To the Senate and House of Representatives:

The year that has passed since the submission of my last message to
Congress has, especially during the latter part of it, been an eventful one
to the country. In the midst of great national prosperity a financial
crisis has occurred that has brought low fortunes of gigantic proportions;
political partisanship has almost ceased to exist, especially in the
agricultural regions; and, finally, the capture upon the high seas of a
vessel bearing our flag has for a time threatened the most serious
consequences, and has agitated the public mind from one end of the country
to the other. But this, happily, now is in the course of satisfactory
adjustment, honorable to both nations concerned.

The relations of the United States, however, with most of the other powers
continue to be friendly and cordial. With France, Germany, Russia, Italy,
and the minor European powers; with Brazil and most of the South American
Republics, and with Japan, nothing has occurred during the year to demand
special notice. The correspondence between the Department of State and
various diplomatic representatives in or from those countries is
transmitted herewith.

In executing the will of Congress, as expressed in its joint resolution of
the 14th of February last, and in accordance with the provisions of the
resolution, a number of "practical artisans," of "scientific men," and of
"honorary commissioners" were authorized to attend the exposition at Vienna
as commissioners on the part of the United States. It is believed that we
have obtained the object which Congress had in view when it passed the
joint resolution--"in order to enable the people of the United States to
participate in the advantages of the International Exhibition of the
Products of Agriculture, Manufactures, and the Fine Arts to be held at
Vienna." I take pleasure in adding that the American exhibitors have
received a gratifying number of diplomas and of medals.

During the exposition a conference was held at Vienna for the purpose of
consultation on the systems prevailing in different countries for the
protection of inventions. I authorized a representative from the Patent
Office to be present at Vienna at the time when this conference was to take
place, in order to aid as far as he might in securing any possible
additional protection to American inventors in Europe. The report of this
agent will be laid before Congress.

It is my pleasant duty to announce to Congress that the Emperor of China,
on attaining his majority, received the diplomatic representatives of the
Western powers in person. An account of these ceremonies and of the
interesting discussions which preceded them will be found in the documents
transmitted herewith. The accompanying papers show that some advance,
although slight, has been made during the past year toward the suppression
of the infamous Chinese cooly trade. I recommend Congress to inquire
whether additional legislation be not needed on this subject.

The money awarded to the United States by the tribunal of arbitration at
Geneva was paid by Her Majesty's Government a few days in advance of the
time when it would have become payable according to the terms of the
treaty. In compliance with the provisions of the act of March 3, 1873, it
was at once paid into the Treasury, and used to redeem, so far as it might,
the public debt of the United States; and the amount so redeemed was
invested in a 5 per cent registered bond of the United States for
$15,500,000, which is now held by the Secretary of State, subject to the
future disposition of Congress.

I renew my recommendation, made at the opening of the last session of
Congress, that a commission be created for the purpose of auditing and
determining the amounts of the several "direct losses growing out of the
destruction of vessels and their cargoes" by the Alabama, the Florida, or
the Shenandoah after leaving Melbourne, for which the sufferers have
received no equivalent or compensation, and of ascertaining the names of
the persons entitled to receive compensation for the same, making the
computations upon the basis indicated by the tribunal of arbitration at
Geneva; and that payment of such losses be authorized to an extent not to
exceed the awards of the tribunal at Geneva.

By an act approved on the 14th day of February last Congress made provision
for completing, jointly with an officer or commissioner to be named by Her
Britannic Majesty, the determination of so much of the boundary line
between the territory of the United States and the possessions of Great
Britain as was left uncompleted by the commissioners appointed under the
act of Congress of August 11, 1856. Under the provisions of this act the
northwest water boundary of the United States has been determined and
marked in accordance with the award of the Emperor of Germany. A protocol
and a copy of the map upon which the line was thus marked are contained in
the papers submitted herewith.

I also transmit a copy of the report of the commissioner for marking the
northern boundary between the United States and the British possessions
west of the Lake of the Woods, of the operations of the commission during
the past season. Surveys have been made to a point 497 miles west of the
Lake of the Woods, leaving about 350 miles to be surveyed, the field work
of which can be completed during the next season.

The mixed commission organized under the provisions of the treaty of
Washington for settling and determining the claims of citizens of either
power against the other arising out of acts committed against their persons
or property during the period between April 13, 1861, and April 9, 1865,
made its final award on the 25th day of September last. It was awarded that
the Government of the United States should pay to the Government of Her
Britannic Majesty, within twelve months from the date of the award, the sum
of $1,929,819 in gold. The commission disallowed or dismissed all other
claims of British subjects against the United States. The amount of the
claims presented by the British Government, but disallowed or dismissed, is
understood to be about $93,000,000. It also disallowed all the claims of
citizens of the United States against Great Britain which were referred to
it.

I recommend the early passage of an act appropriating the amount necessary
to pay this award against the United States.

I have caused to be communicated to the Government of the King of Italy the
thanks of this Government for the eminent services rendered by Count Corti
as the third commissioner on this commission. With dignity, learning, and
impartiality he discharged duties requiring great labor and constant
patience, to the satisfaction, I believe, of both Governments. I recommend
legislation to create a special court, to consist of three judges, who
shall be empowered to hear and determine all claims of aliens upon the
United States arising out of acts committed against their persons or
property during the insurrection. The recent reference under the treaty of
Washington was confined to claims of British subjects arising during the
period named in the treaty; but it is understood that there are other
British claims of a similar nature, arising after the 9th of April, 1865,
and it is known that other claims of a like nature are advanced by citizens
or subjects of other powers. It is desirable to have these claims also
examined and disposed of.

Official information being received from the Dutch Government of a state of
war between the King of the Netherlands and the Sultan of Acheen, the
officers of the United States who were near the seat of the war were
instructed to observe an impartial neutrality. It is believed that they
have done so.

The joint commission under the convention with Mexico of 1868, having again
been legally prolonged, has resumed its business, which, it is hoped, may
be brought to an early conclusion. The distinguished representative of Her
Britannic Majesty at Washington has kindly consented, with the approval of
his Government, to assume the arduous and responsible duties of umpire in
this commission, and to lend the weight of his character and name to such
decisions as may not receive the acquiescence of both the arbitrators
appointed by the respective Governments.

The commissioners appointed pursuant to the authority of Congress to
examine into the nature and extent of the forays by trespassers from that
country upon the herds of Texas have made a report, which will be submitted
for your consideration.

The Venezuelan Government has been apprised of the sense of Congress in
regard to the awards of the joint commission under the convention of 25th
April, 1866, as expressed in the act of the 25th of February last.

It is apprehended that that Government does not realize the character of
its obligations under that convention. As there is reason to believe,
however, that its hesitancy in recognizing them springs, in part at least,
from real difficulty in discharging them in connection with its obligations
to other governments, the expediency of further forbearance on our part is
believed to be worthy of your consideration.

The Ottoman Government and that of Egypt have latterly shown a disposition
to relieve foreign consuls of the judicial powers which heretofore they
have exercised in the Turkish dominions, by organizing other tribunals. As
Congress, however, has by law provided for the discharge of judicial
functions by consuls of the United States in that quarter under the treaty
of 1830, I have not felt at liberty formally to accept the proposed change
without the assent of Congress, whose decision upon the subject at as early
a period as may be convenient is earnestly requested.

I transmit herewith, for the consideration and determination of Congress,
an application of the Republic of Santo Domingo to this Government to
exercise a protectorate over that Republic.

Since the adjournment of Congress the following treaties with foreign
powers have been proclaimed: A naturalization convention with Denmark; a
convention with Mexico for renewing the Claims Commission; a convention of
friendship, commerce, and extradition with the Orange Free State, and a
naturalization convention with Ecuador.

I renew the recommendation made in my message of December, 1870, that
Congress authorize the Postmaster-General to issue all commissions to
officials appointed through his Department.

I invite the earnest attention of Congress to the existing laws of the
United States respecting expatriation and the election of nationality by
individuals. Many citizens of the United States reside permanently abroad
with their families. Under the provisions of the act approved February 10,
1855, the children of such persons are to be deemed and taken to be
citizens of the United States, but the rights of citizenship are not to
descend to persons whose fathers never resided in the United States.

It thus happens that persons who have never resided within the United
States have been enabled to put forward a pretension to the protection of
the United States against the claim to military service of the government
under whose protection they were born and have been reared. In some cases
even naturalized citizens of the United States have returned to the land of
their birth, with intent to remain there, and their children, the issue of
a marriage contracted there after their return, and who have never been in
the United States, have laid claim to our protection when the lapse of many
years had imposed upon them the duty of military service to the only
government which had ever known them personally.

Until the year 1868 it was left, embarrassed by conflicting opinions of
courts and of jurists, to determine how far the doctrine of perpetual
allegiance derived from our former colonial relations with Great Britain
was applicable to American citizens. Congress then wisely swept these
doubts away by enacting that--Any declaration, instruction, opinion,
order, or decision of any officer of this Government which denies,
restricts, impairs, or questions the right of expatriation is inconsistent
with the fundamental principles of this Government. But Congress did not
indicate in that statute, nor has it since done so, what acts are to be
deemed to work expatriation. For my own guidance in determining such
questions I required (under the provisions of the Constitution) the opinion
in writing of the principal officer in each of the Executive Departments
upon certain questions relating to this subject. The result satisfies me
that further legislation has become necessary. I therefore commend the
subject to the careful consideration of Congress, and I transmit herewith
copies of the several opinions of the principal officers of the Executive
Departments, together with other correspondence and pertinent information
on the same subject.

The United States, who led the way in the overthrow of the feudal doctrine
of perpetual allegiance, are among the last to indicate how their own
citizens may elect another nationality. The papers submitted herewith
indicate what is necessary to place us on a par with other leading nations
in liberality of legislation on this international question. We have
already in our treaties assented to the principles which would need to be
embodied in laws intended to accomplish such results. We have agreed that
citizens of the United States may cease to be citizens and may voluntarily
render allegiance to other powers. We have agreed that residence in a
foreign land, without intent to return, shall of itself work expatriation.
We have agreed in some instances upon the length of time necessary for such
continued residence to work a presumption of such intent. I invite Congress
now to mark out and define when and how expatriation can be accomplished;
to regulate by law the condition of American women marrying foreigners; to
fix the status of children born in a foreign country of American parents
residing more or less permanently abroad, and to make rules for determining
such other kindred points as may seem best to Congress.

In compliance with the request of Congress, I transmitted to the American
minister at Madrid, with instructions to present it to the Spanish
Government, the joint resolution approved on the 3d of March last,
tendering to the people of Spain, in the name and on the behalf of the
American people, the congratulations of Congress upon the efforts to
consolidate in Spain the principles of universal liberty in a republican
form of government.

The existence of this new Republic was inaugurated by striking the fetters
from the slaves in Porto Rico. This beneficent measure was followed by the
release of several thousand persons illegally held as slaves in Cuba. Next,
the Captain-General of that colony was deprived of the power to set aside
the orders of his superiors at Madrid, which had pertained to the office
since 1825. The sequestered estates of American citizens, which had been
the cause of long and fruitless correspondence, were ordered to be restored
to their owners. All these liberal steps were taken in the face of a
violent opposition directed by the reactionary slave-holders of Havana, who
are vainly striving to stay the march of ideas which has terminated slavery
in Christendom, Cuba only excepted. Unhappily, however, this baneful
influence has thus far succeeded in defeating the efforts of all
liberal-minded men in Spain to abolish slavery in Cuba, and in preventing
the promised reform in that island. The struggle for political supremacy
continues there.

The proslavery and aristocratic party in Cuba is gradually arraigning
itself in more and more open hostility and defiance of the home government,
while it still maintains a political connection with the Republic in the
peninsula; and although usurping and defying the authority of the home
government whenever such usurpation or defiance tends in the direction of
oppression or of the maintenance of abuses, it is still a power in Madrid,
and is recognized by the Government. Thus an element more dangerous to
continued colonial relations between Cuba and Spain than that which
inspired the insurrection at Yara--an element opposed to granting any
relief from misrule and abuse, with no aspirations after freedom,
commanding no sympathies in generous breasts, aiming to rivet still
stronger the shackles of slavery and oppression--has seized many of the
emblems of power in Cuba, and, under professions of loyalty to the mother
country, is exhausting the resources of the island, and is doing acts which
are at variance with those principles of justice, of liberality, and of
right which give nobility of character to a republic. In the interests of
humanity, of civilization, and of progress, it is to be hoped that this
evil influence may be soon averted.

The steamer Virginius was on the 26th day of September, 1870, duly
registered at the port of New York as a part of the commercial marine of
the United States. On the 4th of October, 1870, having received the
certificate of her register in the usual legal form, she sailed from the
port of New York and has not since been within the territorial jurisdiction
of the United States. On the 31st day of October last, while sailing under
the flag of the United States on the high seas, she was forcibly seized by
the Spanish gunboat Tornado, and was carried into the port of Santiago de
Cuba, where fifty-three of her passengers and crew were inhumanly, and, so
far at least as relates to those who were citizens of the United States,
without due process of law, put to death.

It is a well-established principle, asserted by the United States from the
beginning of their national independence, recognized by Great Britain and
other maritime powers, and stated by the Senate in a resolution passed
unanimously on the 16th of June, 1858, that--American vessels on the high
seas in time of peace, bearing the American flag, remain under the
jurisdiction of the country to which they belong, and therefore any
visitation, molestation, or detention of such vessel by force, or by the
exhibition of force, on the part of a foreign power is in derogation of the
sovereignty of the United States. In accordance with this principle, the
restoration of the Virginius and the surrender of the survivors of her
passengers and crew, and a due reparation to the flag, and the punishment
of the authorities who had been guilty of the illegal acts of violence,
were demanded. The Spanish Government has recognized the justice of the
demand, and has arranged for the immediate delivery of the vessel, and for
the surrender of the survivors of the passengers and crew, and for a salute
to the flag, and for proceedings looking to the punishment of those who may
be proved to have been guilty of illegal acts of violence toward citizens
of the United States, and also toward indemnifying those who may be shown
to be entitled to indemnity. A copy of a protocol of a conference between
the Secretary of State and the Spanish minister, in which the terms of this
arrangement were agreed to, is transmitted herewith.

The correspondence on this subject with the legation of the United States
in Madrid was conducted in cipher and by cable, and needs the verification
of the actual text of the correspondence. It has seemed to me to be due to
the importance of the case not to submit this correspondence until the
accurate text can be received by mail. It is expected shortly, and will be
submitted when received.

In taking leave of this subject for the present I wish to renew the
expression of my conviction that the existence of African slavery in Cuba
is a principal cause of the lamentable condition of the island. I do not
doubt that Congress shares with me the hope that it will soon be made to
disappear, and that peace and prosperity may follow its abolition.

The embargoing of American estates in Cuba, cruelty to American citizens
detected in no act of hostility to the Spanish Government, the murdering of
prisoners taken with arms in their hands, and, finally, the capture upon
the high seas of a vessel sailing under the United States flag and bearing
a United States registry have culminated in an outburst of indignation that
has seemed for a time to threaten war. Pending negotiations between the
United States and the Government of Spain on the subject of this capture, I
have authorized the Secretary of the Navy to put our Navy on a war footing,
to the extent, at least, of the entire annual appropriation for that branch
of the service, trusting to Congress and the public opinion of the American
people to justify my action.

Assuming from the action of the last Congress in appointing a Committee on
Privileges and Elections to prepare and report to this Congress a
constitutional amendment to provide a better method of electing the
President and Vice-President of the United States, and also from the
necessity of such an amendment, that there will be submitted to the State
legislatures for ratification such an improvement in our Constitution, I
suggest two others for your consideration:

First. To authorize the Executive to approve of so much of any measure
passing the two Houses of Congress as his judgment may dictate, without
approving the whole, the disapproved portion or portions to be subjected to
the same rules as now, to wit, to be referred back to the House in which
the measure or measures originated, and, if passed by a two-thirds vote of
the two Houses, then to become a law without the approval of the President.
I would add to this a provision that there should be no legislation by
Congress during the last twenty-four hours of its sitting, except upon
vetoes, in order to give the Executive an opportunity to examine and
approve or disapprove bills understandingly.

Second. To provide by amendment that when an extra session of Congress is
convened by Executive proclamation legislation during the continuance of
such extra session shall be confined to such subjects as the Executive may
bring before it from time to time in writing.

The advantages to be gained by these two amendments are too obvious for me
to comment upon them. One session in each year is provided for by the
Constitution, in which there are no restrictions as to the subjects of
legislation by Congress. If more are required, it is always in the power of
Congress, during their term of office, to provide for sessions at any time.
The first of these amendments would protect the public against the many
abuses and waste of public moneys which creep into appropriation bills and
other important measures passing during the expiring hours of Congress, to
which otherwise due consideration can not be given.

TREASURY DEPARTMENT.

The receipts of the Government from all sources for the last fiscal year
were $333,738,204, and expenditures on all accounts $290,345,245, thus
showing an excess of receipts over expenditures of $43,392,959. But it is
not probable that this favorable exhibit will be shown for the present
fiscal year. Indeed, it is very doubtful whether, except with great economy
on the part of Congress in making appropriations and the same economy in
administering the various Departments of Government, the revenues will not
fall short of meeting actual expenses, including interest on the public
debt.

I commend to Congress such economy, and point out two sources where It
seems to me it might commence, to wit, in the appropriations for public
buildings in the many cities where work has not yet been commenced; in the
appropriations for river and harbor improvement in those localities where
the improvements are of but little benefit to general commerce, and for
fortifications.

There is a still more fruitful source of expenditure, which I will point
out later in this message. I refer to the easy method of manufacturing
claims for losses incurred in suppressing the late rebellion.

I would not be understood here as opposing the erection of good,
substantial, and even ornamental buildings by the Government wherever such
buildings are needed. In fact, I approve of the Government owning its own
buildings in all sections of the country, and hope the day is not far
distant when it will not only possess them, but will erect in the capital
suitable residences for all persons who now receive commutation for
quarters or rent at Government expense, and for the Cabinet, thus setting
an example to the States which may induce them to erect buildings for their
Senators. But I would have this work conducted at a time when the revenues
of the country would abundantly justify it.

The revenues have materially fallen off for the first five months of the
present fiscal year from what they were expected to produce, owing to the
general panic now prevailing, which commenced about the middle of September
last. The full effect of this disaster, if it should not prove a "blessing
in disguise," is yet to be demonstrated. In either event it is your duty to
heed the lesson and to provide by wise and well-considered legislation, as
far as it lies in your power, against its recurrence, and to take advantage
of all benefits that may have accrued.

My own judgment is that, however much individuals may have suffered, one
long step has been taken toward specie payments; that we can never have
permanent prosperity until a specie basis is reached: and that a specie
basis can not be reached and maintained until our exports, exclusive of
gold, pay for our imports, interest due abroad, and other specie
obligations, or so nearly so as to leave an appreciable accumulation of the
precious metals in the country from the products of our mines.

The development of the mines of precious metals during the past year and
the prospective development of them for years to come are gratifying in
their results. Could but one-half of the gold extracted from the mines be
retained at home, our advance toward specie payments would be rapid.

To increase our exports sufficient currency is required to keep all the
industries of the country employed. Without this national as well as
individual bankruptcy must ensue. Undue inflation, on the other hand, while
it might give temporary relief, would only lead to inflation of prices, the
impossibility of competing in our own markets for the products of home
skill and labor, and repeated renewals of present experiences. Elasticity
to our circulating medium, therefore, and just enough of it to transact the
legitimate business of the country and to keep all industries employed, is
what is most to be desired. The exact medium is specie, the recognized
medium of exchange the world over. That obtained, we shall have a currency
of an exact degree of elasticity. If there be too much of it for the
legitimate purposes of trade and commerce, it will flow out of the country.
If too little, the reverse will result. To hold what we have and to
appreciate our currency to that standard is the problem deserving of the
most serious consideration of Congress.

The experience of the present panic has proven that the currency of the
country, based, as it is, upon the credit of the country, is the best that
has ever been devised. Usually in times of such trials currency has become
worthless, or so much depreciated in value as to inflate the values of all
the necessaries of life as compared with the currency. Everyone holding it
has been anxious to dispose of it on any terms. Now we witness the reverse.
Holders of currency hoard it as they did gold in former experiences of a
like nature.

It is patent to the most casual observer that much more currency, or money,
is required to transact the legitimate trade of the country during the fall
and winter months, when the vast crops are being removed, than during the
balance of the year. With our present system the amount in the country
remains the same throughout the entire year, resulting in an accumulation
of all the surplus capital of the country in a few centers when not
employed in the moving of crops, tempted there by the offer of interest on
call loans. Interest being paid, this surplus capital must earn this
interest paid with a profit. Being subject to "call," it can not be loaned,
only in part at best, to the merchant or manufacturer for a fixed term.
Hence, no matter how much currency there might be in the country, it would
be absorbed, prices keeping pace with the volume, and panics, stringency,
and disasters would ever be recurring with the autumn. Elasticity in our
monetary system, therefore, is the object to be attained first, and next to
that, as far as possible, a prevention of the use of other people's money
in stock and other species of speculation. To prevent the latter it seems
to me that one great step would be taken by prohibiting the national banks
from paying interest on deposits, by requiring them to hold their reserves
in their own vaults, and by forcing them into resumption, though it would
only be in legal-tender notes. For this purpose I would suggest the
establishment of clearing houses for your consideration.

To secure the former many plans have been suggested, most, if not all, of
which look to me more like inflation on the one hand, or compelling the
Government, on the other, to pay interest, without corresponding benefits,
upon the surplus funds of the country during the seasons when otherwise
unemployed.

I submit for your consideration whether this difficulty might not be
overcome by authorizing the Secretary of the Treasury to issue at any time
to national banks of issue any amount of their own notes below a fixed
percentage of their issue (say 40 per cent), upon the banks' depositing
with the Treasurer of the United States an amount of Government bonds equal
to the amount of notes demanded, the banks to forfeit to the Government,
say, 4 per cent of the interest accruing on the bonds so pledged during the
time they remain with the Treasurer as security for the increased
circulation, the bonds so pledged to be redeemable by the banks at their
pleasure, either in whole or in part, by returning their own bills for
cancellation to an amount equal to the face of the bonds withdrawn. I would
further suggest for your consideration the propriety of authorizing
national banks to diminish their standing issue at pleasure, by returning
for cancellation their own bills and withdrawing so many United States
bonds as are pledged for the bills returned.

In view of the great actual contraction that has taken place in the
currency and the comparative contraction continuously going on, due to the
increase of population, increase of manufactories and all the industries, I
do not believe there is too much of it now for the dullest period of the
year. Indeed, if clearing houses should be established, thus forcing
redemption, it is a question for your consideration whether banking should
not be made free, retaining all the safeguards now required to secure bill
holders. In any modification of the present laws regulating national banks,
as a further step toward preparing for resumption of specie payments, I
invite your attention to a consideration of the propriety of exacting from
them the retention as a part of their reserve either the whole or a part of
the gold interest accruing upon the bonds pledged as security for their
issue. I have not reflected enough on the bearing this might have in
producing a scarcity of coin with which to pay duties on imports to give it
my positive recommendation. But your attention is invited to the subject.

During the last four years the currency has been contracted, directly, by
the withdrawal of 3 per cent certificates, compound-interest notes, and
"seven-thirty" bonds outstanding on the 4th of March, 1869, all of which
took the place of legal-tenders in the bank reserves to the extent of
$63,000,000.

During the same period there has been a much larger comparative contraction
of the currency. The population of the country has largely increased. More
than 25,000 miles of railroad have been built, requiring the active use of
capital to operate them. Millions of acres of land have been opened to
cultivation, requiring capital to move the products. Manufactories have
multiplied beyond all precedent in the same period of time, requiring
capital weekly for the payment of wages and for the purchase of material;
and probably the largest of all comparative contraction arises from the
organizing of free labor in the South. Now every laborer there receives his
wages, and, for want of savings banks, the greater part of such wages is
carried in the pocket or hoarded until required for use.

These suggestions are thrown out for your consideration, without any
recommendation that they shall be adopted literally, but hoping that the
best method may be arrived at to secure such an elasticity of the currency
as will keep employed all the industries of the country and prevent such an
inflation as will put off indefinitely the resumption of specie payments,
an object so devoutly to be wished for by all, and by none more earnestly
than the class of people most directly interested--those who "earn their
bread by the sweat of their brow." The decisions of Congress on this
subject will have the hearty support of the Executive.

In previous messages I have called attention to the decline in American
shipbuilding and recommended such legislation as would secure to us our
proportion of the carrying trade. Stimulated by high rates and abundance of
freight, the progress for the last year in shipbuilding has been very
satisfactory. There has been an increase of about 3 per cent in the amount
transported in American vessels over the amount of last year. With the
reduced cost of material which has taken place, it may reasonably be hoped
that this progress will be maintained, and even increased. However, as we
pay about $80,000,000 per annum to foreign vessels for the transportation
to a market of our surplus products, thus increasing the balance of trade
against us to this amount, the subject is one worthy of your serious
consideration.

"Cheap transportation" is a subject that has attracted the attention of
both producers and consumers for the past few years, and has contributed
to, if it has not been the direct cause of, the recent panic and
stringency.

As Congress, at its last session, appointed a special committee to
investigate this whole subject during the vacation and report at this
session, I have nothing to recommend until their report is read.

There is one work, however, of a national character, in which the greater
portion of the East and the West, the North and the South, are equally
interested, to which I will invite your attention.

The State of New York has a canal connecting Lake Erie with tide water on
the Hudson River. The State of Illinois has a similar work connecting Lake
Michigan with navigable water on the Illinois River, thus making water
communication inland between the East and the West and South. These great
artificial water courses are the property of the States through which they
pass, and pay toll to those States. Would it not be wise statesmanship to
pledge these States that if they will open these canals for the passage of
large vessels the General Government will look after and keep in navigable
condition the great public highways with which they connect, to wit, the
Overslaugh on the Hudson, the St. Clair Flats, and the Illinois and
Mississippi rivers? This would be a national work; one of great value to
the producers of the West and South in giving them cheap transportation for
their produce to the seaboard and a market, and to the consumers in the
East in giving them cheaper food, particularly of those articles of food
which do not find a foreign market, and the prices of which, therefore, are
not regulated by foreign demands. The advantages of such a work are too
obvious for argument. I submit the subject to you, therefore, without
further comment.

In attempting to regain our lost commerce and carrying trade I have
heretofore called attention to the States south of us offering a field
where much might be accomplished. To further this object I suggest that a
small appropriation be made, accompanied with authority for the Secretary
of the Navy to fit out a naval vessel to ascend the Amazon River to the
mouth of the Madeira; thence to explore that river and its tributaries into
Bolivia, and to report to Congress at its next session, or as soon as
practicable, the accessibility of the country by water, its resources, and
the population so reached. Such an exploration would cost but little; it
can do no harm, and may result in establishing a trade of value to both
nations.

In further connection with the Treasury Department I would recommend a
revision and codification of the tariff laws and the opening of more mints
for coining money, with authority to coin for such nations as may apply.

WAR DEPARTMENT.

The attention of Congress is invited to the recommendations contained in
the report of the Secretary of War herewith accompanying.

The apparent great cost of supporting the Army is fully explained by this
report, and I hope will receive your attention.

While inviting your general attention to all the recommendations made by
the Secretary of War, there are two which I would especially invite you to
consider: First, the importance of preparing for war in time of peace by
providing proper armament for our seacoast defenses. Proper armament is of
vastly more importance than fortifications. The latter can be supplied very
speedily for temporary purposes when needed; the former can not. The second
is the necessity of reopening promotion in the staff corps of the Army.
Particularly is this necessity felt in the Medical, Pay, and Ordnance
departments.

At this time it is necessary to employ "contract surgeons" to supply the
necessary medical attendance required by the Army.

With the present force of the Pay Department it is now difficult to make
the payments to troops provided for by law. Long delays in payments are
productive of desertions and other demoralization, and the law prohibits
the payment of troops by other than regular army paymasters.

There are now sixteen vacancies in the Ordnance Department, thus leaving
that branch of the service without sufficient officers to conduct the
business of the different arsenals on a large scale if ever required.

NAVY DEPARTMENT.

During the past year our Navy has been depleted by the sale of some vessels
no longer fit for naval service and by the condemnation of others not yet
disposed of. This, however, has been more than compensated for by the
repair of six of the old wooden ships and by the building of eight new
sloops of war, authorized by the last Congress. The building of these
latter has occurred at a doubly fortunate time. They are about being
completed at a time when they may possibly be much needed, and the work
upon them has not only given direct employment to thousands of men, but has
no doubt been the means of keeping open establishments for other work at a
time of great financial distress.

Since the commencement of the last month, however, the distressing
occurrences which have taken place in the waters of the Caribbean Sea,
almost on our very seaboard, while they illustrate most forcibly the
necessity always existing that a nation situated like ours should maintain
in a state of possible efficiency a navy adequate to its responsibilities,
has at the same time demanded that all the effective force we really have
shall be put in immediate readiness for warlike service. This has been and
is being done promptly and effectively, and I am assured that all the
available ships and every authorized man of the American Navy will be ready
for whatever action is required for the safety of our citizens or the
maintenance of our honor. This, of course, will require the expenditure in
a short time of some of the appropriations which were calculated to extend
through the fiscal year, but Congress will, I doubt not, understand and
appreciate the emergency, and will provide adequately not only for the
present preparation, but for the future maintenance of our naval force. The
Secretary of the Navy has during the past year been quietly putting some of
our most effective monitors in condition for service, and thus the exigency
finds us in a much better condition for work than we could possibly have
been without his action.

POST-OFFICE DEPARTMENT.

A complete exhibit is presented in the accompanying report of the
postmaster-General of the operations of the Post-Office Department during
the year. The ordinary postal revenues for the fiscal year ended June 30,
1873, amounted to $22,996,741.57, and the expenditures of all kinds to
$29,084,945.67. The increase of revenues over 1872 was $1,081,315.20, and
the increase of expenditures $2,426,753.36.

Independent of the payments made from special appropriations for mail
steamship lines, the amount drawn from the General Treasury to meet
deficiencies was $5,265,475. The constant and rapid extension of our postal
service, particularly upon railways, and the improved facilities for the
collection, transmission, distribution, and delivery of the mails which are
constantly being provided account for the increased expenditures of this
popular branch of the public service.

The total number of post-offices in operation on June 30, 1873, was 33,244,
a net increase of 1,381 over the number reported the preceding year. The
number of Presidential offices was 1,363, an increase of 163 during the
year. The total length of railroad mail routes at the close of the year was
63,457 miles, an increase of 5,546 miles over the year 1872. Fifty-nine
railway post-office lines were in operation June 30, 1873, extending over
14,866 miles of railroad routes and performing an aggregate service of
34,925 miles daily.

The number of letters exchanged with foreign countries was 27,459,185, an
increase of 3,096,685 over the previous year, and the postage thereon
amounted to $2,021,310.86. The total weight of correspondence exchanged in
the mails with European countries exceeded 912 tons, an increase of 92 tons
over the previous year. The total cost of the United States ocean steamship
service, including $725,000 paid from special appropriations to subsidized
lines of mail steamers, was $1,047,271.35.

New or additional postal conventions have been concluded with Sweden,
Norway, Belgium, Germany, Canada, Newfoundland, and Japan, reducing postage
rates on correspondence exchanged with those countries; and further efforts
have been made to conclude a satisfactory postal convention with France,
but without success.

I invite the favorable consideration of Congress to the suggestions and
recommendations of the Postmaster-General for an extension of the
free-delivery system in all cities having a population of not less than
10,000; for the prepayment of postage on newspapers and other printed
matter of the second class; for a uniform postage and limit of weight on
miscellaneous matter; for adjusting the compensation of all postmasters not
appointed by the President, by the old method of commissions on the actual
receipts of the office, instead of the present mode of fixing the salary in
advance upon special returns; and especially do I urge favorable action by
Congress on the important recommendations of the Postmaster-General for the
establishment of United States postal savings depositories.

Your attention is also again called to a consideration of the question of
postal telegraphs and the arguments adduced in support thereof, in the hope
that you may take such action in connection therewith as in your judgment
will most contribute to the best interests of the country.

DEPARTMENT OF JUSTICE.

Affairs in Utah require your early and special attention. The Supreme Court
of the United States, in the case of Clinton vs. Englebrecht, decided that
the United States marshal of that Territory could not lawfully summon
jurors for the district courts; and those courts hold that the Territorial
marshal can not lawfully perform that duty, because he is elected by the
legislative assembly, and not appointed as provided for in the act
organizing the Territory. All proceedings at law are practically abolished
by these decisions, and there have been but few or no jury trials in the
district courts of that Territory since the last session of Congress.
Property is left without protection by the courts, and crimes go
unpunished. To prevent anarchy there it is absolutely necessary that
Congress provide the courts with some mode of obtaining jurors, and I
recommend legislation to that end, and also that the probate courts of the
Territory, now assuming to issue writs of injunction and habeas corpus and
to try criminal cases and questions as to land titles, be denied all
jurisdiction not possessed ordinarily by courts of that description.

I have become impressed with the belief that the act approved March 2,
1867, entitled "An act to establish a uniform system of bankruptcy
throughout the United States," is productive of more evil than good at this
time. Many considerations might be urged for its total repeal, but, if this
is not considered advisable, I think it will not be seriously questioned
that those portions of said act providing for what is called involuntary
bankruptcy operate to increase the financial embarrassments of the country.
Careful and prudent men very often become involved in debt in the
transaction of their business, and though they may possess ample property,
if it could be made available for that purpose, to meet all their
liabilities, yet, on account of the extraordinary scarcity of money, they
may be unable to meet all their pecuniary obligations as they become due,
in consequence of which they are liable to be prostrated in their business
by proceedings in bankruptcy at the instance of unrelenting creditors.
People are now so easily alarmed as to monetary matters that the mere
filing of a petition in bankruptcy by an unfriendly creditor will
necessarily embarrass, and oftentimes accomplish the financial ruin, of a
responsible business man. Those who otherwise might make lawful and just
arrangements to relieve themselves from difficulties produced by the
present stringency in money are prevented by their constant exposure to
attack and disappointment by proceedings against them in bankruptcy, and,
besides, the law is made use of in many cases by obdurate creditors to
frighten or force debtors into a compliance with their wishes and into acts
of injustice to other creditors and to themselves. I recommend that so much
of said act as provides for involuntary bankruptcy on account of the
suspension of payment be repealed.

Your careful attention is invited to the subject of claims against the
Government and to the facilities afforded by existing laws for their
prosecution. Each of the Departments of State, Treasury, and War has
demands for many millions of dollars upon its files, and they are rapidly
accumulating. To these may be added those now pending before Congress, the
Court of Claims, and the Southern Claims Commission, making in the
aggregate an immense sum. Most of these grow out of the rebellion, and are
intended to indemnify persons on both sides for their losses during the
war; and not a few of them are fabricated and supported by false testimony.
Projects are on foot, it is believed, to induce Congress to provide for new
classes of claims, and to revive old ones through the repeal or
modification of the statute of limitations, by which they are now barred. I
presume these schemes, if proposed, will be received with little favor by
Congress, and I recommend that persons having claims against the United
States cognizable by any tribunal or Department thereof be required to
present them at an early day, and that legislation be directed as far as
practicable to the defeat of unfounded and unjust demands upon the
Government; and I would suggest, as a means of preventing fraud, that
witnesses be called upon to appear in person to testify before those
tribunals having said claims before them for adjudication. Probably the
largest saving to the National Treasury can be secured by timely
legislation on these subjects of any of the economic measures that will be
proposed.

You will be advised of the operations of the Department of Justice by the
report of the Attorney-General, and I invite your attention to the
amendments of existing laws suggested by him, with the view of reducing the
expenses of that Department.

DEPARTMENT OF THE INTERIOR.

The policy inaugurated toward the Indians at the beginning of the last
Administration has been steadily pursued, and, I believe, with beneficial
results. It will be continued with only such modifications as time and
experience may demonstrate as necessary.

With the encroachment of civilization upon the Indian reservations and
hunting grounds, disturbances have taken place between the Indians and
whites during the past year, and probably will continue to do so until each
race appreciates that the other has rights which must be respected.

The policy has been to collect the Indians as rapidly as possible on
reservations, and as far as practicable within what is known as the Indian
Territory, and to teach them the arts of civilization and self-support.
Where found off their reservations, and endangering the peace and safety of
the whites, they have been punished, and will continue to be for like
offenses.

The Indian Territory south of Kansas and west of Arkansas is sufficient in
area and agricultural resources to support all the Indians east of the
Rocky Mountains. In time, no doubt, all of them, except a few who may elect
to make their homes among white people, will be collected there. As a
preparatory step for this consummation, I am now satisfied that a
Territorial form of government should be given them, which will secure the
treaty rights of the original settlers and protect their homesteads from
alienation for a period of twenty years.

The operations of the Patent Office are growing to such a magnitude and the
accumulation of material is becoming so great that the necessity of more
room is becoming more obvious day by day. I respectfully invite your
attention to the reports of the Secretary of the Interior and Commissioner
of Patents on this subject.

The business of the General Land Office exhibits a material increase in all
its branches during the last fiscal year. During that time there were
disposed of out of the public lands 13,030,606 acres, being an amount
greater by 1,165,631 acres than was disposed of during the preceding year.
Of the amount disposed of, 1,626,266 acres were sold for cash, 214,940
acres were located with military land warrants, 3,793,612 acres were taken
for homesteads, 653,446 acres were located with agricultural-college scrip,
6,083,536 acres were certified by railroads, 76,576 acres were granted to
wagon roads, 238,548 acres were approved to States as swamp lands, 138,681
acres were certified for agricultural colleges, common schools,
universities, and seminaries, 190,775 acres were approved to States for
internal improvements, and 14,222 acres were located with Indian scrip. The
cash receipts during the same time were $3,408,515.50, being $190,415.50 in
excess of the receipts of the previous year. During the year 30,488,132
acres of public land were surveyed, an increase over the amount surveyed
the previous year of 1,037,193 acres, and, added to the area previously
surveyed, aggregates 616,554,895 acres which have been surveyed, leaving
1,218,443,505 acres of the public land still unsurveyed.

The increased and steadily increasing facilities for reaching our
unoccupied public domain and for the transportation of surplus products
enlarge the available field for desirable homestead locations, thus
stimulating settlement and extending year by year in a gradually increasing
ratio the area of occupation and cultivation.

The expressed desire of the representatives of a large colony of citizens
of Russia to emigrate to this country, as is understood, with the consent
of their Government, if certain concessions can be made to enable them to
settle in a compact colony, is of great interest, as going to show the
light in which our institutions are regarded by an industrious,
intelligent, and wealthy people, desirous of enjoying civil and religious
liberty; and the acquisition of so large an immigration of citizens of a
superior class would without doubt be of substantial benefit to the
country. I invite attention to the suggestion of the Secretary of the
Interior in this behalf.

There was paid during the last fiscal year for pensions, including the
expense of disbursement, $29,185,289.62, being an amount less by
$984,050.98 than was expended for the same purpose the preceding year.
Although this statement of expenditures would indicate a material reduction
in amount compared with the preceding year, it is believed that the changes
in the pension laws at the last session of Congress will absorb that amount
the current year. At the close of the last fiscal year there were on the
pension rolls 99,804 invalid military pensioners and 112,088 widows,
orphans, and dependent relatives of deceased soldiers, making a total of
that class of 211,892; 18,266 survivors of the War of 1812 and 5,058 widows
of soldiers of that war pensioned under the act of Congress of February 14,
1871, making a total of that class of 23,319; 1,480 invalid navy pensioners
and 1,770 widows, orphans, and dependent relatives of deceased officers,
sailors, and marines of the Navy, making a total of navy pensioners of
3,200, and a grand total of pensioners of 311 classes of 238,411, showing a
net increase during the last fiscal year of 6,182. During the last year the
names of 16,405 pensioners were added to the rolls, and 10,223 names were
dropped therefrom for various causes.

The system adopted for the detection of frauds against the Government in
the matter of pensions has been productive of satisfactory results, but
legislation is needed to provide, if possible, against the perpetration of
such frauds in future.

The evidently increasing interest in the cause of education is a most
encouraging feature in the general progress and prosperity of the country,
and the Bureau of Education is earnest in its efforts to give proper
direction to the new appliances and increased facilities which are being
offered to aid the educators of the country in their great work.

The Ninth Census has been completed, the report thereof published and
distributed, and the working force of the Bureau disbanded. The Secretary
of the Interior renews his recommendation for a census to be taken in 1875,
to which subject the attention of Congress is invited. The original
suggestion in that behalf has met with the general approval of the country;
and even if it be not deemed advisable at present to provide for a regular
quinquennial census, a census taken in 1875, the report of which could be
completed and published before the one hundredth anniversary of our
national independence, would be especially interesting and valuable, as
showing the progress of the country during the first century of our
national existence. It is believed, however, that a regular census every
five years would be of substantial benefit to the country, inasmuch as our
growth hitherto has been so rapid that the results of the decennial census
are necessarily unreliable as a basis of estimates for the latter years of
a decennial period.

DISTRICT OF COLUMBIA.

Under the very efficient management of the governor and the board of public
works of this District the city of Washington is rapidly assuming the
appearance of a capital of which the nation may well be proud. From being a
most unsightly place three years ago, disagreeable to pass through in
summer in consequence of the dust arising from unpaved streets, and almost
impassable in the winter from the mud, it is now one of the most sightly
cities in the country, and can boast of being the best paved.

The work has been done systematically, the plans, grades, location of
sewers, water and gas mains being determined upon before the work was
commenced, thus securing permanency when completed. I question whether so
much has ever been accomplished before in any American city for the same
expenditures. The Government having large reservations in the city, and the
nation at large having an interest in their capital, I recommend a liberal
policy toward the District of Columbia, and that the Government should bear
its just share of the expense of these improvements. Every citizen visiting
the capital feels a pride in its growing beauty, and that he too is part
owner in the investments made here.

I would suggest to Congress the propriety of promoting the establishment in
this District of an institution of learning, or university of the highest
class, by the donation of lands. There is no place better suited for such
an institution than the national capital. There is no other place in which
every citizen is so directly interested.

CIVIL-SERVICE REFORM.

In three successive messages to Congress I have called attention to the
subject of "civil-service reform."

Action has been taken so far as to authorize the appointment of a board to
devise rules governing methods of making appointments and promotions, but
there never has been any action making these rules, or any rules, binding,
or even entitled to observance, where persons desire the appointment of a
friend or the removal of an official who may be disagreeable to them.

To have any rules effective they must have the acquiescence of Congress as
well as of the Executive. I commend, therefore, the subject to your
attention, and suggest that a special committee of Congress might confer
with the Civil-Service Board during the present session for the purpose of
devising such rules as can be maintained, and which will secure the
services of honest and capable officials, and which will also protect them
in a degree of independence while in office.

Proper rules will protect Congress, as well as the Executive, from much
needless persecution, and will prove of great value to the public at
large.

I would recommend for your favorable consideration the passage of an
enabling act for the admission of Colorado as a State in the Union. It
possesses all the elements of a prosperous State, agricultural and mineral,
and, I believe, has a population now to justify such admission. In
connection with this I would also recommend the encouragement of a canal
for purposes of irrigation from the eastern slope of the Rocky Mountains to
the Missouri River. As a rule I am opposed to further donations of public
lands for internal improvements owned and controlled by private
corporations, but in this instance I would make an exception. Between the
Missouri River and the Rocky Mountains there is an arid belt of public land
from 300 to 500 miles in width, perfectly valueless for the occupation of
man, for the want of sufficient rain to secure the growth of any product.
An irrigating canal would make productive a belt as wide as the supply of
water could be made to spread over across this entire country, and would
secure a cordon of settlements connecting the present population of the
mountain and mining regions with that of the older States. All the land
reclaimed would be clear gain. If alternate sections are retained by the
Government, I would suggest that the retained sections be thrown open to
entry under the homestead laws, or sold to actual settlers for a very low
price.

I renew my previous recommendation to Congress for general amnesty. The
number engaged in the late rebellion yet laboring under disabilities is
very small, but enough to keep up a constant irritation. No possible danger
can accrue to the Government by restoring them to eligibility to hold
office.

I suggest for your consideration the enactment of a law to better secure
the civil rights which freedom should secure, but has not effectually
secured, to the enfranchised slave.

U. S. GRANT