To the Congress of the United States:

As representatives of the people in the legislative branch of their
Government, you have assembled at a time when the strength and excellence of
our free institutions and the fitness of our citizens to enjoy popular rule
have been again made manifest. A political contest involving momentous
consequences, fraught with feverish apprehension, and creating aggressiveness
so intense as to approach bitterness and passion has been waged throughout our
land and determined by the decree of free and independent suffrage without
disturbance of our tranquillity or the least sign of weakness in our national
structure.

When we consider these incidents and contemplate the peaceful obedience and
manly submission which have succeeded a heated clash of political opinions, we
discover abundant evidence of a determination on the part of our countrymen to
abide by every verdict of the popular will and to be controlled at all times
by an abiding faith in the agencies established for the direction of the
affairs of their Government.

Thus our people exhibit a patriotic disposition which entitles them to demand
of those who undertake to make and execute their laws such faithful and
unselfish service in their behalf as can only be prompted by a serious
appreciation of the trust and confidence which the acceptance of public duty
invites.

In obedience to a constitutional requirement I herein submit to the Congress
certain information concerning national affairs, with the suggestion of such
legislation as in my judgment is necessary and expedient. To secure brevity
and avoid tiresome narration I shall omit many details concerning matters
within Federal control which, though by no means unimportant, are more
profitably discussed in departmental reports. I shall also further curtail
this communication by omitting a minute recital of many minor incidents
connected with our foreign relations which have heretofore found a place in
Executive messages, but are now contained in a report of the Secretary of
State, which is herewith submitted.

At the outset of a reference to the more important matters affecting our
relations with foreign powers it would afford me satisfaction if I could
assure the Congress that the disturbed condition in Asiatic Turkey had during
the past year assumed a less hideous and bloody aspect and that, either as a
consequence of the awakening of the Turkish Government to the demands of
humane civilization or as the result of decisive action on the part of the
great nations having the right by treaty to interfere for the protection of
those exposed to the rage of mad bigotry and cruel fanaticism, the shocking
features of the situation had been mitigated. Instead, however, of welcoming a
softened disposition or protective intervention, we have been afflicted by
continued and not unfrequent reports of the wanton destruction of homes and
the bloody butchery of men, women, and children, made martyrs to their
profession of Christian faith.

While none of our citizens in Turkey have thus far been killed or wounded,
though often in the midst of dreadful scenes of danger, their safety in the
future is by no means assured. Our Government at home and our minister at
Constantinople have left nothing undone to protect our missionaries in Ottoman
territory, who constitute nearly all the individuals residing there who have a
right to claim our protection on the score of American citizenship. Our
efforts in this direction will not be relaxed; but the deep feeling and
sympathy that have been aroused among our people ought not to so far blind
their reason and judgment as to lead them to demand impossible things. The
outbreaks of the blind fury which lead to murder and pillage in Turkey occur
suddenly and without notice, and an attempt on our part to force such a
hostile presence there as might be effective for prevention or protection
would not only be resisted by the Ottoman Government, but would be regarded as
an interruption of their plans by the great nations who assert their exclusive
right to intervene in their own time and method for the security of life and
property in Turkey.

Several naval vessels are stationed in the Mediterranean as a measure of
caution and to furnish all possible relief and refuge in case of emergency.

We have made claims against the Turkish Government for the pillage and
destruction of missionary property at Harpoot and Marash during uprisings at
those places. Thus far the validity of these demands has not been admitted,
though our minister, prior to such outrages and in anticipation of danger,
demanded protection for the persons and property of our missionary citizens in
the localities mentioned and notwithstanding that strong evidence exists of
actual complicity of Turkish soldiers in the work of destruction and robbery.

The facts as they now appear do not permit us to doubt the justice of these
claims, and nothing will be omitted to bring about their prompt settlement.

A number of Armenian refugees having arrived at our ports, an order has lately
been obtained from the Turkish Government permitting the wives and children of
such refugees to join them here. It is hoped that hereafter no obstacle will
be interposed to prevent the escape of all those who seek to avoid the perils
which threaten them in Turkish dominions.

Our recently appointed consul to Erzerum is at his post and discharging the
duties of his office, though for some unaccountable reason his formal
exequatur from the Sultan has not been issued.

I do not believe that the present somber prospect in Turkey will be long
permitted to offend the sight of Christendom. It so mars the humane and
enlightened civilization that belongs to the close of the nineteenth century
that it seems hardly possible that the earnest demand of good people
throughout the Christian world for its corrective treatment will remain
unanswered.

The insurrection in Cuba still continues with all its perplexities. It is
difficult to perceive that any progress has thus far been made toward the
pacification of the island or that the situation of affairs as depicted in my
last annual message has in the least improved. If Spain still holds Havana and
the seaports and all the considerable towns, the insurgents still roam at will
over at least two-thirds of the inland country. If the determination of Spain
to put down the insurrection seems but to strengthen with the lapse of time
and is evinced by her unhesitating devotion of largely increased military and
naval forces to the task, there is much reason to believe that the insurgents
have gained in point of numbers and character and resources and are none the
less inflexible in their resolve not to succumb without practically securing
the great objects for which they took up arms. If Spain has not yet
reestablished her authority, neither have the insurgents yet made good their
title to be regarded as an independent state. Indeed, as the contest has gone
on the pretense that civil government exists on the island, except so far as
Spain is able to maintain it, has been practically abandoned. Spain does keep
on foot such a government, more or less imperfectly, in the large towns and
their immediate suburbs; but that exception being made, the entire country is
either given over to anarchy or is subject to the military occupation of one
or the other party. It is reported, indeed, on reliable authority that at the
demand of the commander in chief of the insurgent army the putative Cuban
government has now given up all attempt to exercise its functions, leaving
that government confessedly (what there is the best reason for supposing it
always to have been in fact) a government merely on paper.

Were the Spanish armies able to meet their antagonists in the open or in
pitched battle, prompt and decisive results might be looked for, and the
immense superiority of the Spanish forces in numbers, discipline, and
equipment could hardly fail to tell greatly to their advantage. But they are
called upon to face a foe that shuns general engagements, that can choose and
does choose its own ground, that from the nature of the country is visible or
invisible at pleasure, and that fights only from ambuscade and when all the
advantages of position and numbers are on its side. In a country where all
that is indispensable to life in the way of food, clothing, and shelter is so
easily obtainable, especially by those born and bred on the soil, it is
obvious that there is hardly a limit to the time during which hostilities of
this sort may be prolonged. Meanwhile, as in all cases of protracted civil
strife, the passions of the combatants grow more and more inflamed and
excesses on both sides become more frequent and more deplorable. They are also
participated in by bands of marauders, who, now in the name of one party and
now in the name of the other, as may best suit the occasion, harry the country
at will and plunder its wretched inhabitants for their own advantage. Such a
condition of things would inevitably entail immense destruction of property,
even if it were the policy of both parties to prevent it as far as
practicable; but while such seemed to be the original policy of the Spanish
Government, it has now apparently abandoned it and is acting upon the same
theory as the insurgents, namely, that the exigencies of the contest require
the wholesale annihilation of property that it may not prove of use and
advantage to the enemy.

It is to the same end that, in pursuance of general orders, Spanish garrisons
are now being withdrawn from plantations and the rural population required to
concentrate itself in the towns. The sure result would seem to be that the
industrial value of the island is fast diminishing and that unless there is a
speedy and radical change in existing conditions it will soon disappear
altogether. That value consists very largely, of course, in its capacity to
produce sugar--a capacity already much reduced by the interruptions to tillage
which have taken place during the last two years. It is reliably asserted that
should these interruptions continue during the current year, and practically
extend, as is now threatened, to the entire sugar-producing territory of the
island, so much time and so much money will be required to restore the land to
its normal productiveness that it is extremely doubtful if capital can be
induced to even make the attempt.

The spectacle of the utter ruin of an adjoining country, by nature one of the
most fertile and charming on the globe, would engage the serious attention of
the Government and people of the United States in any circumstances. In point
of fact, they have a concern with it which is by no means of a wholly
sentimental or philanthropic character. It lies so near to us as to be hardly
separated from our territory. Our actual pecuniary interest in it is second
only to that of the people and Government of Spain. It is reasonably estimated
that at least from $30,000,000 to $50,000,000 of American capital are invested
in plantations and in railroad, mining, and other business enterprises on the
island. The volume of trade between the United States and Cuba, which in 1889
amounted to about $64,000,000, rose in 1893 to about $103,000,000, and in
1894, the year before the present insurrection broke out, amounted to nearly
$96,000,000. Besides this large pecuniary stake in the fortunes of Cuba, the
United States finds itself inextricably involved in the present contest in
other ways, both vexatious and costly.

Many Cubans reside in this country, and indirectly promote the insurrection
through the press, by public meetings, by the purchase and shipment of arms,
by the raising of funds, and by other means which the spirit of our
institutions and the tenor of our laws do not permit to be made the subject of
criminal prosecutions. Some of them, though Cubans at heart and in all their
feelings and interests, have taken out papers as naturalized citizens of the
United States--a proceeding resorted to with a view to possible protection by
this Government, and not unnaturally regarded with much indignation by the
country of their origin. The insurgents are undoubtedly encouraged and
supported by the widespread sympathy the people of this country always and
instinctively feel for every struggle for better and freer government, and
which, in the case of the more adventurous and restless elements of our
population, leads in only too many instances to active and personal
participation in the contest. The result is that this Government is constantly
called upon to protect American citizens, to claim damages for injuries to
persons and property, now estimated at many millions of dollars, and to ask
explanations and apologies for the acts of Spanish officials whose zeal for
the repression of rebellion sometimes blinds them to the immunities belonging
to the unoffending citizens of a friendly power. It follows from the same
causes that the United States is compelled to actively police a long line of
seacoast against unlawful expeditions, the escape of which the utmost
vigilance will not always suffice to prevent.

These inevitable entanglements of the United States with the rebellion in
Cuba, the large American property interests affected, and considerations of
philanthropy and humanity in general have led to a vehement demand in various
quarters for some sort of positive intervention on the part of the United
States. It was at first proposed that belligerent rights should be accorded to
the insurgents--a proposition no longer urged because untimely and in
practical operation dearly perilous and injurious to our own interests. It has
since been and is now sometimes contended that the independence of the
insurgents should be recognized; but imperfect and restricted as the Spanish
government of the island may be, no other exists there, unless the will of the
military officer in temporary command of a particular district can be
dignified as a species of government. It is now also suggested that the United
States should buy the island--a suggestion possibly worthy of consideration if
there were any evidence of a desire or willingness on the part of Spain to
entertain such a proposal. It is urged finally that, all other methods
failing, the existing internecine strife in Cuba should be terminated by our
intervention, even at the cost of a war between the United States and Spain--a
war which its advocates confidently prophesy could neither be large in its
proportions nor doubtful in its issue.

The correctness of this forecast need be neither affirmed nor denied. The
United States has, nevertheless, a character to maintain as a nation, which
plainly dictates that right and not might should be the rule of its conduct.
Further, though the United States is not a nation to which peace is a
necessity, it is in truth the most pacific of powers and desires nothing so
much as to live in amity with all the world. Its own ample and diversified
domains satisfy all possible longings for territory, preclude all dreams of
conquest, and prevent any casting of covetous eyes upon neighboring regions,
however attractive. That our conduct toward Spain and her dominions has
constituted no exception to this national disposition is made manifest by the
course of our Government, not only thus far during the present insurrection,
but during the ten years that followed the rising at Yara in 1868. No other
great power, it may safely be said, under circumstances of similar perplexity,
would have manifested the same restraint and the same patient endurance. It
may also be said that this persistent attitude of the United States toward
Spain in connection with Cuba unquestionably evinces no slight respect and
regard for Spain on the part of the American people. They in truth do not
forget her connection with the discovery of the Western Hemisphere, nor do
they underestimate the great qualities of the Spanish people nor fail to fully
recognize their splendid patriotism and their chivalrous devotion to the
national honor.

They view with wonder and admiration the cheerful resolution with which vast
bodies of men are sent across thousands of miles of ocean and an enormous debt
accumulated that the costly possession of the gem of the Antilles may still
hold its place in the Spanish crown. And yet neither the Government nor the
people of the United States have shut their eyes to the course of events in
Cuba or have failed to realize the existence of conceded grievances which have
led to the present revolt from the authority of Spain--grievances recognized
by the Queen Regent and by the Cortes, voiced by the most patriotic and
enlightened of Spanish statesmen, without regard to party, and demonstrated by
reforms proposed by the executive and approved by the legislative branch of
the Spanish Government. It is in the assumed temper and disposition of the
Spanish Government to remedy these grievances, fortified by indications of
influential public opinion in Spain, that this Government has hoped to
discover the most promising and effective means of composing the present
strife with honor and advantage to Spain and with the achievement of all the
reasonable objects of the insurrection.

It would seem that if Spain should offer to Cuba genuine autonomy--a measure
of home rule which, while preserving the sovereignty of Spain, would satisfy
all rational requirements of her Spanish subjects--there should be no just
reason why the pacification of the island might not be effected on that basis.
Such a result would appear to be in the true interest of all concerned. It
would at once stop the conflict which is now consuming the resources of the
island and making it worthless for whichever party may ultimately prevail. It
would keep intact the possessions of Spain without touching her honor, which
will be consulted rather than impugned by the adequate redress of admitted
grievances. It would put the prosperity of the island and the fortunes of its
inhabitants within their own control without severing the natural and ancient
ties which bind them to the mother country, and would yet enable them to test
their capacity for self-government under the most favorable conditions. It has
been objected on the one side that Spain should not promise autonomy until her
insurgent subjects lay down their arms; on the other side, that promised
autonomy, however liberal, is insufficient, because without assurance of the
promise being fulfilled.

But the reasonableness of a requirement by Spain of unconditional surrender on
the part of the insurgent Cubans before their autonomy is conceded is not
altogether apparent. It ignores important features of the situation--the
stability two years' duration has given to the insurrection; the feasibility
of its indefinite prolongation in the nature of things, and, as shown by past
experience, the utter and imminent ruin of the island unless the present
strife is speedily composed; above all, the rank abuses which all parties in
Spain, all branches of her Government, and all her leading public men concede
to exist and profess a desire to remove. Facing such circumstances, to
withhold the proffer of needed reforms until the parties demanding them put
themselves at mercy by throwing down their arms has the appearance of
neglecting the gravest of perils and inviting suspicion as to the sincerity of
any professed willingness to grant reforms. The objection on behalf of the
insurgents that promised reforms can not be relied upon must of course be
considered, though we have no right to assume and no reason for assuming that
anything Spain undertakes to do for the relief of Cuba will not be done
according to both the spirit and the letter of the undertaking.

Nevertheless, realizing that suspicions and precautions on the part of the
weaker of two combatants are always natural and not always unjustifiable,
being sincerely desirous in the interest of both as well as on its own account
that the Cuban problem should be solved with the least possible delay, it was
intimated by this Government to the Government of Spain some months ago that
if a satisfactory measure of home rule were tendered the Cuban insurgents and
would be accepted by them upon a guaranty of its execution the United States
would endeavor to find a way not objectionable to Spain of furnishing such
graranty. While no definite response to this intimation has yet been received
from the Spanish Government, it is believed to be not altogether unwelcome,
while, as already suggested, no reason is perceived why it should not be
approved by the insurgents. Neither party can fail to see the importance of
early action, and both must realize that to prolong the present state of
things for even a short period will add enormously to the time and labor and
expenditure necessary to bring about the industrial recuperation of the
island. It is therefore fervently hoped on all grounds that earnest efforts
for healing the breach between Spain and the insurgent Cubans upon the lines
above indicated may be at once inaugurated and pushed to an immediate and
successful issue. The friendly offices of the United States, either in the
manner above outlined or in any other way consistent with our Constitution and
laws, will always be at the disposal of either party.

Whatever circumstances may arise, our policy and our interests would constrain
us to object to the acquisition of the island or an interference with its
control by any other power.

It should be added that it can not be reasonably assumed that the hitherto
expectant attitude of the United States will be indefinitely maintained. While
we are anxious to accord all due respect to the sovereignty of Spain, we can
not view the pending conflict in all its features and properly apprehend our
inevitably close relations to it and its possible results without considering
that by the course of events we may be drawn into such an unusual and
unprecedented condition as will fix a limit to our patient waiting for Spain
to end the contest, either alone and in her own way or with our friendly
cooperation.

When the inability of Spain to deal successfully with the insurrection has
become manifest and it is demonstrated that her sovereignty is extinct in Cuba
for all purposes of its rightful existence, and when a hopeless struggle for
its reestablishment has degenerated into a strife which means nothing more
than the useless sacrifice of human life and the utter destruction of the very
subject-matter of the conflict, a situation will be presented in which our
obligations to the sovereignty of Spain will be superseded by higher
obligations, which we can hardly hesitate to recognize and discharge.
Deferring the choice of ways and methods until the time for action arrives, we
should make them depend upon the precise conditions then existing; and they
should not be determined upon without giving careful heed to every
consideration involving our honor and interest or the international duty we
owe to Spain. Until we face the contingencies suggested or the situation is by
other incidents imperatively changed we should continue in the line of conduct
heretofore pursued, thus in all circumstances exhibiting our obedience to the
requirements of public law and our regard for the duty enjoined upon us by the
position we occupy in the family of nations.

A contemplation of emergencies that may arise should plainly lead us to avoid
their creation, either through a careless disregard of present duty or even an
undue stimulation and ill-timed expression of feeling. But I have deemed it
not amiss to remind the Congress that a time may arrive when a correct policy
and care for our interests, as well as a regard for the interests of other
nations and their citizens, joined by considerations of humanity and a desire
to see a rich and fertile country intimately related to us saved from complete
devastation, will constrain our Government to such action as will subserve the
interests thus involved and at the same time promise to Cuba and its
inhabitants an opportunity to enjoy the blessings of peace.

The Venezuelan boundary question has ceased to be a matter of difference
between Great Britain and the United States, their respective Governments
having agreed upon the substantial provisions of a treaty between Great
Britain and Venezuela submitting the whole controversy to arbitration. The
provisions of the treaty are so eminently just and fair that the assent of
Venezuela thereto may confidently be anticipated.

Negotiations for a treaty of general arbitration for all differences between
Great Britain and the United States are far advanced and promise to reach a
successful consummation at an early date.

The scheme of examining applicants for certain consular positions to test
their competency and fitness, adopted under an Executive order issued on the
20th of September, 1895, has fully demonstrated the usefulness of this
innovation. In connection with this plan of examination promotions and
transfers of deserving incumbents have been quite extensively made, with
excellent results.

During the past year 35 appointments have been made in the consular service,
27 of which were made to fill vacancies caused by death or resignation or to
supply newly created posts, 2 to succeed incumbents removed for cause, 2 for
the purpose of displacing alien consular officials by American citizens, and 4
merely changing the official title of incumbent from commercial agent to
consul. Twelve of these appointments were transfers or promotions from other
positions under the Department of State, 4 of those appointed had rendered
previous service under the Department, 8 were made of persons who passed a
satisfactory examination, 7 were appointed to places not included in the order
of September 20, 1895, and 4 appointments, as above stated, involved no change
of incumbency. The inspection of consular offices provided for by an
appropriation for that purpose at the last session of the Congress has been
productive of such wholesome effects that I hope this important work will in
the future be continued. I know of nothing that can be done with the same
slight expense so improving to the service.

I desire to repeat the recommendation contained in my last annual message in
favor of providing at public expense official residences for our ambassadors
and ministers at foreign capitals. The reasons supporting this recommendation
are strongly stated in the report of the Secretary of State, and the subject
seems of such importance that I hope it may receive the early attention of the
Congress.

We have during the last year labored faithfully and against unfavorable
conditions to secure better preservation of seal life in the Bering Sea. Both
the United States and Great Britain have lately dispatched commissioners to
these waters to study the habits and condition of the seal herd and the causes
of their rapid decrease. Upon the reports of these commissioners, soon to be
submitted, and with the exercise of patience and good sense on the part of all
interested parties, it is earnestly hoped that hearty cooperation may be
secured for the protection against threatened extinction of seal life in the
Northern Pacific and Bering Sea.

The Secretary of the Treasury reports that during the fiscal year ended June
30, 1896, the receipts of the Government from all sources amounted to
$409,475,408.78. During the same period its expenditures were $434,678,654.48,
the excess of expenditures over receipts thus amounting to $25,203,245.70. The
ordinary expenditures during the year were $4,015,852.21 less than during the
preceding fiscal year. Of the receipts mentioned there was derived from
customs the sum of $160,021,751.67 and from internal revenue $146,830,615.66.
The receipts from customs show an increase of $7,863,134.22 over those from
the same source for the fiscal year ended June 30, 1895, and the receipts from
internal revenue an increase of $3,584,537.91.

The value of our imported dutiable merchandise during the last fiscal year was
$369,757,470 and the value of free goods imported $409,967,470, being an
increase of $6,523,675 in the value of dutiable goods and $41,231,034 in the
value of free goods over the preceding year. Our exports of merchandise,
foreign and domestic, amounted in value to $882,606,938, being an increase
over the preceding year of $75,068,773. The average ad valorem duty paid on
dutiable goods imported during the year was 39.94 per cent and on free and
dutiable goods taken together 20.55 per cent.

The cost of collecting our internal revenue was 2.78 per cent, as against 2.81
per cent for the fiscal year ending June 30, 1895. The total production of
distilled spirits, exclusive of fruit brandies, was 86,588,703 taxable
gallons, being an increase of 6,639,108 gallons over the preceding year. There
was also an increase of 1,443,676 gallons of spirits produced from fruit as
compared with the preceding year. The number of barrels of beer produced was
35,859,250, as against 33,589,784 produced in the preceding fiscal year, being
all increase of 2,269,466 barrels.

The total amount of gold exported during the last fiscal year was $112,409,947
and of silver $60,541,670, being an increase of $45,941,466 of gold and
$13,246,384 of silver over the exportations of the preceding fiscal year. The
imports of gold were $33,525,065 and of silver $28,777,186, being $2,859,695
less of gold and $8,566,007 more of silver than during the preceding year.

The total stock of metallic money in the United States at the close of the
last fiscal year, ended on the 30th day of June, 1896, was $1,228,326,035, of
which $599,597,964 was in gold and $628,728,071 in silver.

On the 1st day of November, 1896, the total stock of money of all kinds in the
country was $2,285,410,590, and the amount in circulation, not including that
in the Treasury holdings, was $1,627,055,641, being $22.63 per capita upon an
estimated population of 71,902,000.

The production of the precious metals in the United States during the calendar
year 1895 is estimated to have been 2,254,760 fine ounces of gold, of the
value of $46,610,000, and 55,727,000 fine ounces of silver, of the commercial
value of $36,445,000 and the coinage value of $72,051,000. The estimated
production of these metals throughout the world during the same period was
9,688,821 fine ounces of gold, amounting to $200,285,700 in value, and
169,189,249 fine ounces of silver, of the commercial value of $110,654,000 and
of the coinage value of $218,738,100 according to our ratio.

The coinage of these metals in the various countries of the world during the
same calendar year amounted to $232,701,438 in gold and $121,996,219 in
silver.

The total coinage at the mints of the United States during the fiscal year
ended June 30, 1896, amounted to $71,188,468.52, of which $58,878,490 was in
gold coins and $12,309,978.52 in standard silver dollars, subsidiary coins,
and minor coins

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:

Weight of mail matter (other than above) transmitted through the mails for the
year ending June 30, 1896. Class

Weight

Revenue

Pounds

1. Domestic and foreign letters and postal cards, etc 	65,337,343
	$60,624,464 2. Newspapers and periodicals, 1 cent per pound
	348,988,648 	2,996,403 3. Books, seeds, etc., 8 cents a pound
	78,701,148 	10,324,069 4. Parcels, etc., 16 cents a pound
	19,950,187 	3,129,321

Total 	512,977,326 	77,044,257

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 average revenue was--

From each pound of first-class matter .........cents 	93.0 From each pound
of second class ...............mills 	8.5 From each pound of third class
...................cents 	13.1 From each pound of fourth class
..................do 	15.6 Of the second class 52,348,297 was county-free
matter.

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