To the Congress of the United States:

No Congress of the United States ever assembled, on surveying the state of
the Union, has met with a more pleasing prospect than that which appears at
the present time. In the domestic field there is tranquility and
contentment, harmonious relations between management and wage earner,
freedom from industrial strife, and the highest record of years of
prosperity. In the foreign field there is peace, the good will which comes
from mutual understanding, and the knowledge that the problems which a
short time ago appeared so ominous are yielding to the touch of manifest
friendship. The great wealth created by our enterprise and industry, and
saved by our economy, has had the widest distribution among our own people,
and has gone out in a steady stream to serve the charity and the business
of the world. The requirements of existence have passed beyond the standard
of necessity into the region of luxury. Enlarging production is consumed by
an increasing demand at home and an expanding commerce abroad. The country
can regard the present with satisfaction and anticipate the future with
optimism.

The main source of these unexampled blessings lies in the integrity and
character of the American people. They have had great faith, which they
have supplemented with mighty works. They have been able to put trust in
each other and trust in their Government. Their candor in dealing with
foreign governments has commanded respect and confidence. Yet these
remarkable powers would have been exerted almost in vain without the
constant cooperation and careful administration of the Federal Government.

We have been coming into a period which may be fairly characterized as a
conservation of our national resources. Wastefulness in public business and
private enterprise has been displaced by constructive economy. This has
been accomplished by bringing our domestic and foreign relations more and
more under a reign of law. A rule of force has been giving way to a rule of
reason. We have substituted for the vicious circle of increasing
expenditures, increasing tax rates, and diminishing profits the charmed
circle of diminishing expenditures, diminishing tax rates, and increasing
profits.

Four times we have made a drastic revision of our internal revenue system,
abolishing many taxes and substantially reducing almost all others. Each
time the resulting stimulation to business has so increased taxable incomes
and profits that a surplus has been reduced. One-third of the national
debt has been paid, while much of the other two-thirds has been refunded at
lower rates, and these savings of interest and constant economies have
enabled us to repeat the satisfying process of more tax reductions. Under
this sound and healthful encouragement the national income has increased
nearly 50 per cent, until it is estimated to stand well over
$90,000,000,000. It gas been a method which has performed the seeming
miracle of leaving a much greater percentage of earnings in the hands of
the taxpayers with scarcely any diminution of the Government revenue. That
is constructive economy in the highest degree. It is the corner stone of
prosperity. It should not fail to be continued.

This action began by the application of economy to public expenditure. If
it is to be permanent, it must be made so by the repeated application of
economy. There is no surplus on which to base further tax revision at this
time. Last June the estimates showed a threatened deficit for the current
fiscal year of $94,000,000. Under my direction the departments began saving
all they could out of their present appropriations. The last tax reduction
brought an encouraging improvement in business, beginning early in
October, which will also increase our revenue. The combination of economy
and good times now indicates a surplus of about $37,000,000. This is a
margin of less than I percent on out, expenditures and makes it obvious
that the Treasury is in no condition to undertake increases in expenditures
to be made before June 30. It is necessary therefore during the present
session to refrain from new appropriations for immediate outlay, or if such
are absolutely required to provide for them by new revenue; otherwise, we
shall reach the end of the year with the unthinkable result of an unbalanced
budget. For the first time during my term of office we face that
contingency. I am certain that the Congress would not pass and I should not
feel warranted in approving legislation which would involve us in that
financial disgrace.

On the whole the finances of the Government are most satisfactory. Last
year the national debt was reduced about $906,000,000. The refunding and
retirement of the second and third Liberty loans have just been brought to
a successful conclusion, which will save about $75,000,000 a year in
interest. The unpaid balance has been arranged in maturities convenient
for carrying out our permanent debt-paying Program.

The enormous savings made have not been at the expense of any legitimate
public need. The Government plant has been kept up and many improvements
are tinder way, while its service is fully manned and the general
efficiency of operation has increased. We have been enabled to undertake
many new enterprises. Among these are the adjusted compensation of the
veterans of the World War, which is costing us $112,000,000 a year;
amortizing our liability to the civil service retirement funds,
$20,000,000; increase of expenditures for rivers and harbors including
flood control, $43,000,000; public buildings, $47,000,000. In 1928 we spent
$50,000,000 in the adjustment of war claims and alien property. These are
examples of a large list of items.

FOREIGN RELATIONS

When we turn from our domestic affairs to our foreign relations, we
likewise perceive peace and progress. The Sixth International Conference of
American States was held at Habana last winter. It contributed to a better
understanding and cooperation among the nations'. Eleven important
conventions were signed and 71 resolutions passed. Pursuant to the plan
then adopted, this Government has invited the other 20 nations of this
hemisphere to it conference on conciliation and arbitration, which meets in
Washington on December 10. All the nations have accepted and the
expectation is justified that important progress will be made in methods
for resolving international differences by means of arbitration.

During the year we have signed 11 new arbitration treaties, and 22 more are
tinder negotiation.

NICARAGUA

When a destructive and bloody revolution lately broke out in Nicaragua, at
the earnest and repeated entreaties of its Government I dispatched our
Marine forces there to protect the lives and interests of our citizens. To
compose the contending parties, I sent there Col. Henry L. Stimson, former
Secretary of War and now Governor General of the Philippine Islands, who
secured an agreement that warfare should cease, a national election should
be held and peace should be restored. Both parties conscientiously carried
out this agreement, with the exception of a few bandits who later mostly
surrendered or left the country. President Diaz appointed Brig. Gen. Frank
R. McCoy, United States Army, president of the election board, which
included also one member of each political party.

A free and fair election has been held and has worked out so successfully
that both parties have joined in requesting like cooperation from this
country at the election four years hence, to which I have refrained from
making any commitments, although our country must be gratified at such an
exhibition of success and appreciation.

Nicaragua is regaining its prosperity and has taken a long step in the
direction of peaceful self-government.

TACNA-ARICA

The long-standing differences between Chile and Peru have been sufficiently
composed so that diplomatic relations have been resumed by the exchange of
ambassadors. Negotiations are hopefully proceeding as this is written for
the final adjustment of the differences over their disputed territory.

MEXICO

Our relations with Mexico are on a more satisfactory basis than at any time
since their revolution. Many misunderstandings have been resolved and the
most frank and friendly negotiations promise a final adjustment of all
unsettled questions. It is exceedingly gratifying that Ambassador Morrow
has been able to bring our two neighboring countries, which have so many
interests in common, to a position of confidence in each other and of
respect for mutual sovereign rights.

CHINA

The situation in China which a few months ago was so threatening as to call
for the dispatch of a large additional force has, been much composed. The
Nationalist Government has established itself over the country and
promulgated a new organic law announcing a program intended to promote the
political and economic welfare of the people. We have recognized this
Government, encouraged its progress, and have negotiated a treaty
restoring to China complete tariff autonomy and guaranteeing our citizens
against discriminations. Our trade in that quarter is increasing and our
forces are being reduced.

GREEK AND AUSTRIAN DEBTS

Pending before the Congress is a recommendation for the settlement of the
Greek debt and the Austrian debt. Both of these are comparatively small and
our country can afford to be generous. The rehabilitation of these
countries awaits their settlement. There would also be advantages to our
trade. We could scarcely afford to be the only nation that refuses the
relief which Austria seeks. The Congress has already granted Austria a
long-time moratorium, which it is understood will be waived and immediate
payments begun on her debt on the same basis which we have extended to
other countries.

PEACE TREATY

One of the most important treaties ever laid before the Senate of the
United States will be that which the 15 nations recently signed at Paris,
and to which 44 other nations have declared their intention to adhere,
renouncing war as a national policy and agreeing to resort only to peaceful
means for the adjustment of international differences. It is the most
solemn declaration against war, the most positive adherence to peace, that
it is possible for sovereign nations to make. It does not supersede our
inalienable sovereign right and duty of national defense or undertake to
commit us before the event to any mode of action which the Congress might
decide to be wise if ever the treaty should be broken. But it is a new
standard in the world around which can rally the informed and enlightened
opinion of nations to prevent their governments from being forced into
hostile action by the temporary outbreak of international animosities. The
observance of this covenant, so simple and so straightforward, promises more
for the peace of the world than any other agreement ever negotiated among
the nations.

NATIONAL DEFENSE

The first duty of our Government to its own citizens and foreigners within
its borders is the preservation of order. Unless and until that duty is met
a government is not even eligible for recognition among the family of
nations. The advancement of world civilization likewise is dependent upon
that order among the people of different countries which we term peace. To
insure our citizens against the infringement of their legal rights at home
and abroad, to preserve order, liberty, and peace by making the law
supreme, we have an Army and a Navy.

Both of these are organized for defensive purposes. Our Army could not be
much reduced, but does not need to be increased. Such new housing and
repairs as are necessary are tinder way and the 6-year program in aviation
is being put into effect in both branches of our service.

Our Navy, according to generally accepted standards, is deficient in
cruisers. We have 10 comparatively new vessels, 22 that are old, and 8 to
be built. It is evident that renewals and replacements must be provided.
This matter was thoroughly canvassed at the last session of the Congress
and does not need restatement. The bill before the Senate with the
elimination of the time clause should be passed. We have no intention of
competing with any other country. This building program is for necessary
replacements and to meet our needs for defense.

The cost of national defense is stupendous. It has increased $118,000,000
in the past four years. The estimated expenditure for 1930 is $668,000,000.
While this is made up of many items it is, after all, mostly dependent upon
numbers. Our defensive needs do not can for any increase in the number of
men in the Army or the Navy. We have reached the limit of what we ought to
expend for that purpose.

I wish to repeat again for the benefit of the timid and the suspicious that
this country is neither militaristic nor imperialistic. Many people at home
and abroad, who constantly make this charge, are the same ones who are even
more solicitous to have us extend assistance to foreign countries. When
such assistance is granted, the inevitable result is that we have foreign
interests. For us to refuse the customary support and protection of such
interests would be in derogation of the sovereignty of this Nation. Our
largest foreign interests are in the British Empire, France, and Italy.
Because we are constantly solicitous for those interests, I doubt if anyone
would suppose that those countries feel we harbor toward them any
militaristic or imperialistic design. As for smaller countries, we
certainly do not want any of them. We are more anxious than they are to have
their sovereignty respected. Our entire influence is in behalf of their
independence. Cuba stands as a witness to our adherence to this principle.

The position of this Government relative to the limitation of armaments,
the results already secured, and the developments up to the present time
are so well known to the Congress that they do not require any restatement.

VETERANS

The magnitude of our present system of veterans' relief is without
precedent, and the results have been far-reaching. For years a service
pension has been granted to the Grand Army and lately to the survivors of
the Spanish-American War. At the time we entered the World War however,
Congress departed from the usual pension system followed by our
Government. Eleven years have elapsed since our laws were first enacted,
initiating a system of compensation, rehabilitation, hospitalization, and
insurance for the disabled of the World War and their dependents. The
administration of all the laws concerning relief has been a difficult
task, but it can safely be stated that these measures have omitted nothing
in their desire to deal generously and humanely. We should continue to
foster this system and provide all the facilities necessary for adequate
care. It is the conception of our Government that the pension roll is an
honor roll. It should include all those who are justly entitled to its
benefits, but exclude all others.

Annual expenditures for all forms of veterans' relief now approximate
$765,000,000, and are increasing from year to year. It is doubtful if the
peak of expenditures will be reached even under present legislation for
sonic time yet to come. Further amendments to the existing law will be
suggested by the American Legion, the Veterans of Foreign Wars of the
United States, the Disabled American Veterans of the World War, and other
like organizations, and it may be necessary for administrative purposes, or
in order to remove some existing inequalities in the present law, to make
further changes. I am sure that such recommendations its may be submitted
to the Congress will receive your careful consideration. But because of the
vast expenditure now being made, each year, with every assurance that it
will increase, and because of the great liberality of the existing law, the
proposal of any additional legislation dealing with this subject should
receive most searching scrutiny from the Congress.

You are familiar with the suggestion that the various public agencies now
dealing with matters of veterans' relief be consolidated in one Government
department. Some advantages to this plan seem apparent, especially in the
simplification of administration find in the opportunity of bringing about
a greater uniformity in the application of veterans' relief. I recommend
that a survey be made by the proper committees of Congress dealing with
this subject, in order to determine whether legislation to secure this
consolidation is desirable.

AGRICULTURE

The past year has been marked by notable though not uniform improvement in
agriculture. The general purchasing power of farm products and the volume
of production have advanced. This means not only further progress, in
overcoming the price disparity into which agriculture was plunged in
1920-21, but also increased efficiency on the part of farmers and a
well-grounded confidence in the future of agriculture.

The livestock industry has attained the best balance for many years and is
prospering conspicuously. Dairymen, beef producers, and poultrymen are
receiving substantially larger returns than last year. Cotton, although
lower in price than at this time last year, was produced in greater volume
and the prospect for cotton incomes is favorable. But progress is never
uniform in a vast and highly diversified agriculture or industry. Cash
grains, hay, tobacco, and potatoes will bring somewhat smaller returns this
year than last. Present indications are, however, that the gross farm
income will be somewhat larger than in the crop year 1927-28, when the
total was $12,253,000,000. The corresponding figure for 1926-27 was
$12,127,000,000, and in 1925-26, $12,670,000,000. Still better results
would have been secured this year had there not been an undue increase in
the production of certain crops. This is particularly true of potatoes,
which have sold at an unremunerative price, or at a loss, as a direct
result of overexpansion of acreage.

The present status of agriculture, although greatly improved over that of a
few years ago, bespeaks the need of further improvement which calls for
determined effort of farmers themselves, encouraged and assisted by wise
public policy. The Government has been, and must continue to be, alive to
the needs of agriculture.

In the past eight years more constructive legislation of direct benefit to
agriculture has been adopted than during any other period. The Department
of Agriculture has been broadened and reorganized to insure greater
efficiency. The department is laying greater stress on the economic and
business phases of agriculture. It is lending every possible assistance to
cooperative marketing associations. Regulatory and research work have been
segregated in order that each field may be served more effectively.

I can not too strongly commend, in the field of fact finding, the research
work of the Department of Agriculture and the State experiment stations.
The department now receives annually $4,000,000 more for research than in
1921. In addition, the funds paid to the States for experimentation
purposes under the Purnell Act constitute an annual increase in Federal
payments to State agricultural experiment stations of $2,400,000 over the
amount appropriated in 1921. The program of support for research may wisely
be continued and expanded. Since 1921 we have appropriated nearly an
additional $2,000,000 for extension work, and this sum is to be increased
next year under authorization by the Capper-Ketcham Act.

THE SURPLUS PROBLEM

While these developments in fundamental research, regulation, and
dissemination of agricultural information are of distinct help to
agriculture, additional effort is needed. The surplus problem demands
attention. As emphasized in my last message, the Government should assume
no responsibility in normal times for crop surplus clearly due to
overextended acreage. The Government should, however, provide reliable
information as a guide to private effort; and in this connection fundamental
research on prospective supply and demand, as a guide to production and
marketing, should be encouraged. Expenditure of public funds to bring in
more new land should have most searching scrutiny, so long as our farmers
face unsatisfactory prices for crops and livestock produced on land already
under cultivation.

Every proper effort should be made to put land to uses for which it is
adapted. The reforestation of land best suited for timber production is
progressing and should be encouraged, and to this end the forest taxation
inquiry was instituted to afford a practical guide for public policy.
Improvement has been made in grazing regulation in the forest reserves, not
only to protect the ranges, but to preserve the soil from erosion. Similar
action is urgently needed to protect other public lands which are now
overgrazed and rapidly eroding.

Temporary expedients, though sometimes capable of appeasing the demands of
the moment, can not permanently solve the surplus problem and might
seriously aggravate it. Hence putting the Government directly into
business, subsidies, and price fixing, and the alluring promises of
political action as a substitute for private initiative, should be
avoided.

The Government should aid in promoting orderly marketing and in handling
surpluses clearly due to weather and seasonal conditions. As a beginning
there should be created a Federal farm board consisting of able and
experienced men empowered to advise producers' associations in establishing
central agencies or stabilization corporations to handle surpluses, to seek
wore economical means of merchandising, and to aid the producer in securing
returns according to the a14 of his product. A revolving loan fund should
be provided for the necessary financing until these agencies shall have
developed means of financing their operations through regularly constituted
credit institutions. Such a bill should carry authority for raising the
money, by loans or otherwise, necessary to meet the expense, as the
Treasury has no surplus.

Agriculture has lagged behind industry in achieving that unity of effort
which modern economic life demands. The cooperative movement, which is
gradually building the needed organization, is in harmony with public
interest and therefore merits public encouragement.

THE RESPONSIBILITY OF THE STATES

Important phases of public policy related to agriculture lie within the
sphere of the States. While successive reductions in Federal taxes have
relieved most farmers of direct taxes to the National Government, State and
local levies have become a serious burden. This problem needs immediate and
thorough study with a view to correction at the earliest possible moment.
It will have to be made largely by the States themselves.

COMMERCE

It is desirable that the Government continue its helpful attitude toward
American business. The activities of the Department of Commerce have
contributed largely to the present satisfactory position
in our international trade, which has reached about $9,000,000,000
annually. There should be no slackening of effort in that direction. It is
also important that the department's assistance to domestic commerce be
continued. There is probably no way in which the Government can aid sound
economic progress more effectively than by cooperation with our business
men to reduce wastes in distribution.

COMMERCIAL AERONAUTICS

Continued progress in civil aviation is most gratifying. Demands for
airplanes and motors have taxed both the industry and the licensing and
inspection service of the Department of Commerce to their capacity. While
the compulsory licensing provisions of the air commerce act apply only to
equipment and personnel engaged in interstate and foreign commerce, a
Federal license may be procured by anyone possessing the necessary
qualifications. State legislation, local airport regulations, and insurance
requirements make such a license practically indispensable. This results in
uniformity of regulation and increased safety in operation, which are
essential to aeronautical development. Over 17,000 young men and women have
now applied for Federal air pilot's licenses or permits. More than 80 per
cent of them applied during the past year.

Our national airway system exceeds 14,000 miles in length and has 7,500
miles lighted for night operations. Provision has been made for lighting
4,000 miles more during the current fiscal year and equipping an equal
mileage with radio facilities. Three-quarters of our people are now served
by these routes. With the rapid growth of air mail, express, and passenger
service, this new transportation medium is daily becoming a more important
factor in commerce. It is noteworthy that this development has taken place
without governmental subsidies. Commercial passenger flights operating on
schedule have reached 13,000 miles per day.

During the next fortnight this Nation will entertain the nations of the
world in a celebration of the twenty-fifth anniversary of the first
successful airplane flight. The credit for this epoch-making achievement
belongs to a citizen of our own country, Orville Wright.

CUBAN PARCEL POST

I desire to repeat my recommendation of an earlier message, that Congress
enact the legislation necessary to make permanent the Parcel Post
Convention with Cuba, both as a facility to American commerce and as a
measure of equity to Cuba in the one class of goods which that country can
send here by parcel post without detriment to our own trade.

"MAINE" BATTLESHIP MEMORIAL

When I attended the Pan American Conference at Habana, the President of
Cuba showed me a marble statue made from the original memorial that was
overturned by a storm after it was erected on the Cuban shore to the memory
of the men who perished in the destruction of the battleship Maine. As a
testimony of friendship and appreciation of the Cuban Government and people
he most generously offered to present this to the United States, and I
assured him of my pleasure in accepting it. There is no location in the
White House for placing so large and heavy a structure, and I therefore
urge the Congress to provide by law for some locality where it can be
set up.

RAILROADS

In previous annual messages I have suggested the enactment of laws to
promote railroad consolidation with the view of increasing the efficiency
of transportation and lessening its cost to the public. While,
consolidations can and should be made under the present law until it is
changed, vet the provisions of the act of 1920 have not been found fully
adequate to meet the needs of other methods of consolidation. Amendments
designed to remedy these defects have been considered at length by the
respective committees of Congress and a bill was reported out late in the
last session which I understand has the approval in principle of the
Interstate Commerce Commission. It is to be hoped that this legislation may
be enacted at an early date.

Experience has shown that the interstate commerce law requires definition
and clarification in several other respects, some of which have been
pointed out by the Interstate Commerce Commission in its annual reports to
the Congress. It will promote the public interest to have the Congress give
early consideration to the recommendations there made.

MERCHANT MARINE

The cost of maintaining the United States Government merchant fleet has
been steadily reduced. We have established American flag lines in foreign
trade where they had never before existed as a means of promoting commerce
and as a naval auxiliary. There have been sold to private American capital
for operation within the past few years 14 of these lines, which, under the
encouragement of the recent legislation passed by the Congress, give
promise of continued successful operation. Additional legislation from time
to time may be necessary to promote future advancement under private
control.

Through the cooperation of the Post Office Department and the Shipping
Board long-term contracts are being made with American steamship lines for
carrying mail, which already promise the construction of 15 to 20 new
vessels and the gradual reestablishment of the American merchant marine as
a private enterprise. No action of the National Government has been so
beneficial to our shipping. The cost is being absorbed to a considerable
extent by the disposal of unprofitable lines operated by the Shipping
Board, for which the new law has made a market. Meanwhile it should be our
policy to maintain necessary strategic lines under the Government operation
until they can be transferred to private capital.

INTER-AMERICAN HIGHWAY

In my message last year I expressed the view that we should lend our
encouragement for more good roads to all the principal points on this
hemisphere South of the Rio Grande. My view has not changed.

The Pan American Union has recently indorsed it. In some of the countries
to the south a great deal of progress is being made in road building. In,
Others engineering features are often exacting and financing difficult. As
those countries enter upon programs for road building we should be ready to
contribute from our abundant experience to make their task easier of
accomplishment. I prefer not to go into civil life to accomplish this end.
We already furnish military and naval advisors, and following this
precedent we could draw competent men from these same sources and from the
Department of Agriculture.

We should provide our southern neighbors, if they request it, with such
engineer advisors for the construction of roads and bridges. Private
interests should look with favor upon all reasonable loans sought by
these countries to open main lines of travel. Such assistance should be
given especially to any project for a highway designed to connect all the
countries on this hemisphere and thus facilitate, intercourse and closer
relations among, them.

AIR MAIL SERVICE

The friendly relations and the extensive, commercial intercourse with the
Western Hemisphere to the south of us are being further cemented by the
establishment and extension of air-mail routes. We shall soon have one from
Key West, Fla., over Cuba, Haiti, and Santo Domingo to San Juan, P. R.,
where it will connect with another route to Trinidad. There will be another
route from Key West to the Canal Zone, where connection will be made with a
route across the northern coast of South America to Paramaribo. This will
give us a circle around the Caribbean under our own control. Additional
connections will be made at Colon with a route running down the west coast
of South America as far as Conception, Chile, and with the French air mail
at Paramaribo running down the eastern coast of South America. The air
service already spans our continent, with laterals running to Mexico and
Canada, and covering a daily flight of over 28,000 miles, with an average
cargo of 15 000 pounds.

WATERWAYS

Our river and harbor improvements are proceeding with vigor. In the past
few years Ave have increased the appropriation for this regular work
$28,000,000, besides what is to be expended on flood control. The total
appropriation for this year was over $91,000,000. The Ohio River is almost
ready for opening; work on the Missouri and other rivers is under way. In
accordance with the Mississippi flood law Army engineers are making
investigations and surveys on other streams throughout the country with a
view to flood control, navigation, waterpower, and irrigation. Our barrier
lines are being operated under generous appropriations, and negotiations
are developing relative to the St. Lawrence waterway. To Secure the largest
benefits from all these waterways joint rates must be established with the
railroads, preferably by agreement, but otherwise as a result of
congressional action.

We have recently passed several river and harbor bills. The work ordered by
the Congress not, yet completed, will cost about $243,

000,000, besides the hundreds of millions to be spent on the Mississippi
flood way. Until we can see our way out of this expense no further river
and harbor legislation should be passed, as expenditures to put it into
effect would be four or five years away.

IRRIGATION OF ARID LANDS

For many years the Federal Government has been committed to the wise policy
of reclamation and irrigation. While it has met with some failures due to
unwise selection of projects and lack of thorough soil surveys, so that
they could not be placed on a sound business basis, on the whole the
service has been of such incalculable benefit in so many States that no one
would advocate its abandonment. The program to which we are already
committed, providing for the construction of new projects authorized by
Congress and the completion of old projects, will tax the resources of the
reclamation fund over a period of years. The high cost of improving and
equipping farms adds to the difficulty of securing settlers for vacant
farms on federal projects.

Readjustments authorized by the reclamation relief act of May 25, 1926,
have given more favorable terms of repayment to settlers. These new
financial arrangements and the general prosperity on irrigation projects
have resulted in increased collections by the Department of the Interior of
charges due the reclamation fund. Nevertheless, the demand for still
smaller yearly payments on some projects continues. These conditions should
have consideration in connection with any proposed new projects.

COLORADO RIVER

For several years the Congress has considered the erection of a dam on the
Colorado River for flood-control, irrigation, and domestic water purposes,
all of which ma properly be considered as Government functions. There would
be an incidental creation of water power which could be used for generating
electricity. As private enterprise can very well fill this field, there is
no need for the Government to go into it. It is unfortunate that the States
interested in this water have been unable to agree among themselves.
Nevertheless, any legislation should give every possible safeguard to the
present and prospective rights of each of them.

The Congress will have before it, the detailed report of a special board
appointed to consider the engineering and economic feasibility of this
project. From the short summary which I have seen of it, 11 judge they
consider the engineering problems can be met at somewhat increased cost
over previous estimates. They prefer the Black Canyon site. On the economic
features they are not so clear and appear to base their conclusions on many
conditions which can not be established with certainty. So far as I can
judge, however, from the summary, their conclusions appear sufficiently
favorable, so that I feel warranted in recommending a measure which will
protect the rights of the States, discharge the necessary Government
functions, and leave the electrical field to private enterprise.

MUSCLE SHOALS

The development of other methods of producing nitrates will probably render
this plant less important for that purpose than formerly. But we have it,
and I am told it still provides a practical method of making nitrates for
national defense and farm fertilizers. By dividing the property into its
two component parts of power and nitrate plants it would be possible to
dispose of the power, reserving the right to any concern that wished to
make nitrates to use any power that might be needed for that purpose. Such
a disposition of the power plant can be made that will return in rental
about $2,000,000 per year. If the Congress would giant the Secretary of War
authority to lease the nitrate plant on such terms as would insure the
largest production of nitrates, the entire property could begin to
function. Such a division, I am aware, has never seemed to appeal to the
Congress. I should also gladly approve a bill granting authority to lease
the entire property for the production of nitrates.

I wish to avoid building another dam at public expense. Future operators
should provide for that themselves. But if they were to be required to
repay the cost of such dam with the prevailing commercial rates for
interest, this difficulty will be considerably lessened. Nor do I think
this property should be made a vehicle for putting the United States
Government indiscriminately into the private and retail field of power
distribution and nitrate sales.

CONSERVATION

The practical application of economy to the resources of the country calls
for conservation. This does not mean that every resource should not be
developed to its full degree, but it means that none of them should be
wasted. We have a conservation board working on our oil problem. This is of
the utmost importance to the future well-being of our people in this age of
oil-burning engines and the general application of gasoline to
transportation. The Secretary of the Interior should not be compelled to
lease oil lands of the Osage Indians when the market is depressed and the
future supply is in jeopardy.

While the area of lands remaining in public ownership is small, compared
with the vast area in private ownership, the natural resources of those in
public ownership are of immense present and future value. This is
particularly trite as to minerals and water power. The proper bureaus have
been classifying these resources to the end that they may be conserved.
Appropriate estimates are being submitted, in the Budget, for the further
prosecution of this important work.

IMMIGRATION

The policy of restrictive immigration should be maintained. Authority
should be granted the Secretary of Labor to give immediate preference to
learned professions and experts essential to new industries. The reuniting
of families should be expedited. Our immigration and naturalization laws
might well be codified.

WAGE EARNER

In its economic life our country has rejected the long accepted law of a
limitation of the wage fund, which led to pessimism and despair because it
was the doctrine of perpetual poverty, and has substituted for it the
American conception that the only limit to profits and wages is production,
which is the doctrine of optimism and hope because it leads to prosperity.
Here and there the councils of labor are still darkened by the theory that
only by limiting individual production can there be any assurance of
permanent employment for increasing numbers, but in general, management and
wage earner alike have become emancipated from this doom and have entered a
new era in industrial thought which has unleashed the productive capacity
of the individual worker with an increasing scale of wages and profits, the
end of which is not yet. The application of this theory accounts for our
widening distribution of wealth. No discovery ever did more to increase the
happiness and prosperity of the people.

Since 1922 increasing production has increased wages in general 12.9 per
cent, while in certain selected trades they have run as high as 34.9 per
cent and 38 per cent. Even in the boot and shoe shops the increase is over
5 per cent and in woolen mills 8.4 per cent, although these industries have
not prospered like others. As the rise in living costs in this period is
negligible, these figures represent real wage increases.

The cause of constructive economy requires that the Government should
cooperate with private interests to eliminate the waste arising from
industrial accidents. This item, with all that has been done to reduce it,
still reaches enormous proportions with great suffering to the workman and
great loss to the country.

WOMEN AND CHILDREN

The Federal Government should continue its solicitous care for the
8,500,000 women wage earners and its efforts in behalf of public health,
which is reducing infant mortality and improving the bodily and mental
condition of our citizens.

CIVIL SERVICE

The most marked change made in the civil service of the Government in the
past eight years relates to the increase in salaries. The Board of
Actuaries on the retirement act shows by its report, that July 1, 1921 the
average salary of the 330,047 employees subject to the act was $1,307,
while on June 30, 1927, the average salary of the corresponding 405,263
was $1,969. This was an increase in six years of nearly 53 per cent. On top
of this was the generous increase made at the last session of the Congress
generally applicable to Federal employees and another bill increasing the
pay in certain branches of the Postal Service beyond the large increase
which was made three years ago. This raised the average level from $1,969
to $2,092, making an increase in seven years of over 63 per cent. While it
is well known that in the upper brackets the pay in the Federal
service is much smaller than in private employment, in the lower brackets,
ranging well up over $3,000, it is much higher. It is higher not only in
actual money paid, but in privileges granted, a vacation of 30 actual
working days, or 5 weeks each year, with additional time running in some
departments as high as 30 days for sick leave and the generous provisions
of the retirement act. No other body of public servants ever occupied such
a fortunate position.

EDUCATION

Through the Bureau of Education of the Department of the Interior the
Federal Government, acting in an informative and advisory capacity, has
rendered valuable service. While this province belongs peculiarly to the
States, yet the promotion of education and efficiency in educational
methods is a general responsibility of the Federal Government. A survey of
negro colleges and universities in the United States has just been
completed by the Bureau of Education through funds provided by the
institutions themselves and through private sources. The present status of
negro higher education was determined and recommendations were made for its
advancement. This was one of the numerous cooperative undertakings of the
bureau. Following the invitation of the Association of Land Grant Colleges
and Universities, he Bureau of Education now has under way the survey of
agricultural colleges, authorized by Congress. The purpose of the survey is
to ascertain the accomplishments, the status, and the future objectives of
this type of educational training. It is now proposed to undertake a survey
of secondary schools, which educators insist is timely and essential.

PUBLIC BUILDINGS

We, have laid out a public building program for the District of Columbia
and the country at large running into hundreds of millions of dollars.
Three important structures and one annex are already, under way and one
addition has been completed in the City of Washington. in the country sites
have been acquired, many buildings are in course of construction, and some
are already completed. Plans for all this work are being prepared in order
that it may be carried forward as rapidly as possible. This is the greatest
building program ever assumed by this Nation. It contemplates structures of
utility and of beauty. When it reaches completion the people will be well
served and the Federal city will be supplied with the most beautiful and
stately public buildings which adorn any capital in the world.

THE AMERICAN INDIAN

The administration of Indian affairs has been receiving intensive study for
several years. The Department of the Interior has been able to provide
better supervision of health, education, and industrial advancement of this
native race through additional funds provided by the Congress. The present
cooperative arrangement existing between the Bureau of Indian Affairs and
the Public Health Service should be extended. The Government's
responsibility to the American Indian has been acknowledged by annual
increases in appropriations to fulfill its obligations to them and to
hasten the time when Federal supervision of their affairs may be properly
and safely terminated. The movement in Congress and in some of the State
legislatures for extending responsibility in Indian affairs to States
should be encouraged. A complete participation by the Indian in our
economic life is the end to be desired.

THE NEGRO

For 65 years now our negro Population has been under the peculiar care and
solicitude of the National Government. The progress which they have made in
education and the professions, in wealth and in the arts of civilization,
affords one of the most remarkable incidents in this period of world
history. They have demonstrated their ability to partake of the advantages
of our institutions and to benefit by a free and more and more independent
existence. Whatever doubt there may have been of their capacity to assume,
the status granted to them by the Constitution of this Union is being
rapidly dissipated. Their cooperation in the life of the Nation is
constantly enlarging.

Exploiting the Negro problem for political ends is being abandoned and
their protection is being increased by those States in which their
percentage of population is largest. Every encouragement should be extended
for t le development of the race. The colored people have been the victims
of the crime of lynching, which has in late years somewhat decreased. Some
parts of the South already have wholesome laws for its restraint and
punishment. Their example might well be followed by other States, and by
such immediate remedial legislation as the Federal Government can extend
under the Constitution.

PHILIPPINE ISLANDS

Under the guidance of Governor General Stimson the economic and political
conditions of the Philippine Islands have been raised to a standard never
before surpassed. The cooperation between his administration and the people
of the islands is complete and harmonious. It would be an advantage if
relief from double taxation could be granted by the Congress to our
citizens doing business in the islands.

PORTO RICO

Due to the terrific storm that swept Porto Rico last September, the people
of that island suffered large losses. The Red Cross and the War Department
went to their rescue. The property loss is being, retrieved. Sugar,
tobacco, citrus fruit, and coffee, all suffered damage. The first three can
largely look after themselves. The coffee growers will need some
assistance, which should be extended strictly on a business basis, and
only after most careful investigation. The people of Porto Rico are not
asking for charity.

DEPARTMENT OF JUSTICE

It is desirable that all the legal activities of the Government be
consolidated under the supervision of the Attorney General. In
1870 it was felt necessary to create the Department of Justice for this
purpose. During the intervening period, either through legislation creating
law officers or departmental action, additional legal positions not under
the supervision of the Attorney General have been provided until there are
now over 900. Such a condition is as harmful to the interest of the
Government now as it was in 1870, and should be corrected by appropriate
legislation.

SPECIAL GOVERNMENT COUNSEL

In order to prosecute the oil cases, I suggested and the Congress enacted a
law providing for the appointment of two special counsel. They have pursued
their work with signal ability, recovering all the leased lands besides
nearly $30,000,000 in money, and nearly $17,000,000 in other property. They
find themselves hampered by a statute, which the Attorney General construes
as applying to them, prohibiting their appearing for private clients before
any department. For this reason, one has been compelled to resign. No good
result is secured by the application of this rule to these counsel, and as
Mr. Roberts has consented to take reappointment if the rule is abrogated I
recommend the passage of an amendment to the law creating their office
exempting them from the general rule against taking other cases involving
the Government.

PROHIBITION

The country has duly adopted the eighteenth amendment. Those who object to
it have the right to advocate its modification or repeal. Meantime, it is
binding upon the National and State Governments and all our inhabitants.
The Federal enforcement bureau is making every effort to prevent
violations, especially through smuggling, manufacture, and transportation,
and to prosecute generally all violations for which it can secure evidence.
It is bound to continue this policy. Under the terms of the Constitution,
however, the obligation is equally on the States to exercise the power
which they have through the executive, legislative, judicial, and police
branches of their governments in behalf of enforcement. The Federal
Government is doing and will continue to do all it can in this direction
and is entitled to the active cooperation of the States.

CONCLUSION

The country is in the midst of an era of prosperity more extensive and of
peace more permanent than it has ever before experienced. But, having
reached this position, we should not fail to comprehend that it can easily
be lost. It needs more effort for its support than the less exalted places
of the world. We shall not be permitted to take our case, but shall
continue to be required to spend our days in unremitting toil. The actions
of the Government must command the confidence of the country. Without this,
our prosperity would be lost. We must extend to other countries the largest
measure of generosity, moderation, and patience. In addition to dealing
justly, we can well afford to walk humbly.

The end of government is to keep open the opportunity for a more
abundant life. Peace and prosperity are not finalities; they are only
methods. It is too easy under their influence for a nation to become
selfish and degenerate. This test has come to the United States. Our
country has been provided with the resources with which it can enlarge its
intellectual, moral, and spiritual life. The issue is in the hands of the
people. Our faith in man and God is the justification for the belief in our
continuing success.