To the Senate and House of Representatives:

I have the honor to comply with the requirement of the Constitution that I
should lay before the Congress information as to the state of the Union,
and recommend consideration of such measures as are necessary and
expedient.

Substantial progress has been made during the year in national peace and
security; the fundamental strength of the Nation's economic life is
unimpaired; education and scientific discovery have made advances; our
country is more alive to its problems of moral and spiritual welfare.

ECONOMIC SITUATION

During the past 12 months we have suffered with other Nations from economic
depression.

The origins of this depression lie to some extent within our own borders
through a speculative period which diverted capital and energy into
speculation rather than constructive enterprise. Had overspeculation in
securities been the only force operating, we should have seen recovery many
months ago, as these particular dislocations have generally readjusted
themselves.

Other deep-seated causes have been in action, however, chiefly the
world-wide overproduction beyond even the demand of prosperous times for
such important basic commodities as wheat, rubber, coffee, sugar, copper,
silver, zinc, to some extent cotton, and other raw materials. The
cumulative effects of demoralizing price falls of these important
commodities in the process of adjustment of production to world consumption
have produced financial crises in many countries and have diminished the
buying power of these countries for imported goods to a degree which
extended the difficulties farther afield by creating unemployment in all
the industrial nations. The political agitation in Asia; revolutions in
South America and political unrest in some European States; the methods of
sale by Russia of her increasing agricultural exports to European markets;
and our own drought--have all contributed to prolong and deepen the
depression.

In the larger view the major forces of the depression now lie outside of
the United States, and our recuperation has been retarded by the
unwarranted degree of fear and apprehension created by these outside
forces.

The extent of the depression is indicated by the following approximate
percentages of activity during the past three months as compared with the
highly prosperous year of 1928:

Value of department-store sales - 93% of 1928

Volume of manufacturing production - 80% of 1928

Volume of mineral production - 90% of 1928

Volume of factory employment - 84% of 1928

Total of bank deposits - 105% of 1928

Wholesale prices--all commodities - 83% of 1928

Cost of living - 94% of 1928

Various other indexes indicate total decrease of activity from 1928 of from
15 to 20 per cent.

There are many factors which give encouragement for the future. The fact
that we are holding from 80 to 85 per cent of our normal activities and
incomes; that our major financial and industrial institutions have come
through the storm unimpaired; that price levels of major commodities have
remained approximately stable for some time; that a number of industries
are showing signs of increasing demand; that the world at large is
readjusting itself to the situation; all reflect grounds for confidence. We
should remember that these occasions have been met many times before, that
they are but temporary, that our country is to-day stronger and richer in
resources, in equipment, in skill, than ever in its history. We are in an
extraordinary degree self-sustaining, we will overcome world influences and
will lead the march of prosperity as we have always done hitherto.

Economic depression can not be cured by legislative action or executive
pronouncement. Economic wounds must be healed by the action of the cells of
the economic body--the producers and consumers themselves. Recovery can be
expedited and its effects mitigated by cooperative action. That cooperation
requires that every individual should sustain faith and courage; that each
should maintain his self-reliance; that each and every one should search
for methods of improving his business or service; that the vast majority
whose income is unimpaired should not hoard out of fear but should pursue
their normal living and recreations; that each should seek to assist his
neighbors who may be less fortunate; that each industry should assist its
own employees; that each community and each State should assume its full
responsibilities for organization of employment and relief of distress with
that sturdiness and independence which built a great Nation.

Our people are responding to these impulses in remarkable degree. The best
contribution of government lies in encouragement of this voluntary
cooperation in the community. The Government, National, State, and local,
can join with the community in such programs and do its part. A year ago I,
together with other officers of the Government, initiated extensive
cooperative measures throughout the country.

The first of these measures was an agreement of leading employers to
maintain the standards of wages and of labor leaders to use their influence
against strife. In a large sense these undertakings have been adhered to
and we have not witnessed the usual reductions of wages which have always
heretofore marked depressions. The index of union wage scales shows them to
be today fully up to the level of any of the previous three years. In
consequence the buying power of the country has been much larger than would
otherwise have been the case. Of equal importance the Nation has had
unusual peace in industry and freedom from the public disorder which has
characterized previous depressions.

The second direction of cooperation has been that our governments,
National, State, and local, the industries and business so distribute
employment as to give work to the maximum number of employees.

The third direction of cooperation has been to maintain and even extend
construction work and betterments in anticipation of the future. It has
been the universal experience in previous depressions that public works and
private construction have fallen off rapidly with the general tide of
depression. On this occasion, however, the increased authorization and
generous appropriations by the Congress and the action of States and
municipalities have resulted in the expansion of public construction to an
amount even above that in the most prosperous years. In addition the
cooperation of public utilities, railways, and other large organizations
has been generously given in construction and betterment work in
anticipation of future need. The Department of Commerce advises me that as
a result, the volume of this type of construction work, which amounted to
roughly $6,300,000,000 in 1929, instead of decreasing will show a total of
about $7,000,000,000 for 1930. There has, of course, been a substantial
decrease in the types of construction which could not be undertaken in
advance of need.

The fourth direction of cooperation was the organization in such States and
municipalities, as was deemed necessary, of committees to organize local
employment, to provide for employment agencies, and to effect relief of
distress.

The result of magnificent cooperation throughout the country has been that
actual suffering has been kept to a minimum during the past 12 months, and
our unemployment has been far less in proportion than in other large
industrial countries. Some time ago it became evident that unemployment
would continue over the winter and would necessarily be added to from
seasonal causes and that the savings of workpeople would be more largely
depleted. We have as a Nation a definite duty to see that no deserving
person in our country suffers from hunger or cold. I therefore set up a
more extensive organization to stimulate more intensive cooperation
throughout the country. There has been a most gratifying degree of
response, from governors, mayors, and other public officials, from welfare
organizations, and from employers in concerns both large and small. The
local communities through their voluntary agencies have assumed the duty of
relieving individual distress and are being generously supported by the
public.

The number of those wholly out of employment seeking for work was
accurately determined by the census last April as about 2,500,000. The
Department of Labor index of employment in the larger trades shows some
decrease in employment since that time. The problem from a relief point of
view is somewhat less than the published estimates of the number of
unemployed would indicate. The intensive community and individual efforts
in providing special employment outside the listed industries are not
reflected in the statistical indexes and tend to reduce such published
figures. Moreover, there is estimated to be a constant figure at all times
of nearly 1,000,000 unemployed who are not without annual income but
temporarily idle in the shift from one job to another. We have an average
of about three breadwinners to each two families, so that every person
unemployed does not represent a family without income. The view that the
relief problems are less than the gross numbers would indicate is confirmed
by the experience of several cities, which shows that the number of
families in distress represents from 10 to 20 per cent of the number of the
calculated unemployed. This is not said to minimize the very real problem
which exists but to weigh its actual proportions.

As a contribution to the situation the Federal Government is engaged upon
the greatest program of waterway, harbor, flood control, public building,
highway, and airway improvement in all our history. This, together with
loans to merchant shipbuilders, improvement of the Navy and in military
aviation, and other construction work of the Government will exceed
$520,000,000 for this fiscal year. This compares with $253,000,000 in the
fiscal year 1928. The construction works already authorized and the
continuation of policies in Government aid will require a continual
expenditure upwards of half a billion dollars annually.

I favor still further temporary expansion of these activities in aid to
unemployment during this winter. The Congress will, however, have presented
to it numbers of projects, some of them under the guise of, rather than the
reality of, their usefulness in the increase of employment during the
depression. There are certain commonsense limitations upon any expansions
of construction work. The Government must not undertake works that are not
of sound economic purpose and that have not been subject to searching
technical investigation, and which have not been given adequate
consideration by the Congress. The volume of construction work in the
Government is already at the maximum limit warranted by financial prudence
as a continuing policy. To increase taxation for purposes of construction
work defeats its own purpose, as such taxes directly diminish employment in
private industry. Again any kind of construction requires, after its
authorization, a considerable time before labor can be employed in which to
make engineering, architectural, and legal preparations. Our immediate
problem is the increase of employment for the next six months, and new
plans which do not produce such immediate result or which extend
commitments beyond this period are not warranted.

The enlarged rivers and harbors, public building, and highway plans
authorized by the Congress last session, however, offer an opportunity for
assistance by the temporary acceleration of construction of these programs
even faster than originally planned, especially if the technical
requirements of the laws which entail great delays could be amended in such
fashion as to speed up acquirements of land and the letting of contracts.

With view, however, to the possible need for acceleration, we, immediately
upon receiving those authorities from the Congress five months ago, began
the necessary technical work in preparation for such possible eventuality.
I have canvassed the departments of the Government as to the maximum amount
that can be properly added to our present expenditure to accelerate all
construction during the next six months, and I feel warranted in asking the
Congress for an appropriation of from $100,000,000 to $150,000,000 to
provide such further employment in this emergency. In connection therewith
we need some authority to make enlarged temporary advances of
Federal-highway aid to the States.

I recommend that this appropriation be made distributable to the different
departments upon recommendation of a committee of the Cabinet and approval
by the President. Its application to works already authorized by the
Congress assures its use in directions of economic importance and to public
welfare. Such action will imply an expenditure upon construction of all
kinds of over $650,000,000 during the next twelve months.

AGRICULTURE

The world-wide depression has affected agriculture in common with all other
industries. The average price of farm produce has fallen to about 80 per
cent of the levels of 1928. This average is, however, greatly affected by
wheat and cotton, which have participated in world-wide overproduction and
have fallen to about 60 per cent of the average price of the year 1928.
Excluding these commodities, the prices of all other agricultural products
are about 84 per cent of those of 1928. The average wholesale prices of
other primary goods, such as nonferrous metals, have fallen to 76 per cent
of 1928.

The price levels of our major agricultural commodities are, in fact, higher
than those in other principal producing countries, due to the combined
result of the tariff and the operations of the Farm Board. For instance,
wheat prices at Minneapolis are about 30 per cent higher than at Winnipeg,
and at Chicago they are about 20 per cent higher than at Buenos Aires. Corn
prices at Chicago are over twice as high as at Buenos Aires. Wool prices
average more than 80 per cent higher in this country than abroad, and
butter is 30 per cent higher in New York City than in Copenhagen.

Aside from the misfortune to agriculture of the world-wide depression we
have had the most severe drought. It has affected particularly the States
bordering on the Potomac, Ohio, and Lower Mississippi Rivers, with some
areas in Montana, Kansas, Oklahoma, and Texas. It has found its major
expression in the shortage of pasturage and a shrinkage in the corn crop
from an average of about 2,800,000,000 bushels to about 2,090,000,000
bushels.

On August 14 I called a conference of the governors of the most acutely
affected States, and as a result of its conclusions I appointed a national
committee comprising the heads of the important Federal agencies under the
chairmanship of the Secretary of Agriculture. The governors in turn have
appointed State committees representative of the farmers, bankers, business
men, and the Red Cross, and subsidiary committees have been established in
most of the acutely affected counties. Railway rates were reduced on feed
and livestock in and out of the drought areas, and over 50,000 cars of such
products have been transported under these reduced rates. The Red Cross
established a preliminary fund of $5,000,000 for distress relief purposes
and established agencies for its administration in each county. Of this
fund less than $500,000 has been called for up to this time as the need
will appear more largely during the winter. The Federal Farm Loan Board has
extended its credit facilities, and the Federal Farm Board has given
financial assistance to all affected cooperatives.

In order that the Government may meet its full obligation toward our
countrymen in distress through no fault of their own, I recommend that an
appropriation should be made to the Department of Agriculture to be loaned
for the purpose of seed and feed for animals. Its application should as
hitherto in such loans be limited to a gross amount to any one individual,
and secured upon the crop.

The Red Cross can relieve the cases of individual distress by the
sympathetic assistance of our people.

FINANCES OF THE GOVERNMENT

I shall submit the detailed financial position of the Government with
recommendations in the usual Budget message. I will at this time, however,
mention that the Budget estimates of receipts and expenditures for the
current year were formulated by the Treasury and the Budget Bureau at a
time when it was impossible to forecast the severity of the business
depression and have been most seriously affected by it. At that time a
surplus of about $123,000,000 was estimated for this fiscal year and tax
reduction which affected the fiscal year to the extent of $75,000,000 was
authorized by the Congress, thus reducing the estimated surplus to about
$48,000,000. Closely revised estimates now made by the Treasury and the
Bureau of the Budget of the tax, postal, and other receipts for the current
fiscal year indicate a decrease of about $430,000,000 from the estimate of
a year ago, of which about $75,000,000 is due to tax reduction, leaving
about $355,000,000 due to the depression. Moreover, legislation enacted by
Congress subsequent to the submission of the Budget enlarging Federal
construction work to expand employment and for increase in veterans'
services and other items, have increased expenditures during the current
fiscal year by about $225,000,000.

Thus the decrease of $430,000,000 in revenue and the increase of
$225,000,000 in expenditure adversely change the original Budget situation
by about $655,000,000. This large sum is offset by the original estimated
surplus a year ago of about $123,000,000, by the application of
$185,000,000 of interest payments upon the foreign debt to current
expenditures, by arrangements of the Farm Board through repayments, etc.,
in consequence of which they reduced their net cash demands upon the
Treasury by $100,000,000 in this period, and by about $67,000,000 economies
and deferments brought about in the Government, thus reducing the practical
effect of the change in the situation to an estimated deficit of about
$180,000,000 for the present fiscal year. I shall make suggestions for
handling the present-year deficit in the Budget message, but I do not favor
encroachment upon the statutory reduction of the public debt.

While it will be necessary in public interest to further increase
expenditures during the current fiscal year in aid to unemployment by
speeding up construction work and aid to the farmers affected by the
drought, I can not emphasize too strongly the absolute necessity to defer
any other plans for increase of Government expenditures. The Budget for
1932 fiscal year indicates estimated expenditure of about $4,054,000,000,
including postal deficit. The receipts are estimated at about
$4,085,000,000 if the temporary tax reduction of last year be discontinued,
leaving a surplus of only about $30,000,000. Most rigid economy is
therefore necessary to avoid increase in taxes.

NATIONAL DEFENSE

Our Army and Navy are being maintained at a high state of efficiency, under
officers of high training and intelligence, supported by a devoted
personnel of the rank and file. The London naval treaty has brought
important economies in the conduct of the Navy. The Navy Department will
lay before the committees of the Congress recommendations for a program of
authorization of new construction which should be initiated in the fiscal
year of 1932.

LEGISLATION

This is the last session of the Seventy-first Congress. During its previous
sittings it has completed a very large amount of important legislation,
notably: The establishment of the Federal Farm Board; fixing congressional
reapportionment; revision of the tariff, including the flexible provisions
and a reorganization of the Tariff Commission; reorganization of the Radio
Commission; reorganization of the Federal Power Commission; expansion of
Federal prisons; reorganization of parole and probation system in Federal
prisons; expansion of veterans' hospitals; establishment of disability
allowances to veterans; consolidation of veteran activities; consolidation
and strengthening of prohibition enforcement activities in the Department
of Justice; organization of a Narcotics Bureau; large expansion of rivers
and harbors improvements; substantial increase in Federal highways;
enlargement of public buildings construction program; and the ratification
of the London naval treaty.

The Congress has before it legislation partially completed in the last
sitting in respect to Muscle Shoals, bus regulation, relief of congestion
in the courts, reorganization of border patrol in prevention of smuggling,
law enforcement in the District of Columbia, and other subjects.

It is desirable that these measures should be completed.

The short session does not permit of extensive legislative programs, but
there are a number of questions which, if time does not permit action, I
recommend should be placed in consideration by the Congress, perhaps
through committees cooperating in some instances with the Federal
departments, with view to preparation for subsequent action. Among them are
the following subjects:

ELECTRICAL POWER

I have in a previous message recommended effective regulation of interstate
electrical power. Such regulation should preserve the independence and
responsibility of the States.

RAILWAYS

We have determined upon a national policy of consolidation of the railways
as a necessity of more stable and more economically operated
transportation. Further legislation is necessary to facilitate such
consolidation. In the public interest we should strengthen the railways
that they may meet our future needs.

ANTITRUST LAWS

I recommend that the Congress institute an inquiry into some aspects of the
economic working of these laws. I do not favor repeal of the Sherman Act.
The prevention of monopolies is of most vital public importance.
Competition is not only the basis of protection to the consumer but is the
incentive to progress. However, the interpretation of these laws by the
courts, the changes in business, especially in the economic effects upon
those enterprises closely related to the use of the natural resources of
the country, make such an inquiry advisable. The producers of these
materials assert that certain unfortunate results of wasteful and
destructive use of these natural resources together with a destructive
competition which impoverishes both operator and worker can not be remedied
because of the prohibitive interpretation of the antitrust laws. The
well-known condition of the bituminous coal industry is an illustration.
The people have a vital interest in the conservation of their natural
resources; in the prevention of wasteful practices; in conditions of
destructive competition which may impoverish the producer and the wage
earner; and they have an equal interest in maintaining adequate
competition. I therefore suggest that an inquiry be directed especially to
the effect of the workings of the antitrust laws in these particular fields
to determine if these evils can be remedied without sacrifice of the
fundamental purpose of these laws.

CAPITAL-GAINS TAX

It is urged by many thoughtful citizens that the peculiar economic effect
of the income tax on so-called capital gains at the present rate is to
enhance speculative inflation and likewise impede business recovery. I
believe this to be the case and I recommend that a study be made of the
economic effects of this tax and of its relation to the general structure
of our income tax law.

IMMIGRATION

There is need for revision of our immigration laws upon a more limited and
more selective basis, flexible to the needs of the country.

Under conditions of current unemployment it is obvious that persons coming
to the United States seeking work would likely become either a direct or
indirect public charge. As a temporary measure the officers issuing visas
to immigrants have been, in pursuance of the law, instructed to refuse
visas to applicants likely to fall into this class. As a result the visas
issued have decreased from an average of about 24,000 per month prior to
restrictions to a rate of about 7,000 during the last month. These are
largely preferred persons under the law. Visas from Mexico are about 250
per month compared to about 4,000 previous to restrictions. The whole
subject requires exhaustive reconsideration.

DEPORTATION OF ALIEN CRIMINALS

I urge the strengthening of our deportation laws so as to more fully rid
ourselves of criminal aliens. Furthermore, thousands of persons have
entered the country in violation of the immigration laws. The very method
of their entry indicates their objectionable character, and our law-abiding
foreign-born residents suffer in consequence. I recommend that the Congress
provide methods of strengthening the Government to correct this abuse.

POST OFFICE

Due to deferment of Government building over many years, previous
administrations had been compelled to enter upon types of leases for
secondary facilities in large cities, some of which were objectionable as
representing too high a return upon the value of the property. To prevent
the occasion for further uneconomic leasing I recommend that the Congress
authorize the building by the Government of its own facilities.

VETERANS

The Nation has generously expanded its care for veterans. The consolidation
of all veterans' activities into the Veterans' Administration has produced
substantial administrative economies. The consolidation also brings
emphasis to the inequalities in service and allowances. The whole subject
is under study by the administrator, and I recommend it should also be
examined by the committees of the Congress.

SOCIAL SERVICE

I urge further consideration by the Congress of the recommendations I made
a year ago looking to the development through temporary Federal aid of
adequate State and local services for the health of children and the
further stamping out of communicable disease, particularly in the rural
sections. The advance of scientific discovery, methods, and social thought
imposes a new vision in these matters. The drain upon the Federal Treasury
is comparatively small. The results both economic and moral are of the
utmost importance.

GENERAL

It is my belief that after the passing of this depression, when we can
examine it in retrospect, we shall need to consider a number of other
questions as to what action may be taken by the Government to remove
Possible governmental influences which make for instability and to better
organize mitigation of the effect of depression. It is as yet too soon to
constructively formulate such measures.

There are many administrative subjects, such as departmental
reorganization, extension of the civil service, readjustment of the postal
rates, etc., which at some appropriate time require the attention of the
Congress.

FOREIGN RELATIONS

Our relations with foreign countries have been maintained upon a high basis
of cordiality and good will.

During the past year the London naval pact was completed, approved by the
Senate, and ratified by the governments concerned. By this treaty we have
abolished competition in the building of warships, have established the
basis of parity of the United States with the strongest of foreign powers,
and have accomplished a substantial reduction in war vessels.

During the year there has been an extended political unrest in the world.
Asia continues in disturbed condition, and revolutions have taken place in
Brazil, Argentina, Peru, and Bolivia. Despite the jeopardy to our citizens
and their property which naturally arises in such circumstances, we have,
with the cooperation of the governments concerned, been able to meet all
such instances without friction.

We have resumed normal relations with the new Governments of Brazil,
Argentina, Peru, and Bolivia immediately upon evidence that they were able
to give protection to our citizens and their property, and that they
recognized their international obligations.

A commission which was supported by the Congress has completed its
investigation and reported upon our future policies in respect to Haiti and
proved of high value in securing the acceptance of these policies. An
election has been held and a new government established. We have replaced
our high commissioner by a minister and have begun the gradual withdrawal
of our activities with view to complete retirement at the expiration of the
present treaty in 1935.

A number of arbitration and conciliation treaties have been completed or
negotiated during the year, and will be presented for approval by the
Senate.

I shall, in a special message, lay before the Senate the protocols covering
the statutes of the World Court which have been revised to accord with the
sense of previous Senate reservations.

The White House,

December 2, 1930