The relations of the United States with all foreign governments have
continued upon the normal basis of amity and good understanding, and are
very generally satisfactory. EUROPE.

Pursuant to the provisions of the general treaty of arbitration concluded
between the United States and Great Britain, April 4, 1908, a special
agreement was entered into between the two countries on January 27, 1909,
for the submission of questions relating to the fisheries on the North
Atlantic Coast to a tribunal to be formed from members of the Permanent
Court of Arbitration at The Hague.

In accordance with the provisions of the special agreement the printed case
of each Government was, on October 4 last, submitted to the other and to
the Arbitral Tribunal at The Hague, and the counter case of the United
States is now in course of preparation.

The American rights under the fisheries article of the Treaty of 1818 have
been a cause of difference between the United States and Great Britain for
nearly seventy years. The interests involved are of great importance to the
American fishing industry, and the final settlement of the controversy will
remove a source of constant irritation and complaint. This is the first
case involving such great international questions which has been submitted
to the Permanent Court of Arbitration at The Hague.

The treaty between the United States and Great Britain concerning the
Canadian International boundary, concluded April 11, 1908, authorizes the
appointment of two commissioners to define and mark accurately the
international boundary line between the United States and the Dominion of
Canada in the waters of the Passamaquoddy Bay, and provides for the
exchange of briefs within the period of six months. The briefs were duly
presented within the prescribed period, but as the commissioners failed to
agree within six months after the exchange of the printed statements, as
required by the treaty, it has now become necessary to resort to the
arbitration provided for in the article.

The International Fisheries Commission appointed pursuant to and under the
authority of the Convention of April 11, 1908, between the United States
and Great Britain, has completed a system of uniform and common
international regulations for the protection and preservation of the food
fishes in international boundary waters of the United States and Canada.

The regulations will be duly submitted to Congress with a view to the
enactment of such legislation as will be necessary under the convention to
put them into operation.

The Convention providing for the settlement of international differences
between the United States and Canada, including the apportionment between
the two countries of certain of the boundary waters and the appointment of
commissioners to adjust certain other questions, signed on the 11th day of
January, 1909, and to the ratification of which the Senate gave its advice
and consent on March 3, 1909, has not yet been ratified on the part of
Great Britain.

Commissioners have been appointed on the part of the United States to act
jointly with Commissioners on the part of Canada in examining into the
question of obstructions in the St. John River between Maine and New
Brunswick, and to make recommendations for the regulation of the uses
thereof, and are now engaged in this work.

Negotiations for an international conference to consider and reach an
arrangement providing for the preservation and protection of the fur seals
in the North Pacific are in progress with the Governments of Great Britain,
Japan, and Russia. The attitude of the Governments interested leads me to
hope for a satisfactory settlement of this question as the ultimate outcome
of the negotiations.

The Second Peace Conference recently held at The Hague adopted a convention
for the establishment of an International Prize Court upon the joint
proposal of delegations of the United States, France, Germany and Great
Britain. The law to be observed by the Tribunal in the decision of prize
cases was, however, left in an uncertain and therefore unsatisfactory
state. Article 7 of the Convention provided that the Court was to be
governed by the provisions of treaties existing between the belligerents,
but that "in the absence of such provisions, the court shall apply the
rules of international law. If no generally recognized rule exists, the
court shall give judgment in accordance with the general principles of
justice and equity." As, however, many questions in international maritime
law are understood differently and therefore interpreted differently in
various countries, it was deemed advisable not to intrust legislative
powers to the proposed court, but to determine the rules of law properly
applicable in a Conference of the representative maritime nations. Pursuant
to an invitation of Great Britain a conference was held at London from
December 2, 1908, to February 26, 1909, in which the following Powers
participated: the United States, Austria-Hungary, France, Germany, Great
Britain, Italy, Japan, the Netherlands, Russia and Spain. The conference
resulted in the Declaration of London, unanimously agreed to and signed by
the participating Powers, concerning among other matters, the highly
important subjects of blockade, contraband, the destruction of neutral
prizes, and continuous voyages. The declaration of London is an eminently
satisfactory codification of the international maritime law, and it is
hoped that its reasonableness and fairness will secure its general
adoption, as well as remove one of the difficulties standing in the way of
the establishment of an International Prize Court.

Under the authority given in the sundry civil appropriation act, approved
March 4, 1909, the United States was represented at the International
Conference on Maritime Law at Brussels. The Conference met on the 28th of
September last and resulted in the signature ad referendum of a convention
for the unification of certain regulations with regard to maritime
assistance and salvage and a convention for the unification of certain
rules with regard to collisions at sea. Two new projects of conventions
which have not heretofore been considered in a diplomatic conference,
namely, one concerning the limitation of the responsibility of shipowners,
and the other concerning marine mortgages and privileges, have been
submitted by the Conference to the different governments.

The Conference adjourned to meet again on April 11, 1910.

The International Conference for the purpose of promoting uniform
legislation concerning letters of exchange, which was called by the
Government of the Netherlands to meet at The Hague in September, 1909, has
been postponed to meet at that capital in June, 1910. The United States
will be appropriately represented in this Conference under the provision
therefor already made by Congress.

The cordial invitation of Belgium to be represented by a fitting display of
American progress in the useful arts and inventions at the World's Fair to
be held at Brussels in 1910 remains to be acted upon by the Congress.
Mindful of the advantages to accrue to our artisans and producers in
competition with their Continental rivals, I renew the recommendation
heretofore made that provision be made for acceptance of the invitation and
adequate representation in the Exposition. The question arising out of the
Belgian annexation of the Independent State of the Congo, which has so long
and earnestly preoccupied the attention of this Government and enlisted the
sympathy of our best citizens, is still open, but in a more hopeful stage.
This Government was among the foremost in the great work of uplifting the
uncivilized regions of Africa and urging the extension of the benefits of
civilization, education, and fruitful open commerce to that vast domain,
and is a party to treaty engagements of all the interested powers designed
to carry out that great duty to humanity. The way to better the original
and adventitious conditions, so burdensome to the natives and so
destructive to their development, has been pointed out, by observation and
experience, not alone of American representatives, but by cumulative
evidence from all quarters and by the investigations of Belgian Agents. The
announced programmes of reforms, striking at many of the evils known to
exist, are an augury of better things. The attitude of the United States is
one of benevolent encouragement, coupled with a hopeful trust that the good
work, responsibly undertaken and zealously perfected to the accomplishment
of the results so ardently desired, will soon justify the wisdom that
inspires them and satisfy the demands of humane sentiment throughout the
world.

A convention between the United States and Germany, under which the
nonworking provisions of the German patent law are made inapplicable to the
patents of American citizens, was concluded on February 23, 1909, and is
now in force. Negotiations for similar conventions looking to the placing
of American inventors on the same footing as nationals have recently been
initiated with other European governments whose laws require the local
working of foreign patents.

Under an appropriation made at the last session of the Congress, a
commission was sent on American cruisers to Monrovia to investigate the
interests of the United States and its citizens in Liberia. Upon its
arrival at Monrovia the commission was enthusiastically received, and
during its stay in Liberia was everywhere met with the heartiest
expressions of good will for the American Government and people and the
hope was repeatedly expressed on all sides that this Government might see
its way clear to do something to relieve the critical position of the
Republic arising in a measure from external as well as internal and
financial embarrassments. The Liberian Government afforded every facility
to the Commission for ascertaining the true state of affairs. The
Commission also had conferences with representative citizens, interested
foreigners and the representatives of foreign governments in Monrovia.
Visits were made to various parts of the Republic and to the neighboring
British colony of Sierra Leone, where the Commission was received by and
conferred with the Governor.

It will be remembered that the interest of the United States in the
Republic of Liberia springs from the historical fact of the foundation of
the Republic by the colonization of American citizens of the African race.
In an early treaty with Liberia there is a provision under which the United
States may be called upon for advice or assistance. Pursuant to this
provision and in the spirit of the moral relationship of the United States
to Liberia, that Republic last year asked this Government to lend
assistance in the solution of certain of their national problems, and hence
the Commission was sent.

The report of our commissioners has just been completed and is now under
examination by the Department of State. It is hoped that there may result
some helpful measures, in which case it may be my duty again to invite your
attention to this subject.

The Norwegian Government, by a note addressed on January 26, 1909, to the
Department of State, conveyed an invitation to the Government of the United
States to take part in a conference which it is understood will be held in
February or March, 1910, for the purpose of devising means to remedy
existing conditions in the Spitzbergen Islands.

This invitation was conveyed under the reservation that the question of
altering the status of the islands as countries belonging to no particular
State, and as equally open to the citizens and subjects of all States,
should not be raised.

The European Powers invited to this Conference by the Government of Norway
were Belgium, Denmark, France, Germany, Great Britain, Russia, Sweden and
the Netherlands.

The Department of State, in view of proofs filed with it in 1906, showing
the American possession, occupation, and working of certain coal-bearing
lands in Spitzbergen, accepted the invitation under the reservation above
stated, and under the further reservation that all interests in those
islands already vested should be protected and that there should be
equality of opportunity for the future. It was further pointed out that
membership in the Conference on the part of the United States was qualified
by the consideration that this Government would not become a signatory to
any conventional arrangement concluded by the European members of the
Conference which would imply contributory participation by the United
States in any obligation or responsibility for the enforcement of any
scheme of administration which might be devised by the Conference for the
islands.

THE NEAR EAST.

His Majesty Mehmed V, Sultan of Turkey, recently sent to this country a
special embassy to announce his accession. The quick transition of the
Government of the Ottoman Empire from one of retrograde tendencies to a
constitutional government with a Parliament and with progressive modern
policies of reform and public improvement is one of the important phenomena
of our times. Constitutional government seems also to have made further
advance in Persia. These events have turned the eyes of the world upon the
Near East. In that quarter the prestige of the United States has spread
widely through the peaceful influence of American schools, universities and
missionaries. There is every reason why we should obtain a greater share of
the commerce of the Near East since the conditions are more favorable now
than ever before.

LATIN AMERICA.

One of the happiest events in recent Pan-American diplomacy was the
pacific, independent settlement by the Governments of Bolivia and Peru of a
boundary difference between them, which for some weeks threatened to cause
war and even to entrain embitterments affecting other republics less
directly concerned. From various quarters, directly or indirectly
concerned, the intermediation of the United States was sought to assist in
a solution of the controversy. Desiring at all times to abstain from any
undue mingling in the affairs of sister republics and having faith in the
ability of the Governments of Peru and Bolivia themselves to settle their
differences in a manner satisfactory to themselves which, viewed with
magnanimity, would assuage all embitterment, this Government steadily
abstained from being drawn into the controversy and was much gratified to
find its confidence justified by events.

On the 9th of July next there will open at Buenos Aires the Fourth
Pan-American Conference. This conference will have a special meaning to the
hearts of all Americans, because around its date are clustered the
anniversaries of the independence of so many of the American republics. It
is not necessary for me to remind the Congress of the political, social and
commercial importance of these gatherings. You are asked to make liberal
appropriation for our participation. If this be granted, it is my purpose
to appoint a distinguished and representative delegation, qualified
fittingly to represent this country and to deal with the problems of
intercontinental interest which will there be discussed.

The Argentine Republic will also hold from May to November, 1910, at Buenos
Aires, a great International Agricultural Exhibition in which the United
States has been invited to participate. Considering the rapid growth of the
trade of the United States with the Argentine Republic and the cordial
relations existing between the two nations, together with the fact that it
provides an opportunity to show deference to a sister republic on the
occasion of the celebration of its national independence, the proper
Departments of this Government are taking steps to apprise the interests
concerned of the opportunity afforded by this Exhibition, in which
appropriate participation by this country is so desirable. The designation
of an official representative is also receiving consideration.

To-day, more than ever before, American capital is seeking investment in
foreign countries, and American products are more and more generally
seeking foreign markets. As a consequence, in all countries there are
American citizens and American interests to be protected, on occasion, by
their Government. These movements of men, of capital, and of commodities
bring peoples and governments closer together and so form bonds of peace
and mutual dependency, as they must also naturally sometimes make passing
points of friction. The resultant situation inevitably imposes upon this
Government vastly increased responsibilities. This Administration, through
the Department of State and the foreign service, is lending all proper
support to legitimate and beneficial American enterprises in foreign
countries, the degree of such support being measured by the national
advantages to be expected. A citizen himself can not by contract or
otherwise divest himself of the right, nor can this Government escape the
obligation, of his protection in his personal and property rights when
these are unjustly infringed in a foreign country. To avoid ceaseless
vexations it is proper that in considering whether American enterprise
should be encouraged or supported in a particular country, the Government
should give full weight not only to the national, as opposed to the
individual benefits to accrue, but also to the fact whether or not the
Government of the country in question is in its administration and in its
diplomacy faithful to the principles of moderation, equity and justice upon
which alone depend international credit, in diplomacy as well as in
finance.

The Pan-American policy of this Government has long been fixed in its
principles and remains unchanged. With the changed circumstances of the
United States and of the Republics to the south of us, most of which have
great natural resources, stable government and progressive ideals, the
apprehension which gave rise to the Monroe Doctrine may be said to have
nearly disappeared, and neither the doctrine as it exists nor any other
doctrine of American policy should be permitted to operate for the
perpetuation of irresponsible government, the escape of just obligations,
or the insidious allegation of dominating ambitions on the part of the
United States.

Beside the fundamental doctrines of our Pan-American policy there have
grown up a realization of political interests, community of institutions
and ideals, and a flourishing commerce. All these bonds will be greatly
strengthened as time goes on and increased facilities, such as the great
bank soon to be established in Latin America, supply the means for building
up the colossal intercontinental commerce of the future.

My meeting with President Diaz and the greeting exchanged on both American
and Mexican soil served, I hope, to signalize the close and cordial
relations which so well bind together this Republic and the great Republic
immediately to the south, between which there is so vast a network of
material interests.

I am happy to say that all but one of the cases which for so long vexed our
relations with Venezuela have been settled within the past few months and
that, under the enlightened regime now directing the Government of
Venezuela, provision has been made for arbitration of the remaining case
before The Hague Tribunal. On July 30, 1909, the Government of Panama
agreed, after considerable negotiation, to indemnify the relatives of the
American officers and sailors who were brutally treated, one of them
having, indeed, been killed by the Panaman police this year.

The sincere desire of the Government of Panama to do away with a situation
where such an accident could occur is manifest in the recent request in
compliance with which this Government has lent the services of an officer
of the Army to be employed by the Government of Panama as Instructor of
Police.

The sanitary improvements and public works undertaken in Cuba prior to the
present administration of that Government, in the success of which the
United States is interested under the treaty, are reported to be making
good progress and since the Congress provided for the continuance of the
reciprocal commercial arrangement between Cuba and the United States
assurance has been received that no negotiations injuriously affecting the
situation will be undertaken without consultation. The collection of the
customs of the Dominican Republic through the general receiver of customs
appointed by the President of the United States in accordance with the
convention of February 8, 1907, has proceeded in an uneventful and
satisfactory manner. The customs receipts have decreased owing to disturbed
political and economic conditions and to a very natural curtailment of
imports in view of the anticipated revision of the Dominican tariff
schedule. The payments to the fiscal agency fund for the service of the
bonded debt of the Republic, as provided by the convention, have been
regularly and promptly made, and satisfactory progress has been made in
carrying out the provisions of the convention looking towards the
completion of the adjustment of the debt and the acquirement by the
Dominican Government of certain concessions and monopolies which have been
a burden to the commerce of the country. In short, the receivership has
demonstrated its ability, even under unfavorable economic and political
conditions, to do the work for which it was intended.

This Government was obliged to intervene diplomatically to bring about
arbitration or settlement of the claim of the Emery Company against
Nicaragua, which it had long before been agreed should be arbitrated. A
settlement of this troublesome case was reached by the signature of a
protocol on September 18, 1909.

Many years ago diplomatic intervention became necessary to the protection
of the interests in the American claim of Alsop and Company against the
Government of Chile. The Government of Chile had frequently admitted
obligation in the case and had promised this Government to settle. There
had been two abortive attempts to do so through arbitral commissions, which
failed through lack of jurisdiction. Now, happily, as the result of the
recent diplomatic negotiations, the Governments of the United States and of
Chile, actuated by the sincere desire to free from any strain those cordial
and friendly relations upon which both set such store, have agreed by a
protocol to submit the controversy to definitive settlement by His
Britannic Majesty, Edward VII.

Since the Washington Conventions of 1907 were communicated to the
Government of the United States as a consulting and advising party, this
Government has been almost continuously called upon by one or another, and
in turn by all the five Central American Republics, to exert itself for the
maintenance of the Conventions. Nearly every complaint has been against the
Zelaya Government of Nicaragua, which has kept Central America in constant
tension or turmoil. The responses made to the representations of Central
American Republics, as due from the United States on account of its
relation to the Washington Conventions, have been at all times conservative
and have avoided, so far as possible, any semblance of interference,
although it is very apparent that the considerations of geographic
proximity to the Canal Zone and of the very substantial American interests
in Central America give to the United States a special position in the zone
of these Republics and the Caribbean Sea.

I need not rehearse here the patient efforts of this Government to promote
peace and welfare among these Republics, efforts which are fully
appreciated by the majority of them who are loyal to their true interests.
It would be no less unnecessary to rehearse here the sad tale of
unspeakable barbarities and oppression alleged to have been committed by
the Zelaya Government. Recently two Americans were put to death by order of
President Zelaya himself. They were reported to have been regularly
commissioned officers in the organized forces of a revolution which had
continued many weeks and was in control of about half of the Republic, and
as such, according to the modern enlightened practice of civilized nations,
they were entitled to be dealt with as prisoners of war.

At the date when this message is printed this Government has terminated
diplomatic relations with the Zelaya Government, for reasons made public in
a communication to the former Nicaraguan charge d'affaires, and is
intending to take such future steps as may be found most consistent with
its dignity, its duty to American interests, and its moral obligations to
Central America and to civilization. It may later be necessary for me to
bring this subject to the attention of the Congress in a special message.

The International Bureau of American Republics has carried on an important
and increasing work during the last year. In the exercise of its peculiar
functions as an international agency, maintained by all the American
Republics for the development of Pan-American commerce and friendship, it
has accomplished a great practical good which could be done in the same way
by no individual department or bureau of one government, and is therefore
deserving of your liberal support. The fact that it is about to enter a new
building, erected through the munificence of an American philanthropist and
the contributions of all the American nations, where both its efficiency of
administration and expense of maintenance will naturally be much augmented,
further entitles it to special consideration.

THE FAR EAST.

In the Far East this Government preserves unchanged its policy of
supporting the principle of equality of opportunity and scrupulous respect
for the integrity of the Chinese Empire, to which policy are pledged the
interested Powers of both East and West.

By the Treaty of 1903 China has undertaken the abolition of likin with a
moderate and proportionate raising of the customs tariff along with
currency reform. These reforms being of manifest advantage to foreign
commerce as well as to the interests of China, this Government is
endeavoring to facilitate these measures and the needful acquiescence of
the treaty Powers. When it appeared that Chinese likin revenues were to be
hypothecated to foreign bankers in connection with a great railway project,
it was obvious that the Governments whose nationals held this loan would
have a certain direct interest in the question of the carrying out by China
of the reforms in question. Because this railroad loan represented a
practical and real application of the open door policy through cooperation
with China by interested Powers as well as because of its relations to the
reforms referred to above, the Administration deemed American participation
to be of great national interest. Happily, when it was as a matter of broad
policy urgent that this opportunity should not be lost, the indispensable
instrumentality presented itself when a group of American bankers, of
international reputation and great resources, agreed at once to share in
the loan upon precisely such terms as this Government should approve. The
chief of those terms was that American railway material should be upon an
exact equality with that of the other nationals joining in the loan in the
placing of orders for this whole railroad system. After months of
negotiation the equal participation of Americans seems at last assured. It
is gratifying that Americans will thus take their share in this extension
of these great highways of trade, and to believe that such activities will
give a real impetus to our commerce and will prove a practical corollary to
our historic policy in the Far East.

The Imperial Chinese Government in pursuance of its decision to devote
funds from the portion of the indemnity remitted by the United States to
the sending of students to this country has already completed arrangements
for carrying out this purpose, and a considerable body of students have
arrived to take up their work in our schools and universities. No one can
doubt the happy effect that the associations formed by these representative
young men will have when they return to take up their work in the
progressive development of their country.

The results of the Opium Conference held at Shanghai last spring at the
invitation of the United States have been laid before the Government. The
report shows that China is making remarkable progress and admirable efforts
toward the eradication of the opium evil and that the Governments concerned
have not allowed their commercial interests to interfere with a helpful
cooperation in this reform. Collateral investigations of the opium question
in this country lead me to recommend that the manufacture, sale and use of
opium and its derivatives in the United States should be so far as possible
more rigorously controlled by legislation.

In one of the Chinese-Japanese Conventions of September 4 of this year
there was a provision which caused considerable public apprehension in that
upon its face it was believed in some quarters to seek to establish a
monopoly of mining privileges along the South Manchurian and Antung-Mukden
Railroads, and thus to exclude Americans from a wide field of enterprise,
to take part in which they were by treaty with China entitled. After a
thorough examination of the Conventions and of the several contextual
documents, the Secretary of State reached the conclusion that no such
monopoly was intended or accomplished. However, in view of the widespread
discussion of this question, to confirm the view it had reached, this
Government made inquiry of the Imperial Chinese and Japanese Governments
and received from each official assurance that the provision had no purpose
inconsistent with the policy of equality of opportunity to which the
signatories, in common with the United States, are pledged.

Our traditional relations with the Japanese Empire continue cordial as
usual. As the representative of Japan, His Imperial Highness Prince Kuni
visited the Hudson-Fulton Celebration. The recent visit of a delegation of
prominent business men as guests of the chambers of commerce of the Pacific
slope, whose representatives had been so agreeably received in Japan, will
doubtless contribute to the growing trade across the Pacific, as well as to
that mutual understanding which leads to mutual appreciation. The
arrangement of 1908 for a cooperative control of the coming of laborers to
the United States has proved to work satisfactorily. The matter of a
revision of the existing treaty between the United States and Japan which
is terminable in 1912 is already receiving the study of both countries.

The Department of State is considering the revision in whole or in part, of
the existing treaty with Siam, which was concluded in 1856, and is now, in
respect to many of its provisions, out of date.

THE DEPARTMENT OF STATE.

I earnestly recommend to the favorable action of the Congress the estimates
submitted by the Department of State and most especially the legislation
suggested in the Secretary of State's letter of this date whereby it will
be possible to develop and make permanent the reorganization of the
Department upon modern lines in a manner to make it a thoroughly efficient
instrument in the furtherance of our foreign trade and of American
interests abroad. The plan to have Divisions of Latin-American and Far
Eastern Affairs and to institute a certain specialization in business with
Europe and the Near East will at once commend itself. These
politico-geographical divisions and the detail from the diplomatic or
consular service to the Department of a number of men, who bring to the
study of complicated problems in different parts of the world practical
knowledge recently gained on the spot, clearly is of the greatest advantage
to the Secretary of State in foreseeing conditions likely to arise and in
conducting the great variety of correspondence and negotiation. It should
be remembered that such facilities exist in the foreign offices of all the
leading commercial nations and that to deny them to the Secretary of State
would be to place this Government at a great disadvantage in the rivalry of
commercial competition.

The consular service has been greatly improved under the law of April 5,
1906, and the Executive Order of June 27, 1906, and I commend to your
consideration the question of embodying in a statute the principles of the
present Executive Order upon which the efficiency of our consular service
is wholly dependent.

In modern times political and commercial interests are interrelated, and in
the negotiation of commercial treaties, conventions and tariff agreements,
the keeping open of opportunities and the proper support of American
enterprises, our diplomatic service is quite as important as the consular
service to the business interests of the country. Impressed with this idea
and convinced that selection after rigorous examination, promotion for
merit solely and the experience only to be gained through the continuity of
an organized service are indispensable to a high degree of efficiency in
the diplomatic service, I have signed an Executive Order as the first step
toward this very desirable result. Its effect should be to place all
secretaries in the diplomatic service in much the same position as consular
officers are now placed and to tend to the promotion of the most efficient
to the grade of minister, generally leaving for outside appointments such
posts of the grade of ambassador or minister as it may be expedient to fill
from without the service. It is proposed also to continue the practice
instituted last summer of giving to all newly appointed secretaries at
least one month's thorough training in the Department of State before they
proceed to their posts. This has been done for some time in regard to the
consular service with excellent results.

Under a provision of the Act of August 5, 1909, I have appointed three
officials to assist the officers of the Government in collecting
information necessary to a wise administration of the tariff act of August
5, 1909. As to questions of customs administration they are cooperating
with the officials of the Treasury Department and as to matters of the
needs and the exigencies of our manufacturers and exporters, with the
Department of Commerce and Labor, in its relation to the domestic aspect of
the subject of foreign commerce. In the study of foreign tariff treatment
they will assist the Bureau of Trade Relations of the Department of State.
It is hoped thus to coordinate and bring to bear upon this most important
subject all the agencies of the Government which can contribute anything to
its efficient handling.

As a consequence of Section 2 of the tariff act of August 5, 1909, it
becomes the duty of the Secretary of State to conduct as diplomatic
business all the negotiations necessary to place him in a position to
advise me as to whether or not a particular country unduly discriminates
against the United States in the sense of the statute referred to. The
great scope and complexity of this work, as well as the obligation to lend
all proper aid to our expanding commerce, is met by the expansion of the
Bureau of Trade Relations as set forth in the estimates for the Department
of State.

OTHER DEPARTMENTS.

I have thus in some detail described the important transactions of the
State Department since the beginning of this Administration for the reason
that there is no provision either by statute or custom for a formal report
by the Secretary of State to the President or to Congress, and a
Presidential message is the only means by which the condition of our
foreign relations is brought to the attention of Congress and the public.

In dealing with the affairs of the other Departments, the heads of which
all submit annual reports, I shall touch only those matters that seem to me
to call for special mention on my part without minimizing in any way the
recommendations made by them for legislation affecting their respective
Departments, in all of which I wish to express my general concurrence.

GOVERNMENT EXPENDITURES AND REVENUES.

Perhaps the most important question presented to this Administration is
that of economy in expenditures and sufficiency of revenue. The deficit of
the last fiscal year, and the certain deficit of the current year, prompted
Congress to throw a greater responsibility on the Executive and the
Secretary of the Treasury than had heretofore been declared by statute.
This declaration imposes upon the Secretary of the Treasury the duty of
assembling all the estimates of the Executive Departments, bureaus, and
offices, of the expenditures necessary in the ensuing fiscal year, and of
making an estimate of the revenues of the Government for the same period;
and if a probable deficit is thus shown, it is made the duty of the
President to recommend the method by which such deficit can be met.

The report of the Secretary shows that the ordinary expenditures for the
current fiscal year ending June 30, 1910, will exceed the estimated
receipts by $34,075,620. If to this deficit is added the sum to be
disbursed for the Panama Canal, amounting to $38,000,000, and $1,000,000 to
be paid on the public debt, the deficit of ordinary receipts and
expenditures will be increased to a total deficit of $73,075,620. This
deficit the Secretary proposes to meet by the proceeds of bonds issued to
pay the cost of constructing the Panama Canal. I approve this proposal.

The policy of paying for the construction of the Panama Canal, not out of
current revenue, but by bond issues, was adopted in the Spooner Act of
1902, and there seems to be no good reason for departing from the principle
by which a part at least of the burden of the cost of the canal shall fall
upon our posterity who are to enjoy it; and there is all the more reason
for this view because the actual cost to date of the canal, which is now
half done and which will be completed January 1, 1915, shows that the cost
of engineering and construction will be $297,766,000, instead of
$139,705,200, as originally estimated. In addition to engineering and
construction, the other expenses, including sanitation and government, and
the amount paid for the properties, the franchise, and the privilege of
building the canal, increase the cost by $75,435,000, to a total of
$375,201,000. The increase in the cost of engineering and construction is
due to a substantial enlargement of the plan of construction by widening
the canal 100 feet in the Culebra cut and by increasing the dimensions of
the locks, to the underestimate of the quantity of the work to be done
under the original plan, and to an underestimate of the cost of labor and
materials both of which have greatly enhanced in price since the original
estimate was made.

In order to avoid a deficit for the ensuing fiscal year, I directed the
heads of Departments in the preparation of their estimates to make them as
low as possible consistent with imperative governmental necessity. The
result has been, as I am advised by the Secretary of the Treasury, that the
estimates for the expenses of the Government for the next fiscal year
ending June 30, 1911, are less than the appropriations for this current
fiscal year by $42,818,000. So far as the Secretary of the Treasury is able
to form a judgment as to future income, and compare it with the
expenditures for the next fiscal year ending June 30, 1911, and excluding
payments on account of the Panama Canal, which will doubtless be taken up
by bonds, there will be a surplus of $35,931,000.

In the present estimates the needs of the Departments and of the Government
have been cut to the quick, so to speak, and any assumption on the part of
Congress, so often made in times past, that the estimates have been
prepared with the expectation that they may be reduced, will result in
seriously hampering proper administration.

The Secretary of the Treasury points out what should be carefully noted in
respect to this reduction in governmental expenses for the next fiscal
year, that the economies are of two kinds--first, there is a saving in the
permanent administration of the Departments, bureaus, and offices of the
Government; and, second, there is a present reduction in expenses by a
postponement of projects and improvements that ultimately will have to be
carried out but which are now delayed with the hope that additional revenue
in the future will permit their execution without producing a deficit.

It has been impossible in the preparation of estimates greatly to reduce
the cost of permanent administration. This can not be done without a
thorough reorganization of bureaus, offices, and departments. For the
purpose of securing information which may enable the executive and the
legislative branches to unite in a plan for the permanent reduction of the
cost of governmental administration, the Treasury Department has instituted
an investigation by one of the most skilled expert accountants in the
United States. The result of his work in two or three bureaus, which, if
extended to the entire Government, must occupy two or more years, has been
to show much room for improvement and opportunity for substantial
reductions in the cost and increased efficiency of administration. The
object of the investigation is to devise means to increase the average
efficiency of each employee. There is great room for improvement toward
this end, not only by the reorganization of bureaus and departments and in
the avoidance of duplication, but also in the treatment of the individual
employee.

Under the present system it constantly happens that two employees receive
the same salary when the work of one is far more difficult and important
and exacting than that of the other. Superior ability is not rewarded or
encouraged. As the classification is now entirely by salary, an employee
often rises to the highest class while doing the easiest work, for which
alone he may be fitted. An investigation ordered by my predecessor resulted
in the recommendation that the civil service he reclassified according to
the kind of work, so that the work requiring most application and knowledge
and ability shall receive most compensation. I believe such a change would
be fairer to the whole force and would permanently improve the personnel of
the service.

More than this, every reform directed toward the improvement in the average
efficiency of government employees must depend on the ability of the
Executive to eliminate from the government service those who are
inefficient from any cause, and as the degree of efficiency in all the
Departments is much lessened by the retention of old employees who have
outlived their energy and usefulness, it is indispensable to any proper
system of economy that provision be made so that their separation from the
service shall be easy and inevitable. It is impossible to make such
provision unless there is adopted a plan of civil pensions. Most of the
great industrial organizations, and many of the well-conducted railways of
this country, are coming to the conclusion that a system of pensions for
old employees, and the substitution therefor of younger and more energetic
servants, promotes both economy and efficiency of administration.

I am aware that there is a strong feeling in both Houses of Congress, and
possibly in the country, against the establishment of civil pensions, and
that this has naturally grown out of the heavy burden of military pensions,
which it has always been the policy of our Government to assume; but I am
strongly convinced that no other practical solution of the difficulties
presented by the superannuation of civil servants can be found than that of
a system of civil pensions.

The business and expenditures of the Government have expanded enormously
since the Spanish war, but as the revenues have increased in nearly the
same proportion as the expenditures until recently, the attention of the
public, and of those responsible for the Government, has not been fastened
upon the question of reducing the cost of administration. We can not, in
view of the advancing prices of living, hope to save money by a reduction
in the standard of salaries paid. Indeed, if any change is made in that
regard, an increase rather than a decrease will be necessary; and the only
means of economy will be in reducing the number of employees and in
obtaining a greater average of efficiency from those retained in the
service.

Close investigation and study needed to make definite recommendations in
this regard will consume at least two years. I note with much satisfaction
the organization in the Senate of a Committee on Public Expenditures,
charged with the duty of conducting such an investigation, and I tender to
that committee all the assistance which the executive branch of the
Government can possibly render.

FRAUDS IN THE COLLECTION OF CUSTOMS.

I regret to refer to the fact of the discovery of extensive frauds in the
collections of the customs revenue at New York City, in which a number of
the subordinate employees in the weighing and other departments were
directly concerned, and in which the beneficiaries were the American Sugar
Refining Company and others. The frauds consisted in the payment of duty on
underweights of sugar. The Government has recovered from the American Sugar
Refining Company all that it is shown to have been defrauded of. The sum
was received in full of the amount due, which might have been recovered by
civil suit against the beneficiary of the fraud, but there was an express
reservation in the contract of settlement by which the settlement should
not interfere with, or prevent the criminal prosecution of everyone who was
found to be subject to the same.

Criminal prosecutions are now proceeding against a number of the Government
officers. The Treasury Department and the Department of Justice are
exerting every effort to discover all the wrongdoers, including the
officers and employees of the companies who may have been privy to the
fraud. It would seem to me that an investigation of the frauds by Congress
at present, pending the probing by the Treasury Department and the
Department of Justice, as proposed, might by giving immunity and otherwise
prove an embarrassment in securing conviction of the guilty parties.

MAXIMUM AND MINIMUM CLAUSE IN TARIFF ACT.

Two features of the new tariff act call for special reference. By virtue of
the clause known as the "Maximum and Minimum" clause, it is the duty of the
Executive to consider the laws and practices of other countries with
reference to the importation into those countries of the products and
merchandise of the United States, and if the Executive finds such laws and
practices not to be unduly discriminatory against the United States, the
minimum duties provided in the bill are to go into force.

Unless the President makes such a finding, then the maximum duties provided
in the bill, that is, an increase of twenty-five per cent. ad valorem over
the minimum duties, are to be in force. Fear has been expressed that this
power conferred and duty imposed on the Executive is likely to lead to a
tariff war. I beg to express the hope and belief that no such result need
be anticipated.

The discretion granted to the Executive by the terms "unduly
discriminatory" is wide. In order that the maximum duty shall be charged
against the imports from a country, it is necessary that he shall find on
the part of that country not only discriminations in its laws or the
practice under them against the trade of the United States, but that the
discriminations found shall be undue; that is, without good and fair
reason. I conceive that this power was reposed in the President with the
hope that the maximum duties might never be applied in any case, but that
the power to apply them would enable the President and the State Department
through friendly negotiation to secure the elimination from the laws and
the practice under them of any foreign country of that which is unduly
discriminatory. No one is seeking a tariff war or a condition in which the
spirit of retaliation shall be aroused.

USES OF THE NEW TARIFF BOARD.

The new tariff law enables me to appoint a tariff board to assist me in
connection with the Department of State in the administration of the
minimum and maximum clause of the act and also to assist officers of the
Government in the administration of the entire law. An examination of the
law and an understanding of the nature of the facts which should be
considered in discharging the functions imposed upon the Executive show
that I have the power to direct the tariff board to make a comprehensive
glossary and encyclopedia of the terms used and articles embraced in the
tariff law, and to secure information as to the cost of production of such
goods in this country and the cost of their production in foreign
countries. I have therefore appointed a tariff board consisting of three
members and have directed them to perform all the duties above described.
This work will perhaps take two or three years, and I ask from Congress a
continuing annual appropriation equal to that already made for its
prosecution. I believe that the work of this board will be of prime utility
and importance whenever Congress shall deem it wise again to readjust the
customs duties. If the facts secured by the tariff board are of such a
character as to show generally that the rates of duties imposed by the
present tariff law are excessive under the principles of protection as
described in the platform of the successful party at the late election, I
shall not hesitate to invite the attention of Congress to this fact and to
the necessity for action predicated thereon. Nothing, however, halts
business and interferes with the course of prosperity so much as the
threatened revision of the tariff, and until the facts are at hand, after
careful and deliberate investigation, upon which such revision can properly
be undertaken, it seems to me unwise to attempt it. The amount of
misinformation that creeps into arguments pro and con in respect to tariff
rates is such as to require the kind of investigation that I have directed
the tariff board to make, an investigation undertaken by it wholly without
respect to the effect which the facts may have in calling for a
readjustment of the rates of duty.

WAR DEPARTMENT.

In the interest of immediate economy and because of the prospect of a
deficit, I have required a reduction in the estimates of the War Department
for the coming fiscal year, which brings the total estimates down to an
amount forty-five millions less than the corresponding estimates for last
year. This could only be accomplished by cutting off new projects and
suspending for the period of one year all progress in military matters. For
the same reason I have directed that the Army shall not be recruited up to
its present authorized strength. These measures can hardly be more than
temporary--to last until our revenues are in better condition and until the
whole question of the expediency of adopting a definite military policy can
be submitted to Congress, for I am sure that the interests of the military
establishment are seriously in need of careful consideration by Congress.
The laws regulating the organization of our armed forces in the event of
war need to be revised in order that the organization can be modified so as
to produce a force which would be more consistently apportioned throughout
its numerous branches. To explain the circumstances upon which this opinion
is based would necessitate a lengthy discussion, and I postpone it until
the first convenient opportunity shall arise to send to Congress a special
message upon this subject.

The Secretary of War calls attention to a number of needed changes in the
Army in all of which I concur, but the point upon which I place most
emphasis is the need for an elimination bill providing a method by which
the merits of officers shall have some effect upon their advancement and by
which the advancement of all may be accelerated by the effective
elimination of a definite proportion of the least efficient. There are in
every army, and certainly in ours, a number of officers who do not violate
their duty in any such way as to give reason for a court-martial or
dismissal, but who do not show such aptitude and skill and character for
high command as to justify their remaining in the active service to be
Promoted. Provision should be made by which they may be retired on a
certain proportion of their pay, increasing with their length of service at
the time of retirement. There is now a personnel law for the Navy which
itself needs amendment and to which I shall make further reference. Such a
law is needed quite as much for the Army.

The coast defenses of the United States proper are generally all that could
be desired, and in some respects they are rather more elaborate than under
present conditions are needed to stop an enemy's fleet from entering the
harbors defended. There is, however, one place where additional defense is
badly needed, and that is at the mouth of Chesapeake Bay, where it is
proposed to make an artificial island for a fort which shall prevent an
enemy's fleet from entering this most important strategical base of
operations on the whole Atlantic and Gulf coasts. I hope that appropriate
legislation will be adopted to secure the construction of this defense.

The military and naval joint board have unanimously agreed that it would be
unwise to make the large expenditures which at one time were contemplated
in the establishment of a naval base and station in the Philippine Islands,
and have expressed their judgment, in which I fully concur, in favor of
making an extensive naval base at Pearl Harbor, near Honolulu, and not in
the Philippines. This does not dispense with the necessity for the
comparatively small appropriations required to finish the proper coast
defenses in the Philippines now under construction on the island of
Corregidor and elsewhere or to complete a suitable repair station and
coaling supply station at Olongapo, where is the floating dock "Dewey." I
hope that this recommendation of the joint board will end the discussion as
to the comparative merits of Manila Bay and Olongapo as naval stations, and
will lead to prompt measures for the proper equipment and defense of Pearl
Harbor.

THE NAVY.

The return of the battle-ship fleet from its voyage around the world, in
more efficient condition than when it started, was a noteworthy event of
interest alike to our citizens and the naval authorities of the world.
Besides the beneficial and far-reaching effect on our personal and
diplomatic relations in the countries which the fleet visited, the marked
success of the ships in steaming around the world in all weathers on
schedule time has increased respect for our Navy and has added to our
national prestige.

Our enlisted personnel recruited from all sections of the country is young
and energetic and representative of the national spirit. It is, moreover,
owing to its intelligence, capable of quick training into the modern
man-of-warsman. Our officers are earnest and zealous in their profession,
but it is a regrettable fact that the higher officers are old for the
responsibilities of the modern navy, and the admirals do not arrive at flag
rank young enough to obtain adequate training in their duties as flag
officers. This need for reform in the Navy has been ably and earnestly
presented to Congress by my predecessor, and I also urgently recommend the
subject for consideration.

Early in the coming session a comprehensive plan for the reorganization of
the officers of all corps of the Navy will be presented to Congress, and I
hope it will meet with action suited to its urgency.

Owing to the necessity for economy in expenditures, I have directed the
curtailment of recommendations for naval appropriations so that they are
thirty-eight millions less than the corresponding estimates of last year,
and the request for new naval construction is limited to two first-class
battle ships and one repair vessel.

The use of a navy is for military purposes, and there has been found need
in the Department of a military branch dealing directly with the military
use of the fleet. The Secretary of the Navy has also felt the lack of
responsible advisers to aid him in reaching conclusions and deciding
important matters between coordinate branches of the Department. To secure
these results he has inaugurated a tentative plan involving certain changes
in the organization of the Navy Department, including the navy-yards, all
of which have been found by the Attorney-General to be in accordance with
law. I have approved the execution of the plan proposed because of the
greater efficiency and economy it promises.

The generosity of Congress has provided in the present Naval Observatory
the most magnificent and expensive astronomical establishment in the world.
It is being used for certain naval purposes which might easily and
adequately be subserved by a small division connected with the Naval
Department at only a fraction of the cost of the present Naval Observatory.
The official Board of Visitors established by Congress and appointed in
1901 expressed its conclusion that the official head of the observatory
should be an eminent astronomer appointed by the President by and with the
advice and consent of the Senate, holding his place by a tenure at least as
permanent as that of the Superintendent of the Coast Survey or the head of
the Geological Survey, and not merely by a detail of two or three years'
duration. I fully concur in this judgment, and urge a provision by law for
the appointment of such a director.

It may not be necessary to take the observatory out of the Navy Department
and put it into another department in which opportunity for scientific
research afforded by the observatory would seem to be more appropriate,
though I believe such a transfer in the long run is the best policy. I am
sure, however, I express the desire of the astronomers and those learned in
the kindred sciences when I urge upon Congress that the Naval Observatory
be now dedicated to science under control of a man of science who can, if
need be, render all the service to the Navy Department which this
observatory now renders, and still furnish to the world the discoveries in
astronomy that a great astronomer using such a plant would be likely to
make.

DEPARTMENT OF JUSTICE EXPEDITION IN LEGAL PROCEDURE

The deplorable delays in the administration of civil and criminal law have
received the attention of committees of the American Bar Association and of
many State Bar Associations, as well as the considered thought of judges
and jurists. In my judgment, a change in judicial procedure, with a view to
reducing its expense to private litigants in civil cases and facilitating
the dispatch of business and final decision in both civil and criminal
cases, constitutes the greatest need in our American institutions. I do not
doubt for one moment that much of the lawless violence and cruelty
exhibited in lynchings is directly due to the uncertainties and injustice
growing out of the delays in trials, judgments, and the executions thereof
by our courts. Of course these remarks apply quite as well to the
administration of justice in State courts as to that in Federal courts, and
without making invidious distinction it is perhaps not too much to say
that, speaking generally, the defects are less in the Federal courts than
in the State courts. But they are very great in the Federal courts. The
expedition with which business is disposed of both on the civil and the
criminal side of English courts under modern rules of procedure makes the
delays in our courts seem archaic and barbarous. The procedure in the
Federal courts should furnish an example for the State courts. I presume it
is impossible, without an amendment to the Constitution, to unite under one
form of action the proceedings at common law and proceedings in equity in
the Federal courts, but it is certainly not impossible by a statute to
simplify and make short and direct the procedure both at law and in equity
in those courts. It is not impossible to cut down still more than it is cut
down, the jurisdiction of the Supreme Court so as to confine it almost
wholly to statutory and constitutional questions. Under the present
statutes the equity and admiralty procedure in the Federal courts is under
the control of the Supreme Court, but in the pressure of business to which
that court is subjected, it is impossible to hope that a radical and proper
reform of the Federal equity procedure can be brought about. I therefore
recommend legislation providing for the appointment by the President of a
commission with authority to examine the law and equity procedure of the
Federal courts of first instance, the law of appeals from those courts to
the courts of appeals and to the Supreme Court, and the costs imposed in
such procedure upon the private litigants and upon the public treasury and
make recommendation with a view to simplifying and expediting the procedure
as far as possible and making it as inexpensive as may be to the litigant
of little means.

INJUNCTIONS WITHOUT NOTICE.

The platform of the successful party in the last election contained the
following: "The Republican party will uphold at all times the authority and
integrity of the courts, State and Federal, and will ever insist that their
powers to enforce their process and to protect life, liberty, and property
shall be preserved inviolate. We believe, however, that the rules of
procedure in the Federal courts with respect to the issuance of the writ of
injunction should be more accurately defined by statute, and that no
injunction or temporary restraining order should be issued without notice,
except where irreparable injury would result from delay, in which case a
speedy hearing thereafter should be granted." I recommend that in
compliance with the promise thus made, appropriate legislation be adopted.
The ends of justice will best be met and the chief cause of complaint
against ill-considered injunctions without notice will be removed by the
enactment of a statute forbidding hereafter the issuing of any injunction
or restraining order, whether temporary or permanent, by any Federal court,
without previous notice and a reasonable opportunity to be heard on behalf
of the parties to be enjoined; unless it shall appear to the satisfaction
of the court that the delay necessary to give such notice and hearing would
result in irreparable injury to the complainant and unless also the court
shall from the evidence make a written finding, which shall be spread upon
the court minutes, that immediate and irreparable injury is likely to ensue
to the complainant, and shall define the injury, state why it is
irreparable, and shall also endorse on the order issued the date and the
hour of the issuance of the order. Moreover, every such injunction or
restraining order issued without previous notice and opportunity by the
defendant to be heard should by force of the statute expire and be of no
effect after seven days from the issuance thereof or within any time less
than that period which the court may fix, unless within such seven days or
such less period, the injunction or order is extended or renewed after
previous notice and opportunity to be heard.

My judgment is that the passage of such an act which really embodies the
best practice in equity and is very like the rule now in force in some
courts will prevent the issuing of ill-advised orders of injunction without
notice and will render such orders when issued much less objectionable by
the short time in which they may remain effective.

ANTI-TRUST AND INTERSTATE COMMERCE LAWS.

The jurisdiction of the General Government over interstate commerce has led
to the passage of the so-called "Sherman Anti-trust Law" and the
"Interstate Commerce Law" and its amendments. The developments in the
operation of those laws, as shown by indictments, trials, judicial
decisions, and other sources of information, call for a discussion and some
suggestions as to amendments. These I prefer to embody in a special message
instead of including them in the present communication, and I shall avail
myself of the first convenient opportunity to bring these subjects to the
attention of Congress.

JAIL OF THE DISTRICT OF COLUMBIA.

My predecessor transmitted to the Congress a special message on January 11,
1909, accompanying the report of Commissioners theretofore appointed to
investigate the jail, workhouse, etc., in the District of Columbia, in
which he directed attention to the report as setting forth vividly, "the
really outrageous conditions in the workhouse and jail."

The Congress has taken action in pursuance of the recommendations of that
report and of the President, to the extent of appropriating funds and
enacting the necessary legislation for the establishment of a workhouse and
reformatory. No action, however, has been taken by the Congress with
respect to the jail, the conditions of which are still antiquated and
insanitary. I earnestly recommend the passage of a sufficient appropriation
to enable a thorough remodeling of that institution to be made without
delay. It is a reproach to the National Government that almost under the
shadow of the Capitol Dome prisoners should be confined in a building
destitute of the ordinary decent appliances requisite to cleanliness and
sanitary conditions.

POST-OFFICE DEPARTMENT. SECOND-CLASS MAIL MATTER.

The deficit every year in the Post-Office Department is largely caused by
the low rate of postage of 1 cent a pound charged on second-class mail
matter, which includes not only newspapers, but magazines and miscellaneous
periodicals. The actual loss growing out of the transmission of this
second-class mail matter at 1 cent a pound amounts to about $63,000,000 a
year. The average cost of the transportation of this matter is more than 9
cents a pound.

It appears that the average distance over which newspapers are delivered to
their customers is 291 miles, while the average haul of magazines is 1,049,
and of miscellaneous periodicals 1,128 miles. Thus, the average haul of the
magazine is three and one-half times and that of the miscellaneous
periodical nearly four times the haul of the daily newspaper, yet all of
them pay the same postage rate of 1 cent a pound. The statistics of 1907
show that second-class mail matter constituted 63.91 per cent. of the
weight of all the mail, and yielded only 5.19 per cent. of the revenue.

The figures given are startling, and show the payment by the Government of
an enormous subsidy to the newspapers, magazines, and periodicals, and
Congress may well consider whether radical steps should not be taken to
reduce the deficit in the Post-Office Department caused by this discrepancy
between the actual cost of transportation and the compensation exacted
therefor.

A great saving might be made, amounting to much more than half of the loss,
by imposing upon magazines and periodicals a higher rate of postage. They
are much heavier than newspapers, and contain a much higher proportion of
advertising to reading matter, and the average distance of their
transportation is three and a half times as great.

The total deficit for the last fiscal year in the Post-Office Department
amounted to $17,500,000. The branches of its business which it did at a
loss were the second-class mail service, in which the loss, as already
said, was $63,000,000, and the free rural delivery, in which the loss was
$28,000,000. These losses were in part offset by the profits of the letter
postage and other sources of income. It would seem wise to reduce the loss
upon second-class mail matter, at least to the extent of preventing a
deficit in the total operations of the Post-Office.

I commend the whole subject to Congress, not unmindful of the spread of
intelligence which a low charge for carrying newspapers and periodicals
assists. I very much doubt, however, the wisdom of a policy which
constitutes so large a subsidy and requires additional taxation to meet
it.

POSTAL SAVINGS BANKS.

The second subject worthy of mention in the Post-Office Department is the
real necessity and entire practicability of establishing postal savings
banks. The successful party at the last election declared in favor of
postal savings banks, and although the proposition finds opponents in many
parts of the country, I am convinced that the people desire such banks, and
am sure that when the banks are furnished they will be productive of the
utmost good. The postal savings banks are not constituted for the purpose
of creating competition with other banks. The rate of interest upon
deposits to which they would be limited would be so small as to prevent
their drawing deposits away from other banks.

I believe them to be necessary in order to offer a proper inducement to
thrift and saving to a great many people of small means who do not now have
banking facilities, and to whom such a system would offer an opportunity
for the accumulation of capital. They will furnish a satisfactory
substitute, based on sound principle and actual successful trial in nearly
all the countries of the world, for the system of government guaranty of
deposits now being adopted in several western States, which with deference
to those who advocate it seems to me to have in it the seeds of
demoralization to conservative banking and certain financial disaster. The
question of how the money deposited in postal savings banks shall be
invested is not free from difficulty, but I believe that a satisfactory
provision for this purpose was inserted as an amendment to the bill
considered by the Senate at its last session. It has been proposed to delay
the consideration of legislation establishing a postal savings bank until
after the report of the Monetary Commission. This report is likely to be
delayed, and properly so, cause of the necessity for careful deliberation
and close investigation. I do not see why the one should be tied up with
the other. It is understood that the Monetary Commission have looked into
the systems of banking which now prevail abroad, and have found that by a
control there exercised in respect to reserves and the rates of exchange by
some central authority panics are avoided. It is not apparent that a system
of postal savings banks would in any way interfere with a change to such a
system here. Certainly in most of the countries of Europe where control is
thus exercised by a central authority, postal savings banks exist and are
not thought to be inconsistent with a proper financial and banking system.

SHIP SUBSIDY.

Following the course of my distinguished predecessor, I earnestly recommend
to Congress the consideration and passage of a ship subsidy bill, looking
to the establishment of lines between our Atlantic seaboard and the eastern
coast of South America, as well as lines from the west coast of the United
States to South America. China, Japan, and the Philippines. The profits on
foreign mails are perhaps a sufficient measure of the expenditures which
might first be tentatively applied to this method of inducing American
capital to undertake the establishment of American lines of steamships in
those directions in which we now feel it most important that we should have
means of transportation controlled in the interest of the expansion of our
trade. A bill of this character has once passed the House and more than
once passed the Senate, and I hope that at this session a bill framed on
the same lines and with the same purposes may become a law.

INTERIOR DEPARTMENT. NEW MEXICO AND ARIZONA.

The successful party in the last election in its national platform declared
in favor of the admission as separate States of New Mexico and Arizona, and
I recommend that legislation appropriate to this end be adopted. I urge,
however, that care be exercised in the preparation of the legislation
affecting each Territory to secure deliberation in the selection of persons
as members of the convention to draft a constitution for the incoming
State, and I earnestly advise that such constitution after adoption by the
convention shall be submitted to the people of the Territory for their
approval at an election in which the sole issue shall be the merits of the
proposed constitution, and if the constitution is defeated by popular vote
means shall be provided in the enabling act for a new convention and the
drafting of a new constitution. I think it vital that the issue as to the
merits of the constitution should not be mixed up with the selection of
State officers, and that no election of State officers should be had until
after the constitution has been fully approved and finally settled upon.
ALASKA.

With respect to the Territory of Alaska, I recommend legislation which
shall provide for the appointment by the President of a governor and also
of an executive council, the members of which shall during their term of
office reside in the Territory, and which shall have legislative powers
sufficient to enable it to give to the Territory local laws adapted to its
present growth. I strongly deprecate legislation looking to the election of
a Territorial legislature in that vast district. The lack of permanence of
residence of a large part of the present population and the small number of
the people who either permanently or temporarily reside in the district as
compared with its vast expanse and the variety of the interests that have
to be subserved, make it altogether unfitting in my judgment to provide for
a popular election of a legislative body. The present system is not
adequate and does not furnish the character of local control that ought to
be there. The only compromise it seems to me which may give needed local
legislation and secure a conservative government is the one I propose.

CONSERVATION OF NATIONAL RESOURCES.

In several Departments there is presented the necessity for legislation
looking to the further conservation of our national resources, and the
subject is one of such importance as to require a more detailed and
extended discussion than can be entered upon in this communication. For
that reason I shall take an early opportunity to send a special message to
Congress on the subject of the improvement of our waterways, upon the
reclamation and irrigation of arid, semiarid, and swamp lands; upon the
preservation of our forests and the reforesting of suitable areas; upon the
reclassification of the public domain with a view of separating from
agricultural settlement mineral, coal, and phosphate lands and sites
belonging to the Government bordering on streams suitable for the
utilization of water power.

DEPARTMENT OF AGRICULTURE.

I commend to your careful consideration the report of the Secretary of
Agriculture as showing the immense sphere of usefulness which that
Department now fills and the wonderful addition to the wealth of the nation
made by the farmers of this country in the crops of the current year.

DEPARTMENT OF COMMERCE AND LABOR. THE LIGHT-HOUSE BOARD.

The Light-House Board now discharges its duties under the Department of
Commerce and Labor. For upwards of forty years this Board has been
constituted of military and naval officers and two or three men of science,
with such an absence of a duly constituted executive head that it is
marvelous what work has been accomplished. In the period of construction
the energy and enthusiasm of all the members prevented the inherent defects
of the system from interfering greatly with the beneficial work of the
Board, but now that the work is chiefly confined to maintenance and repair,
for which purpose the country is divided into sixteen districts, to which
are assigned an engineer officer of the Army and an inspector of the Navy,
each with a light-house tender and the needed plant for his work, it has
become apparent by the frequent friction that arises, due to the absence of
any central independent authority, that there must be a complete
reorganization of the Board. I concede the advantage of keeping in the
system the rigidity of discipline that the presence of naval and military
officers in charge insures, but unless the presence of such officers in the
Board can be made consistent with a responsible executive head that shall
have proper authority, I recommend the transfer of control over the
light-houses to a suitable civilian bureau. This is in accordance with the
judgment of competent persons who are familiar with the workings of the
present system. I am confident that a reorganization can be effected which
shall avoid the recurrence of friction between members, instances of which
have been officially brought to my attention, and that by such
reorganization greater efficiency and a substantial reduction in the
expense of operation can be brought about.

CONSOLIDATION OF BUREAUS.

I request Congressional authority to enable the Secretary of Commerce and
Labor to unite the Bureaus of Manufactures and Statistics. This was
recommended by a competent committee appointed in the previous
administration for the purpose of suggesting changes in the interest of
economy and efficiency, and is requested by the Secretary.

THE WHITE SLAVE TRADE.

I greatly regret to have to say that the investigations made in the Bureau
of Immigration and other sources of information lead to the view that there
is urgent necessity for additional legislation and greater executive
activity to suppress the recruiting of the ranks of prostitutes from the
streams of immigration into this country--an evil which, for want of a
better name, has been called "The White Slave Trade." I believe it to be
constitutional to forbid, under penalty, the transportation of persons for
purposes of prostitution across national and state lines; and by
appropriating a fund of $50,000 to be used by the Secretary of Commerce and
Labor for the employment of special inspectors it will be possible to bring
those responsible for this trade to indictment and conviction under a
federal law.

BUREAU OF HEALTH

For a very considerable period a movement has been gathering strength,
especially among the members of the medical profession, in favor of a
concentration of the instruments of the National Government which have to
do with the promotion of public health. In the nature of things, the
Medical Department of the Army and the Medical Department of the Navy must
be kept separate. But there seems to be no reason why all the other bureaus
and offices in the General Government which have to do with the public
health or subjects akin thereto should not be united in a bureau to be
called the "Bureau of Public Health." This would necessitate the transfer
of the Marine-Hospital Service to such a bureau. I am aware that there is
wide field in respect to the public health committed to the States in which
the Federal Government can not exercise jurisdiction, but we have seen in
the Agricultural Department the expansion into widest usefulness of a
department giving attention to agriculture when that subject is plainly one
over which the States properly exercise direct jurisdiction. The
opportunities offered for useful research and the spread of useful
information in regard to the cultivation of the soil and the breeding of
stock and the solution of many of the intricate problems in progressive
agriculture have demonstrated the wisdom of establishing that department.
Similar reasons, of equal force, can be given for the establishment of a
bureau of health that shall not only exercise the police jurisdiction of
the Federal Government respecting quarantine, but which shall also afford
an opportunity for investigation and research by competent experts into
questions of health affecting the whole country, or important sections
thereof, questions which, in the absence of Federal governmental work, are
not likely to be promptly solved.

CIVIL SERVICE COMMISSION.

The work of the United States Civil Service Commission has been performed
to the general satisfaction of the executive officers with whom the
Commission has been brought into official communication. The volume of that
work and its variety and extent have under new laws, such as the Census
Act, and new Executive orders, greatly increased. The activities of the
Commission required by the statutes have reached to every portion of the
public domain.

The accommodations of the Commission are most inadequate for its needs. I
call your attention to its request for increase in those accommodations as
will appear from the annual report for this year.

POLITICAL CONTRIBUTIONS.

I urgently recommend to Congress that a law be passed requiring that
candidates in elections of Members of the House of Representatives, and
committees in charge of their candidacy and campaign, file in a proper
office of the United States Government a statement of the contributions
received and of the expenditures incurred in the campaign for such
elections and that similar legislation be enacted in respect to all other
elections which are constitutionally within the control of Congress.

FREEDMAN'S SAVINGS AND TRUST COMPANY.

Recommendations have been made by my predecessors that Congress appropriate
a sufficient sum to pay the balance--about 38 per cent.--of the amounts due
depositors in the Freedman's Savings and Trust Company. I renew this
recommendation, and advise also that a proper limitation be prescribed
fixing a period within which the claims may be presented, that assigned
claims be not recognized, and that a limit be imposed on the amount of fees
collectible for services in presenting such claims.

SEMI-CENTENNIAL OF NEGRO FREEDOM.

The year 1913 will mark the fiftieth anniversary of the issuance of the
Emancipation Proclamation granting freedom to the negroes. It seems fitting
that this event should be properly celebrated. Already a movement has been
started by prominent Negroes, encouraged by prominent white people and the
press. The South especially is manifesting its interest in this movement.

It is suggested that a proper form of celebration would be an exposition to
show the progress the Negroes have made, not only during their period of
freedom, but also from the time of their coming to this country.

I heartily indorse this proposal, and request that the Executive be
authorized to appoint a preliminary commission of not more than seven
persons to consider carefully whether or not it is wise to hold such an
exposition, and if so, to outline a plan for the enterprise. I further
recommend that such preliminary commission serve without salary, except as
to their actual expenses, and that an appropriation be made to meet such
expenses. CONCLUSION.

I have thus, in a message compressed as much as the subjects will permit,
referred to many of the legislative needs of the country, with the
exceptions already noted. Speaking generally, the country is in a high
state of prosperity. There is every reason to believe that we are on the
eve of a substantial business expansion, and we have just garnered a
harvest unexampled in the market value of our agricultural products. The
high prices which such products bring mean great prosperity for the farming
community, but on the other hand they mean a very considerably increased
burden upon those classes in the community whose yearly compensation does
not expand with the improvement in business and the general prosperity.
Various reasons are given for the high prices. The proportionate increase
in the output of gold, which to-day is the chief medium of exchange and is
in some respects a measure of value, furnishes a substantial explanation of
at least a part of the increase in prices. The increase in population and
the more expensive mode of living of the people, which have not been
accompanied by a proportionate increase in acreage production, may furnish
a further reason. It is well to note that the increase in the cost of
living is not confined to this country, but prevails the world over, and
that those who would charge increases in prices to the existing protective
tariff must meet the fact that the rise in prices has taken place almost
wholly in those products of the factory and farm in respect to which there
has been either no increase in the tariff or in many instances a very
considerable reduction.