great wisdom

accorded to it. It gives to the Executive the assistance of the knowledge

and experience of the Senate, which, when acting upon nominations as to

which they may be disinterested and impartial judges, secures as strong a

guaranty of freedom from errors of importance as is perhaps possible in

human affairs.

In addition to this, I recognize the public advantage of making all

nominations, as nearly as possible, impersonal, in the sense of being free

from mere caprice or favor in the selection; and in those offices in which

special training is of greatly increased value I believe such a rule as to

the tenure of office should obtain as may induce men of proper

qualifications to apply themselves industriously to the task of becoming

proficients. Bearing these things in mind, I have endeavored to reduce the

number of changes in subordinate places usually made upon the change of the

general administration, and shall most heartily cooperate with Congress in

the better systematizing of such methods and rules of admission to the

public service and of promotion within it as, may promise to be most

successful in making thorough competency, efficiency, and character the

decisive tests in these matters.

I ask the renewed attention of Congress to what has already been done by

the Civil Service Commission, appointed, in pursuance of an act of

Congress, by my predecessor, to prepare and revise civil-service rules. In

regard to much of the departmental service, especially at Washington, it

may be difficult to organize a better system than that which has thus been

provided, and it is now being used to a considerable extent under my

direction. The Commission has still a legal existence, although for several

years no appropriation has been made for defraying its expenses. Believing

that this Commission has rendered valuable service and will be a most

useful agency in improving the administration of the civil service, I

respectfully recommend that a suitable appropriation, to be immediately

available, be made to enable it to continue its labors.

It is my purpose to transmit to Congress as early as practicable a report

by the chairman of the Commission, and to ask your attention to such

measures on this subject as in my opinion will further promote the

improvement of the civil service.

During the past year the United States have continued to maintain peaceful

relations with foreign powers.

The outbreak of war between Russia and Turkey, though at one time attended

by grave apprehension as to its effect upon other European nations, has had

no tendency to disturb the amicable relations existing between the United

States and each of the two contending powers. An attitude of just and

impartial neutrality has been preserved, and I am gratified to state that

in the midst of their hostilities both the Russian and the Turkish

Governments have shown an earnest disposition to adhere to the obligations

of all treaties with the United States and to give due regard to the rights

of American citizens.

By the terms of the treaty defining the rights, immunities, and privileges

of consuls, between Italy and the United States, ratified in 1868, either

Government may, after the lapse of ten years, terminate the existence of

the treaty by giving twelve months' notice of its intention. The Government

of Italy, availing itself of this faculty, has now given the required

notice, and the treaty will accordingly end on the 17th of September, 1878.

It is understood, however, that the Italian Government wishes to renew it

in its general scope, desiring only certain modifications in some of its

articles. In this disposition I concur, and shall hope that no serious

obstacles may intervene to prevent or delay the negotiation of a

satisfactory treaty.

Numerous questions in regard to passports, naturalization, and exemption

from military service have continued to arise in cases of emigrants from

Germany who have returned to their native country. The provisions of the

treaty of February 22, 1868, however, have proved to be so ample and so

judicious that the legation of the United States at Berlin has been able to

adjust all claims arising under it, not only without detriment to the

amicable relations existing between the two Governments, but, it is

believed, without injury or injustice to any duly naturalized American

citizen. It is desirable that the treaty originally made with the North

German Union in 1868 should now be extended so as to apply equally to all

the States of the Empire of Germany.

The invitation of the Government of France to participate in the Exposition

of the Products of Agriculture, Industry, and the Fine Arts to be held at

Paris during the coming year was submitted for your consideration at the

extra session. It is not doubted that its acceptance by the United States,

and a well-selected exhibition of the products of American industry on that

occasion, will tend to stimulate international commerce and emigration, as

well as to promote the traditional friendship between the two countries.

A question arose some time since as to the proper meaning of the

extradition articles of the treaty of 1842 between the United States and

Great Britain. Both Governments, however, are now in accord in the belief

that the question is not one that should be allowed to frustrate the ends

of justice or to disturb the friendship between the two nations. No serious

difficulty has arisen in accomplishing the extradition of criminals when

necessary. It is probable that all points of disagreement will in due time

be settled, and, if need be, more explicit declarations be made in a new

treaty.

The Fishery Commission under Articles XVIII to XXV of the treaty of

Washington has concluded its session at Halifax. The result of the

deliberations of the commission, as made public by the commissioners, will

be communicated to Congress.

A treaty for the protection of trade-marks has been negotiated with Great

Britain, which has been submitted to the Senate for its consideration.

The revolution which recently occurred in Mexico was followed by the

accession of the successful party to power and the installation of its

chief, General Porfirio Diaz, in the Presidential office. It has been the

custom of the United States, when such changes of government have

heretofore occurred in Mexico, to recognize and enter into official

relations with the de facto government as soon as it should appear to have

the approval of the Mexican people and should manifest a disposition to

adhere to the obligations of treaties and international friendship. In the

present case such official recognition has been deferred by the occurrences

on the Rio Grande border, the records of which have been already

communicated to each House of Congress in answer to their respective

resolutions of inquiry. Assurances have been received that the authorities

at the seat of the Mexican Government have both the disposition and the

power to prevent and punish such unlawful invasions and depredations. It is

earnestly to be hoped that events may prove these assurances to be well

rounded. The best interests of both countries require the maintenance of

peace upon the border and the development of commerce between the two

Republics.

It is gratifying to add that this temporary interruption of official

relations has not prevented due attention by the representatives of the

United States in Mexico to the protection of American citizens, so far as

practicable; nor has it interfered with the prompt payment of the amounts

due from Mexico to the United States under the treaty of July 4, 1868, and

the awards of the joint commission. While I do not anticipate an

interruption of friendly relations with Mexico, yet I can not but look with

some solicitude upon a continuance of border disorders as exposing the two

countries to initiations of popular feeling and mischances of action which

are naturally unfavorable to complete amity. Firmly determined that nothing

shall be wanting on my part to promote a good understanding between the two

nations, I yet must ask the attention of Congress to the actual occurrences

on the border, that the lives and property of our citizens may be

adequately protected and peace preserved.

Another year has passed without bringing to a close the protracted contest

between the Spanish Government and the insurrection in the island of Cuba.

While the United States have sedulously abstained from any intervention in

this contest, it is impossible not to feel that it is attended with

incidents affecting the rights and interests of American citizens. Apart

from the effect of the hostilities upon trade between the United States and

Cuba, their progress is inevitably accompanied by complaints, having more

or less foundation, of searches, arrests, embargoes, and oppressive taxes

upon the property of American residents, and of unprovoked interference

with American vessels and commerce. It is due to the Government of Spain to

say that during the past year it has promptly disavowed and offered

reparation for any unauthorized acts of unduly zealous subordinates

whenever such acts have been brought to its attention. Nevertheless, such

occurrences can not but tend to excite feelings of annoyance, suspicion,

and resentment, which are greatly to be deprecated, between the respective

subjects and citizens of two friendly powers.

Much delay (consequent upon accusations of fraud in some of the awards) has

occurred in respect to the distribution of the limited amounts received

from Venezuela under the treaty of April 25, 1866, applicable to the awards

of the joint commission created by that treaty. So long as these matters

are pending in Congress the Executive can not assume either to pass upon

the questions presented or to distribute the fund received. It is eminently

desirable that definite legislative action should be taken, either

affirming the awards to be final or providing some method for reexamination

of the claims. Our relations with the Republics of Central and South

America and with the Empire of Brazil have continued without serious

change, further than the temporary interruption of diplomatic intercourse

with Venezuela and with Guatemala. Amicable relations have already been

fully restored with Venezuela, and it is not doubted that all grounds of

misunderstanding with Guatemala will speedily be removed. From all these

countries there are favorable indications of a disposition on the part of

their Governments and people to reciprocate our efforts in the direction of

increased commercial intercourse.

The Government of the Samoan Islands has sent an envoy, in the person of

its secretary of state, to invite the Government of the United States to

recognize and protect their independence, to establish commercial relations

with their people, and to assist them in their steps toward regulated and

responsible government. The inhabitants of these islands, having made

considerable progress in Christian civilization and the development of

trade, are doubtful of their ability to maintain peace and independence

without the aid of some stronger power. The subject is deemed worthy of

respectful attention, and the claims upon our assistance by this distant

community will be carefully considered.

The long commercial depression in the United States has directed attention

to the subject of the possible increase of our foreign trade and the

methods for its development, not only with Europe, but with other

countries, and especially with the States and sovereignties of the Western

Hemisphere. Instructions from the Department of State were issued to the

various diplomatic and consular officers of the Government, asking them to

devote attention to the question of methods by which trade between the

respective countries of their official residence and the United States

could be most judiciously fostered. In obedience to these instructions,

examinations and reports upon this subject have been made by many of these

officers and transmitted to the Department, and the same are submitted to

the consideration of Congress.

The annual report of the Secretary of the Treasury on the state of the

finances presents important questions for the action of Congress, upon some

of which I have already remarked.

The revenues of the Government during the fiscal year ending June 30, 1877,

were $269,000,586.62; the total expenditures for the same period were

$238,660,008.93, leaving a surplus revenue of $30,340,577.69. This has

substantially supplied the requirements of the sinking fund for that year.

The estimated revenues of the current fiscal year are $265,500,000, and the

estimated expenditures for the same period are $232,430,643.72. If these

estimates prove to be correct, there will be a surplus revenue of

$33,069,356.28--an amount nearly sufficient for the sinking fund for that

year. The estimated revenues for the next fiscal year are $269,250,000. It

appears from the report that during the last fiscal year the revenues of

the Government, compared with the previous year, have largely decreased.

This decrease, amounting to the sum of $18,481,452.54, was mainly in

customs duties, caused partly by a large falling off of the amount of

imported dutiable goods and partly by the general fall of prices in the

markets of production of such articles as pay ad valorem taxes.

While this is felt injuriously in the diminution of the revenue, it has

been accompanied with a very large increase of exportations. The total

exports during the last fiscal year, including coin, have been

$658,637,457, and the imports have been $492,097,540, leaving a balance of

trade in favor of the United States amounting to the sum of $166,539,917,

the beneficial effects of which extend to all branches of business.

The estimated revenue for the next fiscal year will impose upon Congress

the duty of strictly limiting appropriations, including the requisite sum

for the maintenance of the sinking fund, within the aggregate estimated

receipts.

While the aggregate of taxes should not be increased, amendments might be

made to the revenue laws that would, without diminishing the revenue,

relieve the people from unnecessary burdens. A tax on tea and coffee is

shown by the experience not only of our own country, but of other

countries, to be easily collected, without loss by undervaluation or fraud,

and largely borne in the country of production. A tax of 10 cents a pound

on tea and 2 cents a pound on coffee would produce a revenue exceeding

$12,000,000, and thus enable Congress to repeal a multitude of annoying

taxes yielding a revenue not exceeding that sum. The internal-revenue

system grew out of the necessities of the war, and most of the legislation

imposing taxes upon domestic products under this system has been repealed.

By the substitution of a tax on tea and coffee all forms of internal

taxation may be repealed, except that on whisky, spirits, tobacco, and

beer. Attention is also called to the necessity of enacting more vigorous

laws for the protection of the revenue and for the punishment of frauds and

smuggling. This can best be done by judicious provisions that will induce

the disclosure of attempted fraud by undervaluation and smuggling. All

revenue laws should be simple in their provisions and easily understood. So

far as practicable, the rates of taxation should be in the form of specific

duties, and not ad valorem, requiring the judgment of experienced men to

ascertain values and exposing the revenue to the temptation of fraud.

My attention has been called during the recess of Congress to abuses

existing in the collection of the customs, and strenuous efforts have been

made for their correction by Executive orders. The recommendations

submitted to the Secretary of the Treasury by a commission appointed to

examine into the collection of customs duties at the port of New York

contain many suggestions for the modification of the customs laws, to which

the attention of Congress is invited.

It is matter of congratulation that notwithstanding the severe burdens

caused by the war the public faith with all creditors has been preserved,

and that as the result of this policy the public credit has continuously

advanced and our public securities are regarded with the highest favor in

the markets of the world. I trust that no act of the Government will cast a

shadow upon its credit.

The progress of refunding the public debt has been rapid and satisfactory.

Under the contract existing when I entered upon the discharge of the duties

of my office, bonds bearing interest at the rate of 4 1/2 per cent were

being rapidly sold, and within three months the aggregate sales of these

bonds had reached the sum of $200,000,000. With my sanction the Secretary

of the Treasury entered into a new contract for the sale of 4 per cent

bonds, and within thirty days after the popular subscription for such bonds

was opened subscriptions were had amounting to $75,496,550, which were paid

for within ninety days after the date of subscription. By this process,

within but little more than one year, the annual interest on the public

debt was reduced in the sum of $3,775,000.

I recommended that suitable provision be made to enable the people to

easily convert their savings into Government securities, as the best mode

in which small savings may be well secured and yield a moderate interest.

It is an object of public policy to retain among our own people the

securities of the United States. In this way our country is guarded against

their sudden return from foreign countries, caused by war or other

disturbances beyond our limits.

The commerce of the United States with foreign nations, and especially the

export of domestic productions, has of late years largely increased; but

the greater portion of this trade is conducted in foreign vessels. The

importance of enlarging our foreign trade, and especially by direct and

speedy interchange with countries on this continent, can not be

overestimated; and it is a matter of great moment that our own shipping

interest should receive, to the utmost practical extent, the benefit of our

commerce with other lands. These considerations are forcibly urged by all

the large commercial cities of the country, and public attention is

generally and wisely attracted to the solution of the problems they

present. It is not doubted that Congress will take them up in the broadest

spirit of liberality and respond to the public demand by practical

legislation upon this important subject.

The report of the Secretary of War shows that the Army has been actively

employed during the year, and has rendered very important service in

suppressing hostilities in the Indian country and in preserving peace and

protecting life and property in the interior as well as along the Mexican

border. A long and arduous campaign has been prosecuted, with final

complete success, against a portion of the Nez Perce tribe of Indians. A

full account of this campaign will be found in the report of the General of

the Army. It will be seen that in its course several severe battles were

fought, in which a number of gallant officers and men lost their lives. I

join with the Secretary of War and the General of the Army in awarding to

the officers and men employed in the long and toilsome pursuit and in the

final capture of these Indians the honor and praise which are so justly

their due.

The very serious riots which occurred in several of the States in July last

rendered necessary the employment of a considerable portion of the Army to

preserve the peace and maintain order. In the States of West Virginia,

Maryland, Pennsylvania, and Illinois these disturbances were so formidable

as to defy the local and State authorities, and the National Executive was

called upon, in the mode provided by the Constitution and laws, to furnish

military aid. I am gratified to be able to state that the troops sent in

response to these calls for aid in the suppression of domestic violence

were able, by the influence of their presence in the disturbed regions, to

preserve the peace and restore order without the use of force. In the

discharge of this delicate and important duty both officers and men acted

with great prudence and courage, and for their services deserve the thanks

of the country.

Disturbances along the Rio Grande in Texas, to which I have already

referred, have rendered necessary the constant employment of a military

force in that vicinity. A full report of all recent military operations in

that quarter has been transmitted to the House of Representatives in answer

to a resolution of that body, and it will therefore not be necessary to

enter into details. I regret to say that these lawless incursions into our

territory by armed bands from the Mexican side of the line, for the purpose

of robbery, have been of frequent occurrence, and in spite of the most

vigilant efforts of the commander of our forces the marauders have

generally succeeded in escaping into Mexico with their plunder. In May last

I gave orders for the exercise of the utmost vigilance on the part of our

troops for the suppression of these raids and the punishment of the guilty

parties, as well as the recapture of property stolen by them. General Ord,

commanding in Texas, was directed to invite the cooperation of the Mexican

authorities in efforts to this end, and to assure them that I was anxious

to avoid giving the least offense to Mexico. At the same time, he was

directed to give notice of my determination to put an end to the invasion

of our territory by lawless bands intent upon the plunder of our peaceful

citizens, even if the effectual punishment of the outlaws should make the

crossing of the border by our troops in their pursuit necessary. It is

believed that this policy has had the effect to check somewhat these

depredations, and that with a considerable increase of our force upon that

frontier and the establishment of several additional military posts along

the Rio Grande, so as more effectually to guard that extensive border,

peace may be preserved and the lives and property of our citizens in Texas

fully protected.

Prior to the 1st day of July last the Army was, in accordance with law,

reduced to the maximum of 25,000 enlisted men, being a reduction of 2,500

below the force previously authorized. This reduction was made, as required

by law, entirely from the infantry and artillery branches of the service,

without any reduction of the cavalry. Under the law as it now stands it is

necessary that the cavalry regiments be recruited to 100 men in each

company for service on the Mexican and Indian frontiers. The necessary

effect of this legislation is to reduce the infantry and artillery arms of

the service below the number required for efficiency, and I concur with the

Secretary of War in recommending that authority be given to recruit all

companies of infantry to at least 50 men and all batteries of artillery to

at least 75 men, with the power, in case of emergency, to increase the

former to 100 and the latter to 122 men each.

I invite your special attention to the following recommendations of the

Secretary of War:

First. That provision be made for supplying to the Army a more abundant and

better supply of reading matter.

Second. That early action be taken by Congress looking to a complete

revision and republication of the Army Regulations.

Third. That section 1258 of the Revised Statutes, limiting the number of

officers on the retired list, be repealed.

Fourth. That the claims arising under the act of July 4, 1864, for supplies

taken by the Army during the war, be taken from the offices of the

Quartermaster and Commissary Generals and transferred to the Southern

Claims Commission, or some other tribunal having more time and better

facilities for their prompt investigation and decision than are possessed

by these officers.

Fifth. That Congress provide for an annuity fund for the families of

deceased soldiers, as recommended by the paymaster-General of the Army.

The report of the Secretary of the Navy shows that we have six squadrons

now engaged in the protection of our foreign commerce and other duties

pertaining to the naval service. The condition and operations of the

Department are also shown. The total expenditures for the fiscal year

ending June 30, 1877, were $16,077,974.54. There are unpaid claims against

the Department chargeable to the last year, which are presented to the

consideration of Congress by the report of the Secretary. The estimates for

the fiscal year commencing July 1, 1878, are $16,233,234.40, exclusive of

the sum of $2,314,231 submitted for new buildings, repairs, and

improvements at the several navy-yards. The appropriations for the present

fiscal year, commencing July 1, 1877, are $13,592,932.90. The amount drawn

from the Treasury from July 1 to November 1, 1877, is $5,343,037.40, of

which there is estimated to be yet available $1,029,528.30, showing the

amount of actual expenditure during the first four months of the present

fiscal year to have been $4,313,509.10.

The report of the Postmaster-General contains a full and clear statement of

the operations and condition of the Post-Office Department. The ordinary

revenues of the Department for the fiscal year ending June 30, 1877,

including receipts from the money-order business and from official stamps

and stamped envelopes, amounted to the sum of $27,531,585.26. The

additional sum of $7,013,000 was realized from appropriations from the

general Treasury for various purposes, making the receipts from all sources

$34,544,885.26. The total expenditures during the fiscal year amounted to

$33,486,322.44, leaving an excess of total receipts over total expenditures

of $1,058,562.82, and an excess of total expenditures over ordinary

receipts of $5,954,737.18. Deducting from the total receipts the sum of

$63,261.84, received from international money orders of the preceding

fiscal year, and deducting from the total expenditures the sum of

$1,163,818.20, paid on liabilities incurred in previous fiscal years, the

expenditures and receipts appertaining to the business of the last fiscal

year were as follows:

Expenditures - $32,322,504.24

Receipts (ordinary, from money-order business and

from official postage stamps) - 27,468,323,420 -

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